<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON APRIL 20, 1998
REGISTRATION NO. 333-43553
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------
AMENDMENT NO. 1
TO
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
---------------
NATIONAL EQUIPMENT SERVICES, INC.
ALBANY LADDER COMPANY, INC.
BAT ACQUISITION CORP.
NES ACQUISITION CORP.
NES EAST ACQUISITION CORP.
NES MICHIGAN ACQUISITION CORP.
(EXACT NAME OF REGISTRANTS AS SPECIFIED IN THEIR CHARTERS)
DELAWARE 6719 36-4087016
NEW YORK 7359 14-1295523
DELAWARE 7359 86-0857699
DELAWARE 7359 76-0522698
DELAWARE 7359 36-4209300
DELAWARE 7359 38-3388768
(State or other (Primary Standard (I.R.S. Employer
jurisdiction of Industrial Identification No.)
incorporation or Classification Code
organization) Number)
---------------
1800 SHERMAN AVENUE
EVANSTON, ILLINOIS 60201
TELEPHONE: (847) 733-1000
(Address, including zip code, and telephone number, including
area code, of registrants' principal executive offices)
---------------
PAUL R. INGERSOLL
1800 SHERMAN AVENUE
EVANSTON, ILLINOIS 60201
TELEPHONE: (847) 733-1000
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
---------------
Copy to:
H. KURT VON MOLTKE
KIRKLAND & ELLIS
200 EAST RANDOLPH DRIVE
CHICAGO, ILLINOIS 60601
TELEPHONE: (312) 861-2295
---------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE OF THE SECURITIES TO THE
PUBLIC: As soon as practicable after this Registration Statement becomes
effective.
If the securities being registered on this Form are being offered in
connection with the formation of a holding company and there is compliance
with General Instruction G, check the following box. [_]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [_]
If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
---------------
THE REGISTRANTS HEREBY AMEND THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANTS
SHALL FILE A FURTHER AMENDMENT THAT SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION
8(A), MAY DETERMINE.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A +
+REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE +
+SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY +
+OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT +
+BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR +
+THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE +
+SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE +
+UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF +
+ANY SUCH STATE. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
SUBJECT TO COMPLETION, DATED APRIL 20, 1998
PRELIMINARY PROSPECTUS
, 1998
NATIONAL EQUIPMENT SERVICES, INC.
OFFER TO EXCHANGE ITS 10% SENIOR SUBORDINATED NOTES DUE 2004, SERIES B
FOR ANY AND ALL OF ITS OUTSTANDING 10% SENIOR SUBORDINATED NOTES DUE 2004
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON ,
1998, UNLESS EXTENDED.
-------
National Equipment Services, Inc., a Delaware corporation ("NES" or the
"Company") hereby offers (the "Exchange Offer"), upon the terms and conditions
set forth in this Prospectus (the "Prospectus") and the accompanying Letter of
Transmittal (the "Letter of Transmittal"), to exchange $1,000 principal amount
of its 10% Senior Subordinated Notes due 2004, Series B (the "Exchange Notes"),
registered under the Securities Act of 1933, as amended (the "Securities Act"),
pursuant to a Registration Statement of which this prospectus is a part, for
each $1,000 principal amount of its outstanding 10% Senior Subordinated Notes
due 2004 (the "Old Notes"), of which $100,000,000 principal amount is
outstanding. The form and terms of the Exchange Notes are the same as the form
and term of the Old Notes except that (i) the Exchange Notes will bear a Series
B designation and a different CUSIP number from the Old Notes, (ii) the
Exchange Notes will have been registered under the Securities Act and,
therefore, will not bear legends restricting the transfer thereof and (iii)
holders of the Exchange Notes will not be entitled to certain rights of holders
of Old Notes under the Registration Rights Agreement (as defined). The Old
Notes and the Exchange Notes are sometimes referred to herein collectively as
the "Notes." The Exchange Notes will evidence the same debt as the Old Notes
(which they replace) and will be issued under and be entitled to the benefits
of the Indenture dated as of November 25, 1997 (the "Indenture") by and among
the Company, the Subsidiary Guarantors (as defined) and Harris Trust and
Savings Bank, as trustee, governing the Notes. See "The Exchange Offer" and
"Description of Exchange Notes."
The Company will accept for exchange any and all Old Notes validly tendered
and not withdrawn prior to 5:00 p.m., New York City time on , 1998,
unless extended by the Company in its sole discretion (the "Expiration Date").
Tenders of Old Notes may be withdrawn at any time prior to 5:00 p.m. on the
Expiration Date. The Exchange Offer is subject to certain customary conditions.
See "The Exchange Offer."
The Old Notes were sold by the Company on November 25, 1997 to Smith Barney
Inc., First Union Capital Markets Corp. and Salomon Brothers Inc (the "Initial
Purchasers") in a transaction not registered under the Securities Act in
reliance upon an exemption under the Securities Act (the "Initial Offering").
The Initial Purchasers subsequently placed the Old Notes with qualified
institutional buyers in reliance upon Rule 144A under the Securities Act.
Accordingly, the Old Notes may not be reoffered, resold or otherwise
transferred in the United States unless registered under the Securities Act or
unless an applicable exemption from the registration requirements of the
Securities Act is available. The Exchange Notes are being offered hereunder in
order to satisfy the obligations of the Company and the Subsidiary Guarantors
under the Registration Rights Agreement entered into by the Company, the
Subsidiary Guarantors and the Initial Purchasers in connection with the Initial
Offering (the "Registration Rights Agreement"). See "The Exchange Offer."
Interest on the Notes will accrue from their date of original issuance and
will be payable semi-annually in arrears on May 30 and November 30 of each
year, commencing May 30, 1998, at the rate of 10% per annum. The Notes will be
redeemable, in whole or in part, at the option of the Company on or after
November 30, 2001 in cash at the redemption prices set forth herein plus
accrued and unpaid interest and Liquidated Damages (as defined), if any,
thereon to the date of redemption. In addition, at any time prior to November
30, 2000, the Company may, at its option, on any one or more occasions redeem
up to 33% of the initially outstanding aggregate principal amount of the Notes
at a redemption price equal to 110% of the principal amount thereof, plus
accrued and unpaid interest and Liquidated Damages, if any, thereon to the date
of redemption; provided, that, in each case, at least 67% of the aggregate
principal amount of the Notes remains outstanding immediately after the
occurrence of any such redemption. Upon the occurrence of a Change in Control
(as defined), (i) the Company will have the option, at any time prior to
November 30, 2001, to redeem the Notes in whole, but not in part, at a
redemption price equal to 100% of the aggregate principal amount of the Notes,
plus the Applicable Premium (as defined), plus accrued and unpaid interest and
Liquidated Damages, if any, to the date of redemption and (ii) if the Company
does not so redeem the Notes, or if a Change of Control occurs after November
30, 2001, each holder of Notes will have the right to require the Company to
repurchase all or any part of such holder's Notes at an offer price in cash
equal to 101% of the aggregate principal amount thereof, plus accrued and
unpaid interest and Liquidated Damages, if any, thereon to the date of
purchase. In the event of a Change of Control, there can be no assurance that
the Company will have or be able to acquire sufficient funds to pay to purchase
price for all of the Notes that the Company might be required to purchase. In
addition, the Company will be obligated to offer to repurchase the Notes at
100% of the principal amount thereof plus accrued and unpaid interest and
Liquidated Damages thereon, if any, to date of repurchase in the event of
certain Asset Sales (as defined). See "Description of Exchange Notes --
Repurchase at the Option of Holders."
The Notes will be general unsecured obligations of the Company and will rank
subordinate in right of payment to all existing and future Senior Debt (as
defined) of the Company and will rank senior or pari passu in right of payment
to all existing and future subordinated Indebtedness (as defined) of the
Company. The Notes will be fully and unconditionally guaranteed (the
"Subsidiary Guarantees") by all Restricted Subsidiaries (as defined) of the
Company, (together, the "Subsidiary Guarantors"). The Subsidiary Guarantees
will be general unsecured obligations of the Subsidiary Guarantors, will rank
subordinate in right of payment to all existing and future Senior Debt of the
Subsidiary Guarantors and will rank senior or pari passu in right of payment to
all existing and future subordinated Indebtedness of the Subsidiary Guarantors.
As of March 31, 1998, there was $95.1 million of Senior Debt of the Company and
the Subsidiary Guarantors outstanding and $98.8 million of Indebtedness of the
Company that ranked pari passu in right of payment to the Subsidiary Guarantees
outstanding. See "Risk Factors -- Subordination; Holding Company Structure."
SEE "RISK FACTORS" BEGINNING ON PAGE 9 FOR A DESCRIPTION OF CERTAIN RISKS TO
BE CONSIDERED BY HOLDERS WHO TENDER THEIR OLD NOTES IN THE EXCHANGE OFFER.
-------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
<PAGE>
Based upon an interpretation by the staff of the Securities and Exchange
Commission (the "SEC" or the "Commission") set forth in certain no-action
letters issued to third parties, the Company believes that the Exchange Notes
issued pursuant to the Exchange Offer in exchange for Old Notes may be offered
for resale, resold and otherwise transferred by any holder thereof (other than
any such holder that is an "affiliate" of the Company within the meaning of
Rule 405 under the Securities Act) without compliance with the registration
and prospectus delivery requirements of the Securities Act, provided that such
Exchange Notes are acquired in the ordinary course of such holder's business
and such holder has no arrangement or understanding with any person to
participate in the distribution of such Exchange Notes. See "The Exchange
Offer--Resale of the Exchange Notes." Holders of Old Notes wishing to accept
the Exchange Offer must represent to the Company, as required by the
Registration Rights Agreement, that such conditions have been met. Each
broker-dealer (a "Participating Broker-Dealer") that receives Exchange Notes
for its own account pursuant to the Exchange Offer must acknowledge that it
will deliver a prospectus in connection with any resale of such Exchange
Notes. The Letter of Transmittal states that by so acknowledging and by
delivering a prospectus, a participating Broker-Dealer will not be deemed to
admit that it is an "underwriter" within the meaning of the Securities Act.
This Prospectus, as it may be amended or supplemented from time to time, may
be used by a Participating Broker-Dealer in connection with resales of
Exchange Notes received in exchange for Old Notes where such Old Notes were
acquired by such Participating Broker-Dealer as a result of market-making
activities or other trading activities. The Company has agreed that, for a
period of 180 days after the Expiration Date, it will make this Prospectus
available to any Participating Broker-Dealer for use in connection with any
such resale. See "Plan of Distribution."
The Company will not receive any proceeds from the Exchange Offer. The
Company has agreed to bear the expenses of the Exchange Offer. No underwriter
is being used in connection with the Exchange Offer.
Holders of Old Notes not tendered and accepted in the Exchange Offer will
continue to hold such Old Notes and will be entitled to all the rights and
benefits and will be subject to the limitations applicable thereto under the
Indenture and with respect to transfer under the Securities Act. The Company
will pay all the expenses incurred by it incident to the Exchange Offer. See
"The Exchange Offer."
There has not previously been any public market for the Old Notes or the
Exchange Notes. The Company does not intend to list the Exchange Notes on any
securities exchange or to seek approval for quotation through any automated
quotation system. There can be no assurance that an active market for the
Exchange Notes will develop. See "Risk Factors--Absence of a Public Market
Could Adversely Affect the Value of Exchange Notes." Moreover, to the extent
that Old Notes are tendered and accepted in the Exchange Offer, the trading
market for untendered and tendered but unaccepted Old Notes could be adversely
affected.
THE EXCHANGE OFFER IS NOT BEING MADE TO, NOR WILL THE COMPANY ACCEPT
SURRENDERS FOR EXCHANGE FROM, HOLDERS OF OLD NOTES IN ANY JURISDICTION IN
WHICH THE EXCHANGE OFFER OR THE ACCEPTANCE THEREOF WOULD NOT BE IN COMPLIANCE
WITH THE SECURITIES OR BLUE SKY LAWS OF SUCH JURISDICTION.
NO PERSON IS AUTHORIZED IN CONNECTION WITH ANY OFFERING HEREBY TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATION NOT CONTAINED IN THIS PROSPECTUS OR
THE ACCOMPANYING LETTER OF TRANSMITTAL, AND, IF GIVEN OR MADE, SUCH
INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY THE COMPANY OR THE SUBSIDIARY GUARANTORS. NEITHER THE DELIVERY
OF THIS PROSPECTUS OR THE ACCOMPANYING LETTER OF TRANSMITTAL, NOR ANY EXCHANGE
MADE HEREUNDER SHALL UNDER ANY CIRCUMSTANCES CREATE ANY IMPLICATION THAT THE
INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY DATE SUBSEQUENT TO THE DATE
HEREOF.
UNTIL , 1998 (90 DAYS AFTER COMMENCEMENT OF THE EXCHANGE OFFER), ALL
DEALERS EFFECTING TRANSACTIONS IN THE EXCHANGE NOTES, WHETHER OR NOT
PARTICIPATING IN THE EXCHANGE OFFER, MAY BE REQUIRED TO DELIVER A PROSPECTUS.
THIS IS IN ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS WHEN
ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR
SUBSCRIPTIONS.
THE EXCHANGE NOTES WILL BE AVAILABLE INITIALLY ONLY IN BOOK-ENTRY FORM.
EXCEPT AS DESCRIBED UNDER "DESCRIPTION OF EXCHANGE NOTES--BOOK-ENTRY; DELIVERY
AND FORM", THE COMPANY EXPECTS THAT THE EXCHANGE NOTES ISSUED PURSUANT TO THE
EXCHANGE OFFER WILL BE REPRESENTED BY A GLOBAL NOTE (AS DEFINED), WHICH WILL
BE DEPOSITED WITH, OR ON BEHALF OF, THE DEPOSITORY TRUST COMPANY ("DTC") AND
REGISTERED IN ITS NAME OR IN THE NAME OF CEDE & CO., ITS NOMINEE. BENEFICIAL
INTERESTS IN THE GLOBAL NOTE REPRESENTING THE EXCHANGE NOTES WILL BE SHOWN ON,
AND TRANSFERS THEREOF WILL BE EFFECTED THROUGH, RECORDS MAINTAINED BY DTC AND
ITS PARTICIPANTS. AFTER THE INITIAL ISSUANCE OF THE GLOBAL NOTE, NOTES IN
CERTIFICATED FORM WILL BE ISSUED IN EXCHANGE FOR THE GLOBAL NOTE ONLY UNDER
LIMITED CIRCUMSTANCES AS SET FORTH IN THE INDENTURE. SEE "DESCRIPTION OF
EXCHANGE NOTES--BOOK-ENTRY; DELIVERY AND FORM."
THE CONTENTS OF THIS PROSPECTUS ARE NOT TO BE CONSTRUED AS LEGAL, BUSINESS
OR TAX ADVICE. EACH PROSPECTIVE INVESTOR SHOULD CONSULT ITS OWN ATTORNEY,
BUSINESS ADVISOR AND TAX ADVISOR AS TO LEGAL, BUSINESS AND TAX ADVICE. NEITHER
THE COMPANY NOR ANY OF THE SUBSIDIARY GUARANTORS IS MAKING ANY REPRESENTATION
TO ANY PROSPECTIVE INVESTOR IN THE EXCHANGE NOTES REGARDING THE LEGALITY OF AN
INVESTMENT THEREIN BY SUCH PERSON UNDER APPROPRIATE LEGAL INVESTMENT OR
SIMILAR LAWS.
ii
<PAGE>
MARKET DATA USED THROUGHOUT THE PROSPECTUS WERE OBTAINED FROM INTERNAL
COMPANY SURVEYS AND INDUSTRY PUBLICATIONS, WHICH THE COMPANY BELIEVES TO BE
RELIABLE. THE COMPANY HAS NOT INDEPENDENTLY VERIFIED THIS MARKET DATA.
SIMILARLY, INTERNAL COMPANY SURVEYS, WHILE BELIEVED BY THE COMPANY TO BE
RELIABLE, HAVE NOT BEEN VERIFIED BY ANY INDEPENDENT SOURCES.
THE PROSPECTUS INCLUDES CERTAIN FORWARD-LOOKING STATEMENTS CONCERNING THE
COMPANY. ALL STATEMENTS OTHER THAN STATEMENTS OF HISTORICAL FACTS INCLUDED IN
THE PROSPECTUS, INCLUDING, WITHOUT LIMITATION, STATEMENTS REGARDING THE
COMPANY'S FUTURE FINANCIAL POSITION, BUSINESS STRATEGY, BUDGETS, PROJECTED
COSTS AND PLANS AND OBJECTIVES OF MANAGEMENT FOR FUTURE OPERATIONS, ARE
FORWARD-LOOKING STATEMENTS. ALTHOUGH THE COMPANY BELIEVES THAT THE
EXPECTATIONS REFLECTED IN SUCH FORWARD-LOOKING STATEMENTS ARE REASONABLE, IT
CAN GIVE NO ASSURANCE THAT SUCH EXPECTATIONS WILL PROVE TO HAVE BEEN CORRECT.
IMPORTANT FACTORS THAT COULD CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY FROM
THE COMPANY'S EXPECTATIONS ("CAUTIONARY STATEMENTS") ARE DISCLOSED UNDER "RISK
FACTORS" AND ELSEWHERE IN THE PROSPECTUS, INCLUDING, WITHOUT LIMITATION, IN
CONJUNCTION WITH THE FORWARD-LOOKING STATEMENTS INCLUDED IN THE PROSPECTUS.
ALL SUBSEQUENT WRITTEN AND ORAL FORWARD-LOOKING STATEMENTS ATTRIBUTABLE TO THE
COMPANY OR PERSONS ACTING ON ITS BEHALF, ARE EXPRESSLY QUALIFIED IN THEIR
ENTIRETY BY THE CAUTIONARY STATEMENTS.
AVAILABLE INFORMATION
The Company has filed with the Commission a Registration Statement on Form
S-4 (the "Exchange Offer Registration Statement," which term shall encompass
all amendments, exhibits, annexes and schedules thereto) pursuant to the
Securities Act, and the rules and regulations promulgated thereunder, covering
the Exchange Notes being offered hereby. The Prospectus does not contain all
the information set forth in the Exchange Offer Registration Statement. For
further information with respect to the Company and the Exchange Offer,
reference is made to the Exchange Offer Registration Statement. Statements
made in the Prospectus as to the contents of any contract, agreement or other
document referred to are not necessarily complete. With respect to each such
contract, agreement or other document filed as an exhibit to the Exchange
Offer Registration Statement, reference is made to the exhibit for a more
complete description of the document or matter involved, and each such
statement shall be deemed qualified in its entirety by such reference. As a
result of the filing of the Exchange Offer Registration Statement with the
Commission, the Company will become subject to the informational requirements
of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and
in accordance therewith will be required to file periodic reports and other
information with the Commission. The Subsidiary Guarantors will not file
separate periodic reports and other information with the Commission. The
Exchange Offer Registration Statement, including the exhibits thereto, and
periodic reports and other information filed by the Company with the
Commission can be inspected and copied at the public reference facilities
maintained by the Commission at Room 1024, 450 Fifth Street, N.W., Washington,
D.C. 20549, or at its regional offices located at Northwestern Atrium Center,
500 West Madison Street, Suite 1400, Chicago, Illinois 60661-2511 and 7 World
Trade Center, Suite 1300, New York, New York 10048. Copies of such materials
can be obtained from the Public Reference Section of the Commission at 450
Fifth Street, N.W., Washington, D.C. 20549, at prescribed rates. The
Commission maintains a Web site that contains reports, proxy and information
statements and other information regarding registrants that file
electronically with the Commission. The address of such site is
http://www.sec.gov.
In addition, the Company has agreed that, whether or not it is required to
do so by the rules and regulations of the Commission, for so long as any Notes
remain outstanding, it will furnish to the holders of the Notes and, to the
extent permitted by applicable law or regulation, file with the Commission (i)
all quarterly and annual financial information that would be required to be
contained in a filing with the Commission on Forms 10-Q and 10-K if the
Company was required to file such Forms, including for each a "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and,
with respect to the annual information only, a report thereof by the Company's
independent certified public accountants and (ii) all reports that would be
required to be filed on Form 8-K if it were required to file such reports. In
addition, for so long as any of the Notes remain outstanding, the Company has
agreed to make available to any prospective purchaser of the Notes or
beneficial owner of the Notes, in connection with any sale thereof, the
information required by Rule 144A(d)(4) under the Securities Act.
The Company, a corporation organized under the laws of Delaware, has its
principal executive offices located at 1800 Sherman Avenue, Evanston, Illinois
60201; its telephone number is (847) 733-1000.
iii
<PAGE>
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by, and should be read in
conjunction with, the more detailed information and financial data, including
the Financial Statements and notes thereto, included elsewhere in the
Prospectus. Unless otherwise stated in the Prospectus or unless the context
otherwise requires, "NES" or the "Company" shall mean National Equipment
Services, Inc., including (i) all of its 13 acquired businesses; and (ii)
Falconite, Inc. ("Falconite"), which the Company has a definitive agreement to
acquire concurrent with the Initial Stock Offering (as defined) (collectively,
the "Acquired Businesses"). References herein to various financial information
on a "pro forma basis" (i) give effect to acquisitions of the Acquired
Businesses as if such transactions had been completed as of the first day of
the related period, (ii) give effect to the Initial Stock Offering and (iii)
reflect certain adjustments described in "Selected Pro Forma Combined Financial
Data." There can be no assurance that the acquisition of Falconite or the
Initial Stock Offering will be consummated.
THE COMPANY
GENERAL
National Equipment Services, Inc. is a leading participant in the growing and
highly fragmented $18 billion equipment rental industry. Through its 14
businesses acquired or to be acquired since January 1997, NES specializes in
the rental of specialty and general heavy equipment to industrial and
construction end-users. The Company rents over 750 different types of machinery
and equipment and distributes new equipment for nationally recognized original
equipment manufacturers. The Company also sells used equipment as well as
complementary parts, supplies and merchandise, and provides repair and
maintenance services to its customers. NES is geographically diversified, with
77 locations in across 19 states, and is a leading competitor in each of the
geographic markets it serves. For the year ended December 31, 1997, on a pro
forma basis, the Company generated revenues of $218.6 million, an increase of
23.7% compared to 1996 pro forma revenues of $176.8 million.
Management believes the Company offers one of the most modern and well
maintained fleets of speciality or general equipment in each of its markets.
The average age of the Company's equipment fleet is approximately three years.
Speciality equipment includes electric and pneumatic hoists, hydraulic and
truck-mounted cranes, liquid storage tanks, pumps and highway safety equipment.
General industrial and construction equipment includes aerial work platforms,
air compressors, cranes, earth-moving equipment and rough terrain forklifts.
The Company rents and sells this equipment to industrial and construction end-
users, which represented approximately 53% and 44%, respectively, of the
Company's revenues for the year ended December 31, 1997, on a pro forma basis.
NES is led by a senior management team with significant industry experience
and an impressive track record of acquiring and integrating companies in the
equipment rental industry. Prior to founding the Company, the NES senior
management team was responsible for building Brambles Equipment Services
("Brambles"), the U.S. equipment rental business of an Australian public
company, into a leading participant in the industry. At Brambles, this team
executed a growth strategy that combined a disciplined acquisition program with
significant organic growth. Management believes that the team's extensive
industry experience allows to more easily identify quality acquisition targets
and successfully integrate these businesses through effective financial and
operating controls and the proper deployment of capital. The Company's local
operations are managed by experienced professionals who have an average of over
15 years of experience in the industry and have extensive knowledge of and
relationships in their local markets. These managers are typically former
owners of the businesses acquired by the Company. The Company also benefits
from the financial expertise of Golder, Thoma, Cressey, Rauner, Inc. ("Golder
Thoma"), an established investment firm specializing in the consolidation of
fragmented industries. Golder, Thoma, Cressey, Rauner Fund V, L.P. ("Golder
Thoma Fund V") an affiliate of Golder Thoma, is the Company's principal equity
investor.
1
<PAGE>
RECENT DEVELOPMENTS
On April 2, 1998, the Company filed a registration statement with the
Securities and Exchange Commission for the initial public offering of the
Company's Common Stock (the "Initial Stock Offering"), which the Company
expects to complete in the second quarter of 1998.
In the first quarter of 1998, the Company completed seven acquisitions to add
to the six businesses acquired in 1997. These first quarter 1998 acquisitions
generated combined 1997 pro forma revenues of $89.3 million. In addition, the
Company has entered into a definitive agreement to acquire Falconite concurrent
with the Initial Stock Offering. Falconite is a rental equipment company
serving a diverse range of more than 5,500 active commercial customers from 26
locations in nine southern and mid-western states. Falconite's rental fleet
consists primarily of large equipment, such as aerial work platforms, cranes
and forklifts. Falconite's customers operate in a wide range of industries,
including automotive, chemical, commercial construction, pulp and paper, and
utilities. Falconite generated 1997 pro forma revenues of $72.6 million. The
agreement to acquire Falconite is subject to customary conditions, including
Hart-Scott-Rodino regulatory approval.
2
<PAGE>
THE INITIAL OFFERING
Notes.................. The Old Notes were sold by the Company on November
25, 1997 to the Initial Purchasers pursuant to a
Purchase Agreement dated November 20, 1997 (the
"Purchase Agreement"). The Initial Purchasers
subsequently resold the Old Notes to qualified
institutional buyers pursuant to Rule 144A under the
Securities Act.
Registration Rights Pursuant to the Purchase Agreement, the Company, the
Agreement.............. Subsidiary Guarantors and the Initial Purchasers
entered into a Registration Rights Agreement dated as
of November 25, 1997 (the "Registration Rights
Agreement"), which grants the holders of the Old
Notes certain exchange and registration rights. The
Exchange Offer is intended to satisfy such exchange
rights which terminate upon the consummation of the
Exchange Offer. Upon consummation of the Exchange
Offer, the Company and the Subsidiary Guarantors will
have no further obligation under the Registration
Rights Agreement to register Old Notes except in
limited circumstances in which the Company has agreed
to file a Shelf Registration Statement (as defined).
THE EXCHANGE OFFER
Securities Offered..... $100,000,000 aggregate principal amount of 10% Senior
Subordinated Notes due 2004, Series B, of the
Company.
The Exchange Offer..... $1,000 principal amount of Exchange Notes in exchange
for each $1,000 principal amount of Old Notes. As of
the date hereof, $100,000,000 aggregate principal
amount of Old Notes are outstanding. The Company will
issue the Exchange Notes to holders on or promptly
after the Expiration Date.
Based on an interpretation by the staff of the
Commission set forth in no-action letters issued to
third parties, the Company believes that Exchange
Notes issued pursuant to the Exchange Offer in
exchange for Old Notes may be offered for resale,
resold and otherwise transferred by any holder
thereof (other than any such holder which is an
"affiliate" of the Company within the meaning of Rule
405 under the Securities Act) without compliance with
the registration and prospectus delivery provisions
of the Securities Act, provided that such Exchange
Notes are acquired in the ordinary course of such
holder's business and that such holder does not
intend to participate and has no arrangement or
understanding with any person to participate in the
distribution of such Exchange Notes.
Any Participating Broker-Dealer that acquired Old
Notes for its own account as a result of market-
making activities or other trading activities may be
a statutory underwriter. Each Participating Broker-
Dealer that receives Exchange Notes for its own
account pursuant to the Exchange Offer must
acknowledge that it will deliver a prospectus in
connection with any resale of such Exchange Notes.
The Letter of Transmittal states that by so
acknowledging and by delivering a prospectus, a
Participating Broker-Dealer will not be deemed to
admit that it is an "underwriter" within the meaning
of the Securities Act. This Prospectus, as it may be
amended or supplemented from time to time, may be
used by a Participating Broker-Dealer in connection
with resales of Exchange Notes received in exchange
for Old Notes where such Old Notes were acquired
3
<PAGE>
by such Participating Broker-Dealer as a result of
market-making activities or other trading activities.
The Company has agreed that, for a period of 180 days
after the Expiration Date, they will make this
Prospectus available to any Participating Broker-
Dealer for use in connection with any such resale.
See "Plan of Distribution."
Any holder who tenders in the Exchange Offer with the
intention to participate, or for the purpose of
participating, in a distribution of the Exchange
Notes could not rely on the position of the staff of
the Commission enunciated in no-action letters and,
in the absence of an exemption therefrom, must comply
with the registration and prospectus delivery
requirements of the Securities Act in connection with
any resale transaction. Failure to comply with such
requirements in such instance may result in such
holder incurring liability under the Securities Act
for which the holder is not indemnified by the
Company.
Expiration Date........ 5:00 p.m., New York City time, on , 1998
unless the Exchange Offer is extended, in which case
the term "Expiration Date" means the latest date and
time to which the Exchange Offer is extended.
Accrued Interest on
the New Notes and the
Old Notes............. Each New Note will bear interest from its issuance
date. Holders of Old Notes that are accepted for
exchange will receive, in cash, accrued interest
thereon to, but not including, the issuance date of
the Exchange Notes. Such interest will be paid with
the first interest payment on the Exchange Notes.
Interest on the Old Notes accepted for exchange will
cease to accrue upon issuance of the Exchange Notes.
Conditions to the The Exchange Offer is subject to certain customary
Exchange Offer......... conditions, which may be waived by the Company. See
"The Exchange Offer--Conditions."
Procedures for
Tendering Old Notes...
Each holder of Old Notes wishing to accept the
Exchange Offer must complete, sign and date the
accompanying Letter of Transmittal, or a facsimile
thereof (or, in the case of a book-entry transfer,
delivering an Agent's Message (as defined) in lieu
thereof) in accordance with the instructions
contained herein and therein, and mail or otherwise
deliver such Letter of Transmittal, or such facsimile
(or, in the case of a book-entry transfer, deliver an
Agent's Message (as defined) in lieu thereof),
together with the Old Notes and any other required
documentation to the Exchange Agent (as defined) at
the address set forth herein. By executing the Letter
of Transmittal (or, in the case of a book-entry
transfer, delivering an Agent's Message in lieu
thereof), each holder will represent to the Company
that, among other things, the Exchange Notes acquired
pursuant to the Exchange Offer are being obtained in
the ordinary course of business of the person
receiving such Exchange Notes, whether or not such
person is the holder, that neither the holder nor any
such other person has any arrangement or
understanding with any person to participate in the
distribution of such Exchange Notes and that neither
the holder nor any such other person is an
"affiliate," as defined under Rule 405 of the
Securities Act, of the Company. See "The Exchange
Offer--Purpose and Effect of the Exchange Offer" and
"--Procedures for Tendering."
Untendered Old Notes... Following the consummation of the Exchange Offer,
holders of Old Notes eligible to participate but who
do not tender their Old Notes will not have any
further exchange rights and such Old Notes will
continue to be subject
4
<PAGE>
to certain restrictions on transfer. Accordingly, the
liquidity of the market for such Old Notes could be
adversely affected.
Consequences of
Failure to Exchange...
The Old Notes that are not exchanged pursuant to the
Exchange Offer will remain restricted securities.
Accordingly, such Old Notes may be resold only (i) to
the Company, (ii) pursuant to Rule 144A or Rule 144
under the Securities Act or pursuant to some other
exemption under the Securities Act, (iii) outside the
United States to a foreign person pursuant to the
requirements of Rule 904 under the Securities Act, or
(iv) pursuant to an effective registration statement
under the Securities Act. See "The Exchange Offer--
Consequences of Failure to Exchange."
Shelf Registration If (i) the Exchange Offer is prohibited by applicable
Statement............. law or (ii) any holder of the Old Notes (other than
any such holder which is an "affiliate" of the
Company or a Subsidiary Guarantor within the meaning
of Rule 405 under the Securities Act) notifies the
Company that (A) it is prohibited by law or policy
from participating in the Exchange Offer, (B) that it
may not resell the Exchange Notes acquired by it in
the Exchange Offer to the public without delivering a
prospectus and the prospectus contained in the
Exchange Offer Registration Statement is not
appropriate or available for such resales or (C) that
it is a broker-dealer and holds Notes acquired
directly from the Company or an affiliate of the
Company, the Company has agreed to register the Old
Notes on a shelf registration statement (the "Shelf
Registration Statement"). If the Company fails to
satisfy these registration obligations, it will be
required to pay liquidated damages ("Liquidated
Damages") to holders of Notes under certain
circumstances.
Special Procedures for
Beneficial Owners.....
Any beneficial owner whose Old Notes are registered
in the name of a broker, dealer, commercial bank,
trust company or other nominee and who wishes to
tender should contact such registered holder promptly
and instruct such registered holder to tender on such
beneficial owner's behalf. If such beneficial owner
wishes to tender on such owner's own behalf, such
owner must, prior to completing and executing the
Letter of Transmittal (or in the case of a book-entry
transfer, delivering an Agent's Message in lieu
thereof) and delivering its Old Notes, either make
appropriate arrangements to register ownership of the
Old Notes in such owner's name or obtain a properly
completed bond power from the registered holder. The
transfer of registered ownership may take
considerable time. The Company will keep the Exchange
Offer open for not less than twenty business days in
order to provide for the transfer of registered
ownership.
Guaranteed Delivery Holders of Old Notes who wish to tender their Old
Procedures............ Notes and whose Old Notes are not immediately
available or who cannot deliver their Old Notes, the
Letter of Transmittal (or, in the case of a book-
entry transfer, delivering an Agent's Message in lieu
thereof) or any other documents required by the
Letter of Transmittal to the Exchange Agent (or
comply with the procedures for book-entry transfer)
prior to the Expiration Date must tender their Old
Notes according to the guaranteed delivery procedures
set forth in "The Exchange Offer--Guaranteed Delivery
Procedures."
5
<PAGE>
Withdrawal Rights...... Tenders may be withdrawn at any time prior to 5:00
p.m., New York City time, on the Expiration Date.
Acceptance of Old
Notes and Delivery of
Exchange Notes........ The Company will accept for exchange any and all Old
Notes which are properly tendered in the Exchange
Offer prior to 5:00 p.m., New York City time, on the
Expiration Date. The Exchange Notes issued pursuant
to the Exchange Offer will be delivered promptly
following the Expiration Date. See "The Exchange
Offer--Terms of the Exchange Offer."
Use of Proceeds........ There will be no cash proceeds to the Company from
the exchange pursuant to the Exchange Offer.
Exchange Agent......... Harris Trust and Savings Bank.
THE EXCHANGE NOTES
General................ The form and terms of the Exchange Notes are the same
as the form and terms of the Old Notes (which they
replace) except that (i) the Exchange Notes bear a
Series B designation and a different CUSIP number
from the Old Notes, (ii) the Exchange Notes have been
registered under the Securities Act and, therefore,
will not bear legends restricting the transfer
thereof, and (iii) the holders of Exchange Notes will
not be entitled to certain rights under the
Registration Rights Agreement, including the
provisions providing for Liquidated Damages on the
Old Notes in certain circumstances relating to the
timing of the Exchange Offer, which rights will
terminate when the Exchange Offer is consummated. See
"The Exchange Offer -- Purpose and Effect of the
Exchange Offer." The Exchange Notes will evidence the
same debt as the Old Notes and will be entitled to
the benefits of the Indenture. See "Description of
Exchange Notes."
Securities Offered..... $100,000,000 aggregate principal amount of the
Company's 10% Senior Subordinated Notes due 2004,
Series B.
Interest Rate.......... The Exchange Notes will bear interest at the rate of
10% per annum, payable semi-annually on May 30 and
November 30 of each year, commencing May 30, 1998.
Subsidiary Guarantees..
The Exchange Notes will be fully and unconditionally
guaranteed by all Restricted Subsidiaries (as
defined) of the Company (together, the "Subsidiary
Guarantors").
Subordination..........
The Exchange Notes will be general unsecured
obligations of the Company, will rank subordinate in
right of payment to all existing and future Senior
Debt of the Company and will rank senior or pari
passu in right of payment to all existing and future
subordinated Indebtedness of the Company. The
Subsidiary Guarantees will be general unsecured
obligations of the Subsidiary Guarantors, will rank
subordinate in right of payment to all existing and
future Senior Debt of the Subsidiary Guarantors and
will rank senior or pari passu in right of payment to
all existing and future subordinated Indebtedness of
the Subsidiary Guarantors. At March 31, 1998, there
was $95.1 million of Senior Debt of the Company and
the Subsidiary Guarantors outstanding and $98.8
million of Indebtedness of the Company that ranked
pari passu in right of payment to the Subsidiary
Guarantees outstanding. See "Risk Factors--
Subordination; Holding Company Structure."
6
<PAGE>
Optional Redemption.... The Notes will be redeemable at the option of the
Company, in whole or in part, at any time on or after
November 30, 2001 in cash at the redemption prices
set forth herein, plus accrued and unpaid interest
and Liquidated Damages, if any, thereon to the date
of redemption. In addition, at any time prior to
November 30, 2000, the Company may on any one or more
occasions redeem up to 33% of the initially
outstanding aggregate principal amount of Notes at a
redemption price equal to 110% of the principal
amount thereof, plus accrued and unpaid interest and
Liquidated Damages, if any, thereon to the redemption
date, with the net proceeds of a public offering of
Common Stock of the Company; provided that, in each
case, at least 67% of the aggregate principal amount
of Notes remains outstanding immediately after the
occurrence of any such redemption. See "Description
of Exchange Notes--Optional Redemption."
Change of Control...... Upon the occurrence of a Change of Control, (i) the
Company will have the option, at any time prior to
November 30, 2001, to redeem the Notes in whole, but
not in part, at a redemption price equal to 100% of
the aggregate principal amount of the Notes, plus the
Applicable Premium, plus accrued and unpaid interest
and Liquidated Damages, if any, to the date of
redemption and (ii) if the Company does not so redeem
the Notes, or if a Change of Control occurs after
November 30, 2001, each holder of Notes will have the
right to require the Company to repurchase all or any
part of such holder's Notes at an offer price in cash
equal to 101% of the aggregate principal amount
thereof, plus accrued and unpaid interest and
Liquidated Damages, if any, thereon to the date of
purchase. See "Description of Exchange Notes--
Optional Redemption" and
"--Repurchase at the Option of Holders--Change of
Control." There can be no assurance that, in the
event of a Change of Control, the Company would have
sufficient funds to purchase all Notes tendered. See
"Risk Factors--Limitations on Change of Control."
Certain Covenants...... The Indenture contains certain covenants that limit,
among other things, the ability of the Company and
its Subsidiaries (as defined) to: (i) pay dividends,
redeem capital stock or make certain other restricted
payments or investments; (ii) incur additional
indebtedness or issue preferred equity interests;
(iii) merge, consolidate or sell all or substantially
all of its assets; (iv) create liens on assets; and
(v) enter into certain transactions with affiliates
or related persons. See "Description of Exchange
Notes--Certain Covenants."
Use of Proceeds........
There will be no proceeds to the Company from the
exchange pursuant to the Exchange Offer. The net
proceeds from the sale of the Old Notes in the
Initial Offering were used to repay all indebtedness
outstanding under the Credit Facility and certain
seller notes and for acquisitions. See "Use of
Proceeds."
RISK FACTORS
See "Risk Factors" for a discussion of certain factors that should be
considered before tendering Old Notes in exchange for Exchange Notes. These
risk factors are generally applicable to the Old Notes as well as the Exchange
Notes.
7
<PAGE>
SUMMARY HISTORICAL AND PRO FORMA COMBINED FINANCIAL INFORMATION
(DOLLARS IN THOUSANDS)
The Company was founded in June 1996 to acquire and integrate equipment
rental companies. In 1997, the Company acquired six businesses in separate
transactions. In 1998, the Company acquired seven businesses in separate
transactions and has a definitive agreement to acquire Falconite current with
the Initial Stock Offering. While the Acquired Businesses were or will be
acquired at various dates during 1997 and 1998, the following pro forma data
for the Company are presented as if all such acquisitions and the Initial Stock
Offering had occurred on January 1, 1997. The following pro forma balance sheet
data give effect to the aforementioned acquisitions and the Initial Stock
Offering as if they had occurred on December 31, 1997. See "Capitalization."
The summary historical and pro forma combined financial information should be
read in conjunction with the information contained in "Selected Pro Forma
Combined Financial Data," "Selected Historical Financial Data" and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and the Financial Statements and notes thereto included elsewhere
herein.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
1997
-----------------------
HISTORICAL PRO FORMA(A)
---------- ------------
<S> <C> <C>
OPERATING DATA:
Total revenues......................................... $41,288 $218,628
Gross profit........................................... 15,573 89,866
Operating income....................................... 6,187 37,472
Interest expense, net.................................. 4,336 15,541
Income before income taxes............................. 1,923 22,248
Income tax expense..................................... 818 9,336
Net income............................................. 1,105 12,912
OTHER DATA:
Rental fleet purchases................................. $15,336 $ 86,030
EBITDA(b).............................................. 12,744 77,363
</TABLE>
<TABLE>
<CAPTION>
AT DECEMBER 31, 1997
---------------------
ACTUAL PRO FORMA(A)
-------- ------------
<S> <C> <C>
BALANCE SHEET DATA:
Cash..................................................... $ 35,682 $ --
Rental equipment, net.................................... 46,801 210,851
Total assets............................................. 131,137 431,950
Total debt............................................... 98,782 153,530
Total stockholders' equity............................... 26,473 233,354
</TABLE>
- --------
(a) For an explanation of the calculation of the pro forma adjustments, see
"Selected Pro Forma Combined Financial Data."
(b) Reflects operating income plus other income (expense), net, before interest
expense, net, income taxes, rental equipment depreciation and non-rental
depreciation and amortization. EBITDA is not intended to represent cash
flow from operations or net income as defined by generally accepted
accounting principles and should not be considered as a measure of
liquidity or an alternative to, or more meaningful than, cash flow from
operations or net income as an indication of the Company's operating
performance. EBITDA is included herein because management believes that
EBITDA, as presented, represents a useful measure of assessing the
performance of the Company's ongoing operating activities as it reflects
the earnings trends of the Company without the impact of interest, income
taxes and certain non-cash charges.
8
<PAGE>
RISK FACTORS
Prospective investors should carefully consider the following factors in
addition to the other information set forth in the Prospectus before tendering
Old Notes in exchange for Exchange Notes. The risk factors set forth below are
generally applicable to the Old Notes as well as to the Exchange Notes.
LEVERAGED FINANCIAL POSITION; RESTRICTIONS IMPOSED BY TERMS OF INDEBTEDNESS
The Company has incurred significant indebtedness. As of December 31, 1997,
the Company had $98.8 million of indebtedness outstanding (which consist
entirely of Old Notes), its stockholders' equity was approximately $26.0
million and there was $100.0 million available for future borrowings under the
Credit Facility subject to calculation of the borrowing base under the Credit
Facility.
The level of the Company's indebtedness could have important consequences to
holders of Exchange Notes, including: (i) a substantial portion of the
Company's cash flow from operations must be dedicated to debt service and will
not be available for other purposes; (ii) the Company's ability to obtain
additional debt financing in the future for working capital, capital
expenditures or acquisitions may be limited; and (iii) the Company's level of
indebtedness could limit its flexibility in reacting to changes in the
industry and economic conditions generally. The Company's ability to pay
interest on the Exchange Notes, to repay portions of its long-term
indebtedness (including the Exchange Notes and borrowings under the Credit
Facility) and to satisfy its other debt obligations will depend upon the
future operating performance and the availability of refinancing indebtedness,
which will be affected by prevailing economic conditions and financial,
business and other factors, certain of which are beyond its control.
The Indenture and the Credit Facility contain certain covenants that
restrict, among other things, the Company's ability to incur additional
indebtedness, incur liens, pay dividends or make certain other restricted
payments, consummate certain asset sales, enter into certain transactions with
affiliates, impose restrictions on the ability of a subsidiary to pay
dividends or make certain payments to the Company, merge or consolidate with
any other person or sell, assign, transfer, lease, convey, or otherwise
dispose of all or substantially all of the assets of the Company. In addition,
the Credit Facility contains certain other and more restrictive covenants and
also requires the Company to maintain specified financial ratios and to
satisfy certain financial condition tests. The Company's ability to meet these
financial ratio and financial condition tests can be affected by events beyond
its control and there can be no assurance that the Company will meet those
tests. A breach of any of these covenants could result in a default under the
Credit Facility or the Indenture. In the event of an event of default under
the Credit Facility or the Indenture, the lenders thereunder could elect to
declare all amounts outstanding thereunder, together with accrued and unpaid
interest, to be immediately due and payable. If the indebtedness under the
Credit Facility were to be accelerated, there can be no assurance that the
assets of the Company would be sufficient to repay in full that indebtedness
and the other indebtedness of the Company, including the Exchange Notes. See
"Capitalization," "Management's Discussion and Analysis of Financial Condition
and Results of Operations," "Description of Credit Facility," "Description of
Exchange Notes--Subordination" and "--Certain Covenants."
SUBORDINATION
The payment of principal, premium, if any, and interest on, and any other
amounts owing in respect of, the Notes and the Subsidiary Guarantees will be
subordinated to the prior payment in full of all existing and future Senior
Debt of the Company and the Subsidiary Guarantors (including, without
limitation, indebtedness incurred under the Credit Facility). In the event of
the bankruptcy, liquidation, dissolution, reorganization or other winding-up
of the Company or a Subsidiary Guarantor, the assets of the Company or such
Subsidiary Guarantor will be available to pay obligations on the Exchange
Notes or the Subsidiary Guarantees only after all Senior Debt (including
amounts incurred under the Credit Facility) has been so paid in full;
accordingly, there may not be sufficient assets remaining to pay amounts due
on any or all of the Exchange Notes or the Subsidiary Guarantees then
outstanding. In addition, under certain circumstances, the Company and the
Subsidiary
9
<PAGE>
Guarantors may not pay principal of, premium, if any, or interest on, or any
other amounts owing in respect of the Exchange Notes or the Subsidiary
Guarantees, or purchase, redeem or otherwise retire the Exchange Notes, in the
event of certain defaults with respect to certain classes of Senior Debt,
including Senior Debt incurred under the Credit Facility. At March 31, 1998,
there was $95.1 million of Senior Debt outstanding and additional Senior Debt
may be incurred by the Company and the Subsidiary Guarantees from time to
time, subject to certain restrictions. See "Description of Credit Facility"
and "Description of Exchange Notes--Certain Covenants--Incurrence of
Indebtedness and Issuance of Preferred Stock."
The Exchange Notes and the Subsidiary Guarantees will be general unsecured
obligations of the Company and the Subsidiary Guarantors and will be
subordinated in right of payment to all existing and future secured
indebtedness of the Company and the Subsidiary Guarantors, to the extent of
the value of the assets securing such indebtedness. The Credit Facility is
currently secured by substantially all of the assets of the Company and the
Subsidiary Guarantors.
HOLDING COMPANY STRUCTURE
The Company is a holding company with no significant assets other than its
investments in its subsidiaries. Accordingly, the Company must rely entirely
upon distributions from its subsidiaries to generate the funds necessary to
meet its obligations, including the payment of principal and interest on the
Exchange Notes. The ability of the subsidiaries of the Company to pay
dividends or make other payments or advances to the Company will depend upon
their operating results and will be subject to applicable laws and contractual
restrictions contained in the instruments governing any indebtedness of such
subsidiaries (including the Credit Facility). Although the Indenture limits
the ability of such subsidiaries to enter into consensual restrictions on
their ability to pay dividends and make other payments to the Company, such
limitations are subject to a number of significant qualifications. See
"Description of Exchange Notes--Certain Covenants--Dividend and Other Payment
Restrictions Affecting Subsidiaries."
LIMITATIONS ON CHANGE OF CONTROL
Upon the occurrence of a Change of Control, the Company will be required
under certain circumstances to make an offer for cash to repurchase the
Exchange Notes at a price equal to 101% of the principal amount thereof,
together with accrued and unpaid interest and Liquidated Damages, if any, to
the date of repurchase. If a Change of Control were to occur, there can be no
assurance that the Company would have, or would be able to acquire, sufficient
funds to pay the purchase price for all of the Exchange Notes that the Company
might be required to purchase. Certain events involving a Change of Control
may result in an event of default under the Credit Facility or other
indebtedness of the Company that may be incurred in the future. In the event a
Change of Control occurs at a time when the Company is prohibited from
purchasing the Exchange Notes, the Company could seek the consent of its
lenders to purchase the Exchange Notes or could attempt to refinance the
borrowings that contain such prohibition. If the Company does not obtain such
a consent or repay such borrowings, the Company would remain prohibited from
purchasing the Exchange Notes. In such case, the Company's failure to purchase
tendered Exchange Notes would constitute an Event of Default under the
Indenture. If, as a result thereof, a default occurs with respect to any
Senior Debt, the subordination provisions of the Exchange Notes would require
payment in full of the Credit Facility and any other such Senior Debt before
repurchase of the Exchange Notes. See "Description of Credit Facility,"
"Description of Exchange Notes--Subordination" and "--Repurchase at the Option
of the Holders--Change of Control."
FRAUDULENT CONVEYANCE
A substantial portion of the proceeds of the Initial Offering was used to
refinance existing indebtedness. Accordingly, the obligations of the Company
under the Exchange Notes may be subject to review under relevant federal and
state fraudulent conveyance statutes ("fraudulent conveyance statutes") in a
bankruptcy, reorganization or rehabilitation case or similar proceeding or a
lawsuit by or on behalf of unpaid creditors of the Company. If a court were to
find under relevant fraudulent conveyance statutes that, at the time the
Exchange Notes were issued, (a) the Company issued the Exchange Notes with the
intent of hindering, delaying or
10
<PAGE>
defrauding current or future creditors or (b)(i) the Company received less
than reasonably equivalent value or fair consideration for issuing the
Exchange Notes (including, to the extent the proceeds from the Initial
Offering were used to refinance any indebtedness of the Company or any of its
subsidiaries, by virtue of an invalidation as a fraudulent conveyance of the
incurrence of such indebtedness) and (ii)(A) was insolvent, (B) was rendered
insolvent by reason of such issuance and/or such related transactions, (C) was
engaged, or about to engage, in a business or transaction for which its
remaining assets constituted unreasonably small capital, (D) intended to
incur, or believed that it would incur, obligations beyond its ability to pay
as such obligations matured (as all of the foregoing terms are defined in or
interpreted under such fraudulent conveyance statutes) or (E) was a defendant
in an action for money damages, or had a judgment for money damages docketed
against it (if, in either case, after final judgment, the judgment was
unsatisfied), such court could further subordinate the Exchange Notes to
presently existing and future indebtedness of the Company and take other
action detrimental to the holders of the Exchange Notes, including, under
certain circumstances, invalidating the Exchange Notes.
The fraudulent conveyance statutes may apply to the Subsidiary Guarantors'
issuance of the Subsidiary Guarantees. To the extent that a court were to find
that (a) a Subsidiary Guarantee was incurred by a Subsidiary Guarantor with
the intent to hinder, delay or defraud any present or future creditor or (b)
such Subsidiary Guarantor did not receive fair consideration or reasonably
equivalent value for issuing its Subsidiary Guarantee and such Subsidiary
Guarantor (i) was insolvent, (ii) was rendered insolvent by reason of the
issuance of such Subsidiary Guarantee, (iii) was engaged or about to engage in
a business or transaction for which the remaining assets of such Subsidiary
Guarantor constituted unreasonably small capital to carry on its business,
(iv) intended to incur, or believed that it would incur, debts beyond its
ability to pay such debts as they matured or (v) was a defendant in an action
for money damages, or had a judgment for money damages docketed against it
(if, in either case, after final judgment, the judgment was unsatisfied), the
court could avoid or further subordinate such Subsidiary Guarantee in favor of
the Subsidiary Guarantor's creditors. Among other things, a legal challenge of
a Subsidiary Guarantee on fraudulent conveyance grounds may focus on the
benefits, if any, realized by the Subsidiary Guarantor as a result of the
issuance by the Company of the Exchange Notes. To the extent any Subsidiary
Guarantees were avoided as a fraudulent conveyance or held unenforceable for
any other reason, the claims of holders of the Exchange Notes in respect of
such Subsidiary Guarantor would be adversely affected and such holders would,
to such extent, be creditors solely of the Company and any Subsidiary
Guarantor whose Subsidiary Guarantee was not avoided or held unenforceable. To
the extent the claims of the holders of the Exchange Notes against the issuer
of an invalid Subsidiary Guarantee were further subordinated, they could be
subject to the prior payment of all liabilities of such Subsidiary Guarantor.
There can be no assurance that, after providing for all prior claims, there
would be sufficient assets to satisfy the claims of the holders of the
Exchange Notes relating to any voided portions of any of the Subsidiary
Guarantees.
The measure of insolvency for purposes of the foregoing considerations will
vary depending upon the law applied in any such proceeding. Generally however,
the Company or a Subsidiary Guarantor may be considered insolvent if the sum
of its debts, taking contingent liabilities into account, is greater than the
fair marketable value of all of its assets at a fair valuation or if the
present fair marketable value of its assets is less than the amount that would
be required to pay its probable liability on its existing debts, including
contingent liabilities, as they become absolute and mature.
COMPETITION
The equipment rental industry is highly fragmented and competitive. The
Company's competitors include: large national companies; regional competitors
which operate in one or two states; small, independent businesses with one or
two rental locations; and equipment vendors and dealers who both sell and rent
equipment to customers. Some of the Company's competitors have greater
financial resources, are more geographically diverse and have greater name
recognition than the Company. There can be no assurance that the Company will
not encounter increased competition from existing competitors or new market
entrants that may be significantly larger and have greater financial and
marketing resources. In addition, to the extent existing or future competitors
seek to gain or retain market share by reducing prices, the Company may be
required to lower its prices and rates, thereby adversely affecting operating
results. Existing or future competitors also may seek to compete with
11
<PAGE>
the Company for acquisitions, which could have the effect of increasing the
price for acquisitions or reducing the number of suitable acquisitions. In
addition, such competitors also may compete with the Company for start-up
locations, thereby limiting the number of attractive locations for expansion.
See "Business--Competition."
ABILITY TO COMPLETE AND INTEGRATE ACQUISITIONS
A significant portion of the Company's strategy is to pursue and complete
acquisitions that meet its acquisition criteria. The Company has acquired and
seeks to acquire other companies that can benefit from the Company's
operations, management and access to capital. The Company's ability to grow by
acquisition is dependent upon, and may be limited by, the availability of
suitable acquisition candidates and capital, and the restrictions contained in
the Credit Facility, the Indenture and the Company's other financing
arrangements. To the extent that cash generated internally and cash available
under the Credit Facility are not sufficient to provide the capital required
for acquisitions, the Company will require additional debt and/or equity
financing in order to provide for such capital. Future debt financings, if
available, will result in increased interest and amortization expense,
increased leverage and decreased income available to fund acquisitions and
expansion, and may limit the Company's ability to withstand competitive
pressures and render the Company more vulnerable to economic downturns. Growth
by acquisition involves risks that could adversely affect the Company's
operating results, including difficulties in integrating the operations and
personnel of acquired companies and the potential loss of key employees of
acquired companies. In addition, although the Company performs a due diligence
investigation of each business that it acquires, there may nevertheless be
liabilities of the Acquired Businesses or future acquired companies that the
Company fails or is unable to discover during its due diligence investigation
and for which the Company, as a successor owner, may be responsible.
There can be no assurance that the Company will be able to obtain the
capital necessary to pursue its growth strategy, consummate acquisitions on
satisfactory terms or, if any such acquisitions are consummated, successfully
integrate such acquired businesses into the Company. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations--
Liquidity and Capital Resources."
DEPENDENCE ON KEY PERSONNEL
Certain of the executive officers of the Company are of significant
importance to the direction and management of the Company. The loss of the
services of such persons could have a material adverse effect on the Company's
business and future operations, and there can be no assurance that the Company
would be able to find replacements for such persons with comparable business
experience. The Company does not maintain key man life insurance with respect
to such executive officers. See "Management--Directors and Executive
Officers."
GENERAL ECONOMIC CONDITIONS
A majority of the Company's revenues are derived from customers which are in
industries and businesses that are cyclical in nature and subject to changes
in general economic conditions, such as the construction industry. In
addition, because the Company conducts its operations in a variety of
geographic markets, it is subject to the economic conditions in each such
geographic market. General economic downturns or localized downturns in
markets where the Company has operations, including any downturns in the
construction industry, could have a material adverse effect on the Company and
its business, results of operations and financial condition.
CONTROLLING STOCKHOLDER
Golder Thoma Fund V owns and controls 94% of the outstanding common stock of
the Company. As a result, Golder Thoma Fund V has significant influence on the
election of the Company's Board of Directors (the "Board of Directors" or the
"Board") and, therefore, significant influence on the affairs and management
of
12
<PAGE>
the Company. The Stockholders Agreement (as defined) provides that Golder
Thoma Fund V has the right to designate all but one of the members of the
Board of Directors of the Company. Circumstances may occur in which the
interests of Golder Thoma Fund V, as a stockholder of the Company, could be in
conflict with the interests of the holders of the Exchange Notes. In addition,
Golder Thoma Fund V, as a stockholder of the Company, may have an interest in
pursuing acquisitions, divestitures or other transactions that, in its
judgment, could enhance its equity investment, even though such transactions
might involve risks to the holders of the Exchange Notes. See "Certain
Relationships and Related Transactions--Stockholders Agreement" and "--
Registration Agreement."
ENVIRONMENTAL LIABILITIES
The Company's facilities are subject to federal, state and local
environmental requirements, including those relating to discharges to air,
water and land, the handling and disposal of solid and hazardous waste and the
cleanup of properties affected by hazardous substances. Certain environmental
laws impose substantial penalties for noncompliance, and others impose strict,
retroactive, joint and several liability upon persons responsible for releases
of hazardous substances.
The Company does not currently anticipate any material adverse effect on its
operations or financial condition as a result of its efforts to comply with,
or its liabilities under, such requirements. Some risk of environmental
liability is inherent in the Company's business, however, and there can be no
assurance that material environmental costs will not arise in the future. See
"Business--Governmental and Environmental Regulation."
LIABILITY AND INSURANCE
The Company's business exposes it to claims for personal injury or death
resulting from the use of equipment rented or sold by the Company, from
injuries caused in motor vehicle accidents in which Company delivery and
service personnel are involved, as well as workers' compensation claims and
other employment-related claims by the Company's employees. The Company
carries insurance coverage for product liability, general and automobile
liability and employment related claims from various national insurance
carriers. There can be no assurance, however, that existing or future claims
will not exceed the level of the Company's insurance, that the Company will
have sufficient capital available to pay any uninsured claims or that its
insurance will continue to be available on economically reasonable terms, if
at all. See "Business--Legal Proceedings."
ABSENCE OF A PUBLIC MARKET COULD ADVERSELY AFFECT THE VALUE OF EXCHANGE NOTES
The Old Notes were issued to, and the Company believes are currently owned
by, a relatively small number of beneficial owners. Prior to the Exchange
Offer, there has not been any public market for the Old Notes. The Old Notes
have not been registered under the Securities Act and will be subject to
restrictions on transferability to the extent that they are not exchanged for
Exchange Notes by holders who are entitled to participate in this Exchange
Offer. After consummation of the Exchange Offer, the market for Old Notes not
tendered or exchanged (or tendered but not accepted for exchange) in the
Exchange Offer will be even more limited than their existing market. The
holders of Old Notes (other than any such holder that is an "affiliate" of the
Company within the meaning of Rule 405 under the Securities Act) who are not
eligible to participate in the Exchange Offer are entitled to certain
registration rights, and the Company is required to file a Shelf Registration
Statement with respect to such Old Notes. The Exchange Notes will constitute a
new issue of securities with no established trading market. The Company does
not intend to list the Exchange Notes on any national securities exchange or
seek the admission thereof to trading in the National Association of
Securities Dealers Automated Quotation System. The Initial Purchasers have
advised the Company that they currently intend to make a market in the
Exchange Notes, but they are not obligated to do so and may discontinue such
market making at any time. In addition, such market making activity will be
subject to the limits imposed by the Securities Act and the Exchange Act and
may be limited during the Exchange Offer and the pendency of the Shelf
Registration Statement. Accordingly, no assurance can be given that an active
public or other market will develop for the
13
<PAGE>
Exchange Notes or as to the liquidity of the trading market for the Exchange
Notes. If a trading market does not develop or is not maintained, holders of
the Exchange Notes may experience difficulty in reselling the Exchange Notes
or may be unable to sell them at all. If a market for the Exchange Notes
develops, any such market may be discontinued at any time.
If a public trading market develops for the Exchange Notes, future trading
prices of such securities will depend on many factors including, among other
things, prevailing interest rates, the Company's results of operations and
market for similar securities. Depending on prevailing interest rates, the
market for similar securities and other factors, including the financial
condition of the Company, the Exchange Notes may trade at a discount from
their principal amount.
FAILURE TO FOLLOW EXCHANGE OFFER PROCEDURES COULD ADVERSELY AFFECT HOLDERS
Issuance of the Exchange Notes in exchange for the Old Notes pursuant to the
Exchange Offer will be made only after a timely receipt by the Company of such
Old Notes, a properly completed and duly executed Letter of Transmittal (or,
in the case of a book-entry transfer, an Agent's Message in lieu thereof) and
all other required documents. Therefore, holders of the Old Notes desiring to
tender such Old Notes in exchange for Exchange Notes should allow sufficient
time to ensure timely delivery. The Company is under no duty to give
notification of defects or irregularities with respect to the tenders of Old
Notes for exchange. Old Notes that are not tendered or are tendered but not
accepted will, following the consummation of the Exchange Offer, continue to
be subject to the existing restrictions upon transfer thereof, and, upon
consummation of the Exchange Offer, certain registration rights under the
Registration Rights Agreement will terminate. In addition, any holder of Old
Notes who tenders in the Exchange Offer for the purpose of participating in a
distribution of the Exchange Notes may be deemed to have received restricted
securities, and if so, will be required to comply with the registration and
prospectus delivery requirements of the Securities Act in connection with any
resale transaction. Each broker-dealer that receives Exchange Notes for its
own account in exchange for Old Notes, where such Old Notes were acquired by
such broker-dealer as a result of market-making activities or other trading
activities, must acknowledge that it will deliver a prospectus in connection
with any resale of such Exchange Notes. See "Plan of Distribution." To the
extent that Old Notes are tendered and accepted in the Exchange Offer, the
trading market for untendered and tendered but unaccepted Old Notes could be
adversely affected. See "The Exchange Offer."
14
<PAGE>
USE OF PROCEEDS
The Exchange Offer is intended to satisfy certain of the Company's
obligations under the Purchase Agreement and the Registration Rights
Agreement. The Company will not receive any cash proceeds from the issuance of
the Exchange Notes offered hereby. In consideration for issuing the Exchange
Notes contemplated in the Prospectus, the Company will receive Old Notes in
like principal amount, the form and terms of which are the same as the forms
and terms of the Exchange Notes (which replace the Old Notes), except as
otherwise described herein. The Old Notes surrendered in exchange for Exchange
Notes will be retired and cancelled and cannot be reissued. Accordingly, the
issuance of the Exchange Notes will not result in any increase or decrease in
the indebtedness of the Company. As such, no effect has been given to the
Exchange Offer in the pro forma combined financial data or capitalization
tables.
The net proceeds to the Company from the sale of the Old Notes in the
Initial Offering (after deducting discounts, fees and expenses) were utilized
by the Company for the following:
<TABLE>
<CAPTION>
(IN THOUSANDS)
<S> <C>
Net Proceeds from the Initial Offering (1).................... $95,652
=======
Uses of Funds:
Repayment of Credit Facility................................ $59,513
-------
Repayment of Sellers Notes.................................. $ 1,015
-------
Acquisitions (2)............................................ $35,124
-------
Total..................................................... $95,652
=======
</TABLE>
- --------
(1) Reflects $100,000 aggregate principal amount of Old Notes net of a $1,233
discount at issuance and net of $3,115 of underwriting, legal, accounting
and other fees and expenses.
(2) The Company used the remainder of the net proceeds from the Initial
Offering after the repayment of the Credit Facility to acquire the seven
businesses it acquired in the first quarter of 1998.
15
<PAGE>
CAPITALIZATION
The following table sets forth the consolidated capitalization of the
Company at December 31, 1997, on an actual basis giving effect to the Initial
Offering and the application of the net proceeds therefrom. The information in
this table should be read in conjunction with "Selected Pro Forma Combined
Financial Data," "Selected Historical Financial Data," "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
the Financial Statements and notes thereto appearing elsewhere herein.
<TABLE>
<CAPTION>
AT DECEMBER
31, 1997
--------------
(IN THOUSANDS)
<S> <C>
Cash............................................................. $ 35,682
========
Debt:
Notes........................................................... $ 98,782
--------
Total debt................................................... 98,782
Total stockholders' equity................................... 26,473
--------
Total capitalization......................................... $125,255
========
</TABLE>
16
<PAGE>
SELECTED PRO FORMA COMBINED FINANCIAL DATA
The Company was founded in June 1996 to acquire and integrate equipment
rental companies. In 1997, the Company acquired the six businesses in separate
transactions. In 1998, the Company acquired seven businesses in separate
transactions and has a definitive agreement to acquire Falconite concurrent
with the Initial Stock Offering. While the Acquired Businesses were or will be
acquired at various dates during 1997 and 1998, the following pro forma
combined statement of operations is presented as if all such acquisitions and
the Initial Stock Offering had occurred on January 1, 1997. The following pro
forma balance sheet gives effect to the aforementioned acquisitions and the
Initial Stock Offering as if they had occurred on December 31, 1997. There can
be no assurances that the acquisition of Falconite or the Initial Stock
Offering will be consummated.
The following selected pro forma combined financial data have been derived
from Company (the Company herein defined to include the Acquired Businesses)
prepared financial information (and, when applicable, includes adjustments to
conform fiscal periods to calendar periods), the audited Financial Statements
and notes thereto of certain of the Acquired Businesses for certain periods
and the audited Financial Statements and notes thereto of the Company since
inception, which Financial Statements appear elsewhere in this Prospectus.
The selected pro forma combined financial data have been prepared for
comparative purposes only and do not purport to be indicative of the results
which would have been achieved had the Acquired Businesses been purchased and
the Initial Stock Offering been consummated as of the assumed dates, nor are
the results indicative of the Company's future results. The selected pro forma
combined financial data should be read in conjunction with "Selected
Historical Financial Data," "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and the Financial Statements and notes
thereto of the Company since inception and certain of the Acquired Businesses
for certain periods and the Unaudited Pro Forma Combined Financial Statements
and notes thereto included elsewhere herein.
17
<PAGE>
PRO FORMA COMBINED STATEMENT OF OPERATIONS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1997
--------------------------------------------------
THE ACQUIRED
COMPANY(A) BUSINESSES(B) ADJUSTMENTS(C) PRO FORMA
---------- ------------- -------------- ---------
<S> <C> <C> <C> <C>
REVENUES:
Rental revenues............ $26,398 $115,678 $ 4,227 $146,303
Rental equipment sales..... 4,186 15,638 2,910 22,734
New equipment sales and
other..................... 10,704 37,193 1,694 49,591
------- -------- ------- --------
Total revenues............... 41,288 168,509 8,831 218,628
COST OF REVENUES:
Rental equipment
depreciation.............. 5,009 23,320 1,157 (d) 29,486
Cost of rental equipment
sales..................... 2,935 10,579 2,561 16,075
Cost of new equipment
sales..................... 4,872 17,444 1,579 23,895
Other operating expenses... 12,899 46,594 (187)(e) 59,306
------- -------- ------- --------
Total cost of revenues....... 25,715 97,937 5,110 128,762
------- -------- ------- --------
Gross profit................. 15,573 70,572 3,721 89,866
Selling, general and
administrative expenses..... 7,910 38,088 (3,692)(f) 42,306
Non-rental depreciation and
amortization................ 1,476 3,776 4,836 (g) 10,088
------- -------- ------- --------
Operating income............. 6,187 28,708 2,577 37,472
Other income (expense), net.. 72 (1,177) 1,422 (h) 317
Interest expense, net........ 4,336 10,622 583 (i) 15,541
------- -------- ------- --------
Income before income taxes... 1,923 16,909 3,416 22,248
Income tax expense........... 818 3,172 5,346 (j) 9,336
------- -------- ------- --------
Net income................... $ 1,105 $ 13,737 $(1,930) $ 12,912
======= ======== ======= ========
</TABLE>
(See Notes to Selected Pro Forma Combined Financial Data)
18
<PAGE>
PRO FORMA COMBINED BALANCE SHEET
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
AT DECEMBER 31, 1997
----------------------------------------------------
THE ACQUIRED PRO
COMPANY(K) BUSINESSES(L) ADJUSTMENTS(M) FORMA
---------- ------------- -------------- --------
<S> <C> <C> <C> <C>
ASSETS
Cash and cash equivalents. $ 35,682 $ 1,390 $(37,072)(i) $ --
Accounts receivable, net.. 8,356 27,450 (2,665)(ii) 33,141
Inventory, net............ 2,239 7,373 -- 9,612
Rental equipment, net..... 46,801 148,154 15,896 (iii) 210,851
Property and equipment,
net...................... 3,012 15,392 3,054 (iv) 21,458
Intangible assets, net.... 27,937 16,279 103,166 (v) 147,382
Loan origination costs,
net...................... 6,270 -- -- 6,270
Prepaid and other assets,
net...................... 840 3,567 (1,171)(vi) 3,236
-------- -------- -------- --------
Total assets.......... $131,137 $219,605 $ 81,208 $431,950
======== ======== ======== ========
LIABILITIES
Accounts payable.......... $ 2,489 $ 5,280 $ -- $ 7,769
Accrued interest.......... 1,066 803 (137)(vii) 1,732
Accrued expenses and other
liabilities.............. 2,327 16,907 16,331 (viii) 35,565
Debt...................... 98,782 134,618 (79,870)(ix) 153,530
-------- -------- -------- --------
Total liabilities..... 104,664 157,608 (63,676) 198,596
Stockholders' equity...... 26,473 61,997 144,884 (x) 233,354
-------- -------- -------- --------
Total liabilities and
stockholders' equity. $131,137 $219,605 $ 81,208 $431,950
======== ======== ======== ========
</TABLE>
(See Notes to Selected Pro Forma Combined Financial Data)
19
<PAGE>
NOTES TO SELECTED PRO FORMA COMBINED FINANCIAL DATA
(DOLLARS IN THOUSANDS)
(a) Represents actual historical 1997 results for the Company, including
results for the Acquired Businesses purchased in 1997 from the date of
acquisition.
(b) Represents combined historical 1997 results for (i) the Acquired
Businesses purchased in 1997 prior to the date of acquisition and (ii) the
Acquired Businesses purchased or to be purchased in 1998.
(c) In each of the following items, reflects the elimination of a location
not purchased from Cormier Equipment as follows:
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
1997
------------
<S> <C>
Rental revenues............................................ $ 130
New equipment sales and other.............................. 21
-----
Total revenues............................................. 151
Rental equipment depreciation.............................. 81
Other operating expenses................................... 102
-----
Total cost of revenues..................................... 183
-----
Gross profit (loss)........................................ (32)
Selling, general and administrative expenses............... 72
Non-rental depreciation and amortization................... 1
-----
Operating loss............................................. $(105)
=====
</TABLE>
In addition, reflects the acquisition of GenEquip, Inc., a business acquired
by Falconite, Inc. in January 1998 as follows:
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
1997
------------
<S> <C>
Rental revenues.............................................. $4,357
Rental equipment sales....................................... 2,910
New equipment sales and other................................ 1,715
------
Total revenues............................................... 8,982
Rental equipment depreciation................................ 1,583
Cost of rental equipment sales............................... 2,561
Cost of new equipment sales.................................. 1,578
Other operating costs........................................ 1,664
------
Total cost of revenues....................................... 7,386
------
Gross profit................................................. 1,596
Selling, general and administrative expenses................. 1,221
Non-rental depreciation and amortization..................... 107
------
Operating income............................................. 268
Other income, net............................................ 59
Interest income, net......................................... 23
------
Income before income taxes................................... $ 350
======
</TABLE>
(d) Pursuant to SEC reporting requirements, rental equipment depreciation has
been derived utilizing the rental equipment asset values of each of the
Acquired Businesses at the time of their acquisition rather than utilizing
values of rental equipment assets actually held by each of the Acquired
Businesses in the period presented. Reflects the impact on rental
equipment depreciation resulting from the application of the Company's
depreciation policy rather than those of the former owners of the Acquired
Businesses. In addition, reflects the increase in rental equipment
depreciation resulting from the write-up of rental equipment assets to
fair value arising from purchase accounting. In addition, reflects the
increase in rental equipment depreciation resulting from the purchase of
equipment referred to in note (e) below.
20
<PAGE>
(e) Reflects the elimination of lease expense resulting from the termination
of certain rental equipment leases which occurred with the purchase of the
underlying equipment. Also reflects the rent expense resulting from the
Company's current lease terms as compared to lease terms entered into by
former owners. In addition, reflects the increase in rent expense and
corresponding decrease in depreciation expense and real estate tax expense
resulting from the Company leasing rather than owning certain related
facilities and, conversely, the decrease in rent expense and corresponding
increase in depreciation expense and real estate tax expense resulting
from the termination of certain facility leases which occurred with the
purchase of the underlying facility by the Company. Also, reflects the
decrease in rent expense resulting from the termination of certain
facility leases.
(f) Reflects the decrease resulting from differentials between the
compensation levels of former owners of the Acquired Businesses and the
terms of the employment agreements entered into between certain of the
former owners and the Company.
(g) Pursuant to SEC reporting requirements, non-rental depreciation has been
derived utilizing the property, plant and equipment values of each of the
Acquired Businesses at the time of their acquisition, rather than
utilizing values of property, plant and equipment actually held by each of
the Acquired Businesses in the period presented. Reflects the decrease in
non-rental depreciation resulting from the application of the Company's
depreciation policy rather than those of the former owners of the Acquired
Businesses. In addition, reflects the increase in non-rental depreciation
resulting from the write-up of property, plant and equipment to fair value
arising from purchase accounting. Also reflects amortization of goodwill
calculated on a goodwill life of 40 years and amortization of non-compete
agreements calculated on their contract terms of two to five years, in
each case specifically related to the purchases of the Acquired
Businesses.
(h) Reflects discontinuation and elimination of unrelated businesses
previously operated and related charges incurred by the former owners of
certain of the Acquired Businesses.
(i) Reflects additional interest expense at the Company's incremental
borrowing rate on the net indebtedness resulting from the purchase of the
Acquired Businesses after giving effect to the Initial Stock Offering.
(j) Reflects the income tax rate that would have been in effect if the
Acquired Businesses had been combined and subject to a federal statutory
rate of 34% and the applicable state statutory rate for each of the
Acquired Businesses throughout the period presented.
(k) Represents actual historical balance sheet of the Company as of December
31, 1997.
(l) Represents actual historical combined balance sheets as of December 31,
1997 for the Acquired Businesses purchased in 1998 or to be purchased in
1998.
(m) The following are adjustments to the aforementioned balance sheets:
(i) Reflects the use of the Company's and the Acquired Businesses' cash at
December 31, 1997 to pay a portion of the consideration due to selling
shareholders.
(ii) Reflects the exclusion of contract receivables which will be retained
by a selling shareholder.
(iii) Reflects the write-up of rental equipment to fair value as part of
purchase accounting. Reflects the purchase of rental equipment
previously leased. In addition, reflects the purchase of rental
equipment resulting from the acquisition of GenEquip, Inc. by
Falconite, Inc. in January 1998.
(iv) Reflects the write-up of property and equipment to fair value as part
of purchase accounting. Reflects the purchase of facilities previously
leased. In addition, reflects the purchase of equipment resulting from
the acquisition of GenEquip, Inc. by Falconite, Inc. in January 1998.
(v) Reflects $101,666 of goodwill representing the excess of the purchase
price over the fair value of net assets acquired. In addition, reflects
$1,500 of noncompete agreements entered into by the Company and certain
selling shareholders.
(vi) Reflects the exclusion of certain related party receivables which will
be retained by the selling shareholders.
(vii) Reflects the exclusion of certain accrued interest not assumed by the
Company.
(viii) Reflects certain additional accrued expenses and other liabilities
assumed by the Company.
(ix) Reflects the reduction of indebtedness resulting from the use of the
Company's and the Acquired Businesses' cash on hand and application of
net proceeds from the Initial Stock Offering.
(x) Reflects the cash proceeds from the Initial Stock Offering, net of
estimated Initial Stock Offering cost and the Mandatory Redemption,
less the elimination of equity of the Acquired Businesses purchased or
to be purchased in 1998.
21
<PAGE>
SELECTED HISTORICAL FINANCIAL DATA
(IN THOUSANDS)
The Company was founded in June 1996 to acquire and integrate equipment
rental companies. In 1997, the Company acquired Aerial Platforms, BAT Rentals,
Equipco Rentals & Sales, Industrial Hoist Services, Lone Star Rentals and
Sprintank in separate transactions. For historical financial data presentation
purposes, Aerial Platforms, BAT Rentals, Equipco Rentals & Sales, Lone Star
Rentals and Sprintank have been identified as the predecessor companies and
are collectively referred to herein as the "Predecessor Companies." The
following selected historical financial data of the Predecessor Companies as
of and for the years ended December 31, 1996 and 1997 (or the corresponding
fiscal year) have been derived from audited Financial Statements and notes
thereto included elsewhere in this Prospectus. The following selected
historical financial data of BAT Rentals, Equipco Rentals & Sales, Lone Star
Rentals and Sprintank as of and for the year ended December 31, 1995 (or the
corresponding fiscal year) have been derived from audited Financial Statements
and notes thereto included elsewhere in this Prospectus. The following
selected historical financial data of Aerial Platforms as of and for the year
ended December 31, 1995 (or the corresponding fiscal year) have been derived
from unaudited financial statements which have been prepared on the same basis
as the audited Financial Statements and, in the opinion of management, reflect
all adjustments, consisting only of normal recurring adjustments, necessary
for a fair presentation of such data. The following selected historical
financial data of the Predecessor Companies as of and for the years ended
December 31, 1993 and 1994 (or the corresponding fiscal year) have been
derived from unaudited financial statements, which have been prepared on the
same basis as the audited Financial Statements and, in the opinion of
management, reflect all adjustments, consisting only of normal recurring
adjustments, necessary for a fair presentation of such data.
The Company has entered into a definitive agreement to acquire Falconite
concurrent with the Initial Stock Offering. Due to the materiality of
Falconite to the Company on a pro forma basis, the following selected
historical financial data includes results of Falconite, which have been
derived from audited Financial Statements and notes thereto included elsewhere
herein.
The selected historical financial data of the Company as of and for the
period from inception (June 4, 1996) through December 31, 1996 and as of and
for the year ended December 31, 1997 have been derived from audited Financial
Statements and notes thereto appearing elsewhere in this Prospectus.
The selected historical financial data should be read in conjunction with
the information contained in "Selected Pro Forma Combined Financial Data,"
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and the Financial Statements and notes thereto included elsewhere
herein.
OPERATING DATA
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------------------
1993 1994 1995 1996 1997(A)
------ ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
PREDECESSOR COMPANIES:(B)
Aerial Platforms
Total revenues....................... $1,571 $ 2,039 $ 3,269 $ 4,746 $ 233
Operating income (loss).............. 356 351 887 998 (8)
Income (loss) before income taxes.... 265 266 818 874 (14)
BAT Rentals
Total revenues....................... $9,214 $10,932 $12,453 $13,140 $ 3,802
Operating income..................... 1,893 2,099 1,973 2,877 757
Income before income taxes........... 1,956 1,944 1,899 2,801 710
Equipco Rentals & Sales
Total revenues....................... $3,080 $ 3,768 $ 5,390 $ 5,832 $ 4,369
Operating income..................... 133 216 305 407 911
Income before income taxes........... 65 124 145 227 837
Lone Star Rentals
Total revenues....................... $7,333 $ 8,935 $ 9,703 $ 9,349 $ 1,643
Operating income (loss).............. 993 1,263 1,103 640 (229)
Income (loss) before income taxes.... 598 707 726 381 (254)
Sprintank
Total revenues....................... $3,810 $ 5,182 $ 7,879 $ 9,598 $ 6,042
Operating income..................... 482 830 1,522 1,503 2,179
Income before income taxes........... 98 407 655 480 1,616
FALCONITE:(B)
Total revenues....................... $35,661 $48,086 $63,646
Operating income..................... 11,306 12,075 11,959
Income before income taxes and
minority interests.................. 8,094 7,959 3,817
THE COMPANY:
Total revenues....................... $ -- $41,288
Operating income (loss).............. (336) 6,187
Income (loss) before income taxes.... (332) 1,923
</TABLE>
22
<PAGE>
BALANCE SHEET DATA
<TABLE>
<CAPTION>
AT DECEMBER 31,
----------------------------------------
1993 1994 1995 1996 1997
------ ------- ------- -------- --------
<S> <C> <C> <C> <C> <C>
PREDECESSOR COMPANIES:
Aerial Platforms
Rental equipment, net................ $ 326 $ 306 $ 1,396 $ 1,758
Total assets......................... 921 944 2,455 2,889
Total debt........................... 878 549 1,216 1,243
BAT Rentals
Rental equipment, net................ $3,122 $ 3,499 $ 4,434 $ 5,779
Total assets......................... 8,603 9,212 10,111 11,504
Total debt........................... 2,734 2,659 3,191 3,302
Equipco Rentals & Sales
Rental equipment, net................ $1,112 $ 1,588 $ 2,047 $ 2,553
Total assets......................... 2,102 2,750 3,337 4,102
Total debt........................... 1,224 1,470 1,846 2,393
Lone Star Rentals
Rental equipment, net................ $4,765 $ 6,954 $ 7,622 $ 6,952
Total assets......................... 7,144 9,910 10,094 9,405
Total debt........................... 4,301 6,390 6,121 4,983
Sprintank
Rental equipment, net................ $4,664 $ 4,665 $ 8,118 $ 9,741
Total assets......................... 6,831 6,807 10,727 12,546
Total debt........................... 4,739 4,702 7,370 8,987
FALCONITE:
Rental equipment, net................ $ 81,583 $107,721
Total assets......................... 117,458 148,068
Total debt........................... 60,619 100,200
THE COMPANY:
Rental equipment, net................ $ -- $ 46,801
Total assets......................... 216 131,137
Total debt........................... -- 98,782
Total stockholders' equity........... 106 26,473
</TABLE>
- --------
(a) With respect to the Predecessor Companies, includes results prior to
acquisition by the Company. With respect to Falconite, represents actual
1997 results. With respect to the Company, represents actual 1997 results,
including results for the Predecessor Companies and Industrial Hoist
Services after acquisition by the Company.
(b) Operating income (loss) and income (loss) before income taxes reflect
private company expenses such as certain owners' compensation which would
not be included in the Company's results going forward.
23
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
(IN THOUSANDS)
The following discussion and analysis of the Company's and Falconite's
results of operations, and the Company's financial condition and liquidity
should be read in conjunction with "Selected Pro Forma and Historical
Consolidated Financial Information" and "Selected Historical Financial Data"
and the Financial Statements and notes thereto included elsewhere herein.
GENERAL
NES was founded in June 1996 to acquire and integrate businesses that
specialize in the rental of specialty and general equipment to industrial and
construction end-users. Since January 1997, the Company has acquired 13
businesses in separate transactions and entered into a definitive agreement to
acquire Falconite. The following discussion is presented as if the 14
acquisitions and the Initial Stock Offering had been completed on the first
day of the periods discussed. The Company's pro forma results are based upon
adjustments described in the notes to "Selected Pro Forma Combined Financial
Data." Management believes that the Acquired Businesses and others that the
Company will acquire will benefit from increased access to capital, the
support of experienced and professional senior management, centrally
coordinated purchasing and an increased emphasis on financial management.
Therefore, the Company's pro forma results discussed below do not necessarily
represent the results of the Company had each of the Acquired Businesses been
operated by the Company during those periods.
The Company derives its revenues from four sources: (i) rental of equipment;
(ii) rental equipment sales; (iii) new equipment sales; and (iv) the sale of
complementary parts and services. The Company's primary source of revenue is
the rental of equipment to industrial and construction end-users. The growth
of rental revenues is dependent on several factors, including demand for
rental equipment, the amount and quality of equipment available for rent,
rental rates and general economic conditions. Revenues generated from the sale
of used rental equipment are impacted by price, general economic conditions
and the fleet maintenance programs conducted by the Company. Sales of new
equipment are impacted by price and general economic conditions. Revenues from
the sale of complementary parts and services are primarily affected by
equipment rental and sales volumes.
Cost of revenues consists primarily of rental equipment depreciation, the
cost of new equipment, the net book value of rental equipment sold and other
direct operating costs. Given the varied, and in some cases specialized,
nature of its rental equipment, the Company utilizes a range of periods over
which it depreciates its equipment on a straight line basis. On average, the
Company depreciates its equipment over an estimated useful life of seven years
with no residual value.
The Company has entered into a definitive agreement to purchase Falconite
concurrent with the Initial Stock Offering. Due to the materiality of
Falconite to the Company on a pro forma basis, the following includes a
discussion and analysis of Falconite's results of operations.
24
<PAGE>
The following table sets forth, for the periods indicated, information
derived from the historical and pro forma consolidated statements of
operations of the Company expressed as a percentage of total revenues.
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
DECEMBER 31, 1996 DECEMBER 31, 1997
----------------- --------------------
PRO FORMA PRO FORMA HISTORICAL
----------------- --------- ----------
<S> <C> <C> <C>
Rental revenues......................... 67.0% 66.9% 63.9%
Rental equipment sales.................. 10.8 10.4 10.2
New equipment sales and other........... 22.2 22.7 25.9
----- ----- -----
Total revenues.......................... 100.0 100.0 100.0
Cost of revenues........................ 61.7 58.9 62.3
----- ----- -----
Gross profit............................ 38.3 41.1 37.7
Selling, general and administrative
expenses............................... 20.5 19.4 19.2
Non-rental depreciation and
amortization........................... 5.5 4.6 3.6
----- ----- -----
Operating income........................ 12.3 17.1 14.9
Other income, net....................... 0.4 0.1 0.2
Interest expense, net................... 8.8 7.0 10.5
----- ----- -----
Income before income taxes.............. 3.9 10.2 4.6
Income tax expense...................... 2.1 4.3 2.0
----- ----- -----
Net income.............................. 1.8% 5.9% 2.6%
===== ===== =====
</TABLE>
PRO FORMA RESULTS OF OPERATIONS--THE COMPANY
Pro Forma Combined Year Ended December 31, 1997 as Compared to Pro Forma
Combined Year Ended December 31, 1996
Revenues. Total revenues increased 23.7%, or $41,872, from $176,756 to
$218,628 from 1996 to 1997. Rental revenue growth accounted for $27,932 or
66.7% of such increase. A portion of the rental revenue growth was
attributable to eight locations opened or acquired by Falconite during
November and December 1996, which contributed approximately $10,700 in 1997.
The remaining approximately $17,000 of rental revenue growth resulted
primarily from increased capital investment in rental equipment by the
Company. Rental equipment sales increased 19.1%, or $3,646, reflecting strong
demand for the Company's equipment and the dispositions of certain equipment
in order to optimize the average age of the Company's expanding fleet. New
equipment sales and other increased $10,295 or 26.2% due to strong demand for
the Company's new hoists and pump equipment as well as strong performances at
Albany Ladder and Falconite.
Gross Profit. Gross profit increased from $67,733 to $89,866 from 1996 to
1997. Gross margin increased from 38.3% to 41.1%. This margin improvement was
primarily the result of the decline in rental equipment depreciation as a
percentage of rental revenues. Much of this decline reflects mandated SEC
reporting requirements for pro forma depreciation as discussed in the notes to
"Selected Pro Forma Combined Financial Data."
Selling, General and Administrative Expenses. Selling, general and
administrative expenses increased from $36,250 to $42,306 from 1996 to 1997
primarily reflecting costs incurred to support the growth in the Company's
businesses. As a percentage of total revenues, these costs decreased from
20.5% to 19.4%, reflecting economies of scale resulting from the growth in the
Company's revenues.
Non-rental Depreciation and Amortization. Non-rental depreciation and
amortization increased from $9,793 to $10,088 from 1996 to 1997, respectively.
As a percentage of total revenues, non-rental depreciation and amortization
decreased from 5.5% to 4.6%. Much of this decline reflects mandated SEC
reporting requirements for pro forma depreciation as discussed in the notes to
"Selected Pro Forma Combined Financial Data."
25
<PAGE>
Operating Income. As a result of the foregoing, operating income increased
72.8% from $21,690 or 12.3% of total revenues to $37,471 or 17.1% of total
revenues from 1996 to 1997.
Interest Expense, Net. Interest expense, net was $15,541 for each of 1996
and 1997.
Income Tax Expense. Income tax expense was $3,650 and $9,336 for 1996 and
1997, respectively.
HISTORICAL RESULTS OF OPERATIONS--THE COMPANY
The Company's historical Financial Statements included herein cover the
period from inception on June 4, 1996 through December 31, 1996 and the year
ended December 31, 1997. The Company believes that comparison of its
historical results for such periods are not meaningful given the fact that (i)
the Company did not complete its first acquisition until January 1997, (ii)
the Company completed five additional acquisitions at different times in 1997
and (iii) the results of the eight businesses acquired or to be acquired in
1998 prior to or concurrent with the Initial Stock Offering are not reflected
in such financial statements.
Revenues. Total revenues were $41,288 for 1997. Rental revenues accounted
for 63.9% of such revenues.
Gross Profit. Gross profit was $15,573 for 1997. Gross margin was 37.7% for
1997.
Selling, General and Administrative Expenses. For 1997, selling, general and
administrative expenses were $7,910 or 19.2% of total revenues.
Non-rental Depreciation and Amortization. Non-rental depreciation and
amortization was $1,476 or 3.6% of total revenues for 1997.
Operating Income. Operating income was $6,187 or 14.9% of total revenues for
1997.
Interest Expense, Net. Interest expense, net was $4,336 for 1997.
Income Tax Expense. Income tax expense was $818 for 1997.
HISTORICAL RESULTS OF OPERATIONS--FALCONITE
Year Ended December 31, 1997 as Compared to Year Ended December 31, 1996.
Revenues. Total revenues increased 32.4% from $48,086 to $63,646 from 1996
to 1997. Rental revenue growth accounted for $12,028 or 77.3% of such
increase. The increase in rental revenues resulted primarily from the
contribution of the eight locations opened or acquired during November and
December 1996, which generated approximately $10,700 in rental revenues in
1997. The balance of the rental revenue growth was attributable to locations
open throughout both periods, primarily due to an increase in Falconite's
rental fleet. Sales of used rental equipment increased by $1,548 or 20.2% in
the recently completed period, reflecting the opening of new locations and
dispositions of certain equipment in order to optimize the average age of
Falconite's expanding fleet. Revenues from new equipment sales and other
increased from $7,529 to $9,513 or 26.4% from 1996 to 1997.
Gross Profit. Gross profit increased from $22,824 to $29,452 from 1996 to
1997. Gross margin decreased from 47.5% to 46.3%, with rental gross margin
decreasing from 57.0% to 52.4% and sales gross margin increasing from 26.9% to
31.7%. The decline in rental gross margin was attributable primarily to an
increase in rental equipment depreciation as a percentage of rental revenues
from 20.7% to 24.7% due to the substantial additions to Falconite's rental
fleet during 1996 and 1997. The increase in sales gross margin is primarily
the result of the sale of selected high margin pieces of equipment during
1997.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses increased from $9,985 to $15,065 from 1996 to 1997,
primarily reflecting costs incurred to support the growth in Falconite's
26
<PAGE>
business as well as an increase in executive compensation of $1,200. As a
percentage of revenues, these costs increased from 20.8% to 23.7%, reflecting
the lag between incurrence of expenses and the related growth in revenues from
locations opened in late 1996. In addition, Falconite recorded certain charges
in 1997 aggregating $1,301 resulting from the resolution of certain tax
deficiencies and the termination of certain employment agreements.
Non-Rental Depreciation and Amortization. Non-rental depreciation and
amortization increased from $764 to $2,428 from 1996 to 1997. As a percentage
of total revenues, non-rental depreciation and amortization increased from
1.6% to 3.8%. This increase was attributable primarily to the locations added
in late 1996 and to additional goodwill amortization of approximately $500 in
1997.
Operating Income. As a result of the foregoing and excluding the
aforementioned charges of $1,301, operating income increased from $12,075, or
25.1% of total revenues in 1996, to $13,260, or 20.8% of total revenues in
1997. Including these charges, operating income was $11,959 or 18.8% of total
revenues in 1997.
Year Ended December 31, 1996 as Compared to Year Ended December 31, 1995
Revenues. Total revenues increased 34.8% from $35,661 to $48,086 from 1995
to 1996. Rental revenue growth accounted for $9,488 or 76.4% of such increase.
Rental revenues increased primarily as a result of additional locations. The
balance of the rental revenue increases were attributable to locations open
throughout both periods, primarily due to an increase in Falconite's rental
fleet. Sales of used rental equipment increased by $2,226 or 40.8% to $7,674
in 1996, reflecting the opening of new locations and Falconite's increased
emphasis on selling used equipment. Revenues from new equipment sales and
other increased from $6,818 to $7,529 or 10.4%.
Gross Profit. Gross profit increased from $17,576 to $22,824 from 1995 to
1996. Gross margin decreased from 49.3% to 47.5% with rental gross margin
decreasing from 61.2% to 57.0%. The decline in rental gross margin was partly
attributable to an increase in rental equipment depreciation due to
substantial additions to Falconite's rental fleet during 1996 as well as to
the substantial underutilization of equipment at one of its divisions.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses increased from $5,858 to $9,985 from 1995 to 1996,
primarily reflecting facilities, personnel and administrative infrastructure
costs incurred to support the growth in Falconite's business. As a percentage
of total revenues, these expenses increased from 16.4% to 20.8%, reflecting
the lag between incurrence of expenses and the related growth in revenues from
new location openings.
Non-Rental Depreciation and Amortization. Non-rental depreciation and
amortization increased from $412 to $764 from 1995 to 1996. As a percentage of
total revenues, non-rental depreciation and amortization increased from 1.2%
to 1.6%. This increase resulted primarily from the addition of locations
during 1995, in particular, related transportation equipment and furniture,
fixtures and equipment.
Operating Income. As a result of the foregoing, operating income increased
from $11,306, or 31.7% of total revenues in 1995, to $12,075, or 25.1% of
total revenues in 1996.
LIQUIDITY AND CAPITAL RESOURCES--THE COMPANY
The Company's primary capital requirements are for the purchase of new
rental equipment fleet and for acquisitions. The Company's other capital
expenditures consist of the purchase of vehicles used for delivery and
maintenance and property, plant and equipment. The Company purchases rental
fleet throughout the year to replace equipment which has been sold as well as
to maintain adequate levels of equipment to meet existing and new customer
needs. Combined rental fleet purchases for the Company and the Acquired
Businesses were $55,525, $65,547 and $86,030 in 1995, 1996 and 1997,
respectively. As the Company's business strategy
27
<PAGE>
continues to be implemented, rental fleet purchases are expected to increase.
Expenditures for rental fleet are expected to be approximately $82,000 in
1998.
On an actual basis, for the years ended December 31, 1996 and 1997, the
Company's net cash (used in) provided by operations was $(269) and $7,378,
respectively. On an actual basis, for the years ended December 31, 1996 and
1997, the Company's net cash used in investing activities was $20 and $81,497,
respectively. On an actual basis, for the years ended December 31, 1996 and
1997, the Company's net cash provided by financing activities was $301 and
$109,789, respectively. Net cash provided by financing activities consists of
equity capital provided by Golder Thoma Fund V and members of management, net
borrowings under the Credit Facility and indebtedness under the Indenture.
The Credit Facility provides for a $140,000 line of credit, subject to
calculation of the borrowing base, to meet acquisition and expansion needs as
well as seasonal working capital and general corporate requirements. As of
March 31, 1997, the Company was in default under its Credit Facility with
respect to its interest/rental expense to senior debt covenant. This covenant
was eliminated pursuant to an amendment to the Credit Facility that was
entered into in April 1998. The Company believes it is currently in compliance
with all covenants of the Credit Facility. As of March 31, 1998, $95,128 was
outstanding under the Credit Facility. After giving effect to the Offerings,
$35,876 is expected to be available for borrowing under the Credit Facility,
subject to calculation of the borrowing base. The Company believes that the
Credit Facility, together with funds generated by the Company's operations,
will provide the Company with sufficient liquidity and capital resources to
pursue its business strategy, including the funding of working capital,
capital expenditures and other needs.
YEAR 2000 SOFTWARE ISSUE
The Company uses a number of computer software programs and operating
systems in its operations, including applications used in sales and marketing,
billing, inventory management and other administrative functions. To the
extent that the software applications used in such functions and
communications are unable to recognize the year 2000, the Company may incur
expenses in connection with the need to remediate such software and also may
incur the risk and potential expense of disruptions that may be caused by the
software's impaired functioning as the year 2000 approaches. The Company
believes that the manufacturers of the software applications it uses most
frequently, including its systems software and its word processing and
spreadsheet software, are in the process of preparing or have already
completed Year 2000 remediations for their products. The Company believes that
with the remediations to existing software and conversions to new software,
the Year 2000 issue will not pose significant operational problems for its
computer systems.
EFFECT OF INFLATION
Management believes that inflation has not had a material effect on the
Company.
RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
Earnings Per Share
In February 1997, the Financial Accounting Standards Board ("FASB") issued
SFAS No. 128 "Earnings per Share." For the Company, SFAS No. 128 will be
effective for the year ended December 31, 1997. SFAS No. 128 simplifies the
standards required under current accounting rules for computing earnings per
share and replaces the presentation of primary earnings per share and fully
diluted earnings per share with a presentation of basic earnings per share
("basic EPS") and diluted earnings per share ("diluted EPS"). Basic EPS
excludes dilution and is determined by dividing income available to common
stockholders by the weighted average number of common shares outstanding
during the period. Diluted EPS reflects the potential dilution that could
occur if securities and other contracts to issue common stock were exercised
or converted into common stock. Diluted EPS is computed similarly to fully
diluted earnings per share under current accounting rules.
28
<PAGE>
Reporting Comprehensive Income
In June 1997, the FASB issued SFAS No. 130, "Reporting Comprehensive
Income." SFAS No. 130 establishes standards for reporting and display of
comprehensive income and its components (revenues, expenses, gains, and
losses) in a full set of general-purpose financial statements. The Statement
requires that all items that are required to be recognized under accounting
standards as components of comprehensive income be reported in a financial
statement that is displayed with the same prominence as other financial
statements. SFAS No. 130 requires that an enterprise (a) classify items of
other comprehensive income by their nature in a financial statement and (b)
display the accumulated balance of other comprehensive income separately from
retained earnings and additional paid-in capital in the equity section of a
statement of financial position. The Statement is effective for fiscal years
beginning after December 15, 1997. Reclassification of financial statements
for earlier periods provided for comparative purposes is required. The Company
intends to adopt SFAS No. 130 in 1998.
29
<PAGE>
BUSINESS
GENERAL
National Equipment Services, Inc. is a leading participant in the growing
and highly fragmented $18 billion equipment rental industry. Through its 14
businesses acquired or to be acquired since January 1997, NES specializes in
the rental of specialty and general equipment to industrial and construction
end users. The Company rents over 750 different types of machinery and
equipment and distributes new equipment for nationally recognized original
equipment manufacturers. The Company also sells used equipment as well as
complementary parts, supplies and merchandise, and provides repair and
maintenance services to its customers. NES is geographically diversified, with
77 locations across 19 states and is a leading competitor in each of the
geographic markets it serves. For the year ended December 31, 1997, on a pro
forma basis, the Company generated revenues of $218.6 million, an increase of
23.7% compared to 1996 pro forma revenues of $176.8 million.
Management believes that the Company offers one of the most modern and well
maintained fleets of speciality or general equipment in each of its markets.
The average age of the Company's equipment fleet is approximately three years.
Specialty equipment includes electric and pneumatic hoists, hydraulic and
truck-mounted cranes, liquid storage tanks, pumps and highway safety
equipment. General industrial and construction equipment includes aerial work
platforms, air compressors, cranes, earth moving equipment and rough terrain
forklifts. The Company rents and sells this equipment to industrial and
construction end users which represented approximately 53% and 44%,
respectively, of the Company's revenues for the year ended December 31, 1997,
on a pro forma basis.
NES is led by a senior management team with significant industry experience
and an impressive track record of acquiring and integrating companies in the
equipment rental industry. Prior to founding the Company, the NES senior
management team was responsible for building Brambles, the U.S. equipment
rental business of an Australian public company, into a leading participant in
the industry. At Brambles, this team executed a growth strategy that combined
a disciplined acquisition program with significant organic growth. Management
believes that the team's extensive industry experience allows it to more
easily identify quality acquisition targets and successfully integrate these
businesses through effective financial and operating controls and the proper
deployment of capital. The Company's local operations are managed by
experienced professionals who have an average of over 15 years of experience
in the industry and have extensive knowledge of and relationships in their
local markets. These managers are typically former owners of the businesses
acquired by the Company. The Company also benefits from the financial
expertise of Golder Thoma, an established investment firm specializing in the
consolidation of fragmented industries. Golder Thoma Fund V, an affiliate of
Golder Thoma, is the Company's principal equity investor.
INDUSTRY OVERVIEW
Revenues for the $18 billion equipment rental industry have grown at a
compound annual rate of approximately 24% from 1984 to 1997 according to
surveys conducted by the Associated Equipment Distributors and have grown in
12 of the past 13 years. Management believes that the equipment rental
industry growth will continue to be driven by the trend among customers to
outsource non-core operations in order to reduce their capital investment and
minimize the downtime, maintenance, repair and storage costs associated with
equipment ownership. While customers traditionally have rented equipment for
specific purposes such as supplementing capacity during peak periods and in
connection with special projects, customers are increasingly looking to rental
operators to provide an ongoing, comprehensive supply of equipment, enabling
such customers to benefit from the economic advantages and convenience of
rental. According to a survey published in 1997 by The CIT Group, contractors
intended to increase the percentage of equipment they rent without a purchase
option to an estimated 15% of their total equipment requirements in 1997 from
less than 5% in 1994.
30
<PAGE>
The highly fragmented equipment rental industry consists of a large number
of relatively small independent businesses typically serving discrete local
markets within 30 to 50 miles of the store location, and a small number of
multi-location regional or national operators. According to Rental Equipment
Register, there are more than 12,000 participants in the industry, with the
largest 100 rental companies accounting for less than 20% of 1996 industry
revenues. Management believes that the rental equipment industry offers
substantial consolidation opportunities for large, well-capitalized equipment
rental companies such as NES. Relative to smaller companies with only one or
two rental locations, multi-regional operators such as NES benefit from a
number of competitive advantages, including access to capital, the ability to
offer a broader range of modern, high-quality equipment, standardized
management information systems, volume purchasing discounts and the ability to
service larger, multi-regional accounts. In addition, management believes that
multi-regional operators are less affected by changes in local economic
conditions.
GROWTH STRATEGY
Management believes that NES is well positioned to benefit from industry
trends of growth and consolidation. The Company's strategic objective is to
continue to grow profitably in both existing and new markets by acquiring
additional specialty and general equipment rental companies, by expanding the
size and breadth of its equipment fleet and by maximizing higher margin rental
revenues and by leveraging its new remanufacturing center. The Company intends
to attain its objective by continuing to execute the following growth
strategy:
Acquire Specialty and General Equipment Rental Businesses. The Company seeks
to acquire strong and successful specialty and general equipment rental
businesses. In 1997, NES generated approximately 33% and 67% of its revenues
on a pro forma basis from specialty and general equipment businesses,
respectively. The Company routinely evaluates attractive markets for expansion
where a leading position can be created by acquiring an existing business. The
Company generally targets acquisition candidates that (i) have a strong local
market share or participate in a high-growth market, (ii) are led by an
experienced management team that will continue to manage the acquired business
and invest equity capital in NES, (iii) provide opportunities to expand their
customer base through better access to and employment of capital and (iv)
generate a high percentage of revenues from rentals with a significant portion
derived from industrial customers. The Company also seeks to acquire smaller
businesses in locations already served by the Company that offer product lines
or services that are complementary to those at existing locations. Since
January 1997, the Company has completed 13 acquisitions and expects to
complete the acquisition of Falconite concurrent with the Stock Offering.
Management believes that with over 12,000 participants, the equipment rental
industry will continue to offer a significant number of businesses that fit
the Company's acquisition profile.
Increase Revenues from Industrial Customers. The Company is committed to
increasing its revenues derived from industrial customers. Management believes
that these revenues are more stable than revenues from construction customers
due to the fact that industrial customers typically utilize rental equipment
for ongoing and periodic maintenance work on their existing facilities as well
as for material handling applications. Industrial customers tend to rent
equipment for longer periods and use equipment under less severe conditions
than contractors, thereby increasing the Company's equipment utilization and
decreasing the Company's equipment maintenance costs. The good condition and
quality of rental equipment are essential for industrial customers in order to
avoid costly slowdowns or shutdowns of plant facilities. Management believes
that larger well-capitalized companies such as NES are better able to provide
well-maintained and high quality equipment. The Company intends to continue to
expand its industrial customer base by providing additional equipment and
services to its existing industrial customers and establishing new
relationships through its existing businesses as well as through acquisitions.
For the year ended December 31, 1997, on a pro forma basis, revenues derived
from industrial end-users represented approximately 53% of the Company's total
revenues.
Maximize High-Margin Rental Revenues Through Efficient Fleet Management. The
Company is focused on growing its high-margin rental revenues by expanding
fleet inventory, efficiently managing fleet inventory in order to maximize
equipment utilization, optimizing fleet maintenance, and systematically
evaluating the optimal
31
<PAGE>
timing of used equipment sales. The Company's acquisition targets have
typically operated under capital constraints, which prevented them from
purchasing rental equipment sufficient to meet customer demand and
consequently resulted in lost revenue opportunities. In pursuing acquisitions,
NES evaluates the target's customer base and fleet inventory and, following
its acquisition, typically provides capital to expand the equipment fleet and
improve utilization, resulting in significant increases in rental revenues.
Leverage New Remanufacturing Center. As part of the acquisition of
Falconite, the Company will acquire a recently-constructed 45,000 square foot
equipment remanufacturing facility in the Paducah, Kentucky area. The Company
believes this facility will enhance its ability to perform major repair
operations and maintain its rental fleet in top condition. Management
anticipates that the center will increase rental gross profit margins by
reducing capital expenditure requirements and related rental equipment
depreciation. The Company also expects that the center will provide an
additional source of revenue by allowing NES to perform repair and rebuild
services for third party equipment owners. The center incorporates four
production lines to simultaneously refurbish equipment by replacing or
rebuilding all major components including engines, transmissions and
mechanical, hydraulic and electrical systems.
ACQUIRED BUSINESSES
NES was founded in June 1996 to acquire and integrate businesses that focus
on the rental of specialty and general equipment to industrial and
construction end-users. Since January 1997, the Company has acquired 13
businesses and has entered into a definitive agreement to acquire Falconite.
Management believes that with over 12,000 participants, the equipment rental
industry will continue to offer a significant number of acquisition
opportunities. The Company is led by a senior management team with extensive
industry experience. The Company believes this experience allows management to
more easily identify quality acquisition targets and successfully integrate
and optimize these businesses. The following table summarizes the Company's
completed or pending acquisitions to date:
<TABLE>
<CAPTION>
YEARS IN
DIVISION PRODUCTS GEOGRAPHIC FOCUS BUSINESS DATE ACQUIRED
- ----------------------- ------------------------------------ ------------------------ -------- -------------
<S> <C> <C> <C> <C>
Industrial Hoist
Services Pneumatic and electric hoists National 15 January 1997
Aerial Platforms Aerial work platforms Atlanta, Georgia 14 February 1997
Lone Star Rentals General equipment Gulf Coast 16 March 1997
BAT Rentals General equipment Las Vegas, Nevada 36 April 1997
Sprintank Liquid and specialized storage tanks Gulf Coast 8 July 1997
Equipco Rentals & Sales General equipment Western Virginia 20 July 1997
GenPower Pumps Gulf Coast 14 January 1998
Eagle Scaffolding Scaffolding Las Vegas, Nevada 5 January 1998
Grand Hi-Reach Aerial work platforms Grand Rapids, Michigan 13 February 1998
Worksafe Supply Highway safety equipment Michigan 19 February 1998
Dragon Rentals Liquid storage tanks Gulf Coast 6 March 1998
Cormier Equipment General equipment Eastern Coast 14 March 1998
Albany Ladder Aerial work platforms Northeast 66 March 1998
Falconite Aerial work platforms and cranes Mid-South and Gulf Coast 43 Pending
</TABLE>
PRODUCTS AND SERVICES
The Company's primary business is the rental of equipment to industrial and
construction end-users. In addition, to more fully service its customer base
and leverage its fixed costs, the Company sells complementary parts,
merchandise and rental equipment, acts as a distributor of new equipment on
behalf of original equipment manufacturers and services the equipment it sells
and rents.
32
<PAGE>
Equipment Rentals. The Company rents a broad selection of general equipment
ranging from large equipment such as aerial manlifts, forklifts, light earth-
moving equipment and portable air compressors to small equipment such as hand
tools to industrial and commercial construction customers. The Company's
specialty equipment available for rent includes pumps and highway safety
equipment. The Company is the leading renter of industrial hoists in the
United States and the leading renter of portable storage tanks to the chemical
and petrochemical industries in the Gulf Coast region. The Company's rental
contracts range from a one-day rental contract for a small subcontractor to a
multi-year contract for certain industrial customers, with an overall average
rental period of 19 days. Four categories of equipment represented
approximately 78.8% of the Company's total rental equipment fleet (based on
original equipment cost), on a pro forma basis, at December 31, 1997: (i)
aerial work platforms (44.8%); (ii) forklifts (12.9%); (iii) mobile storage
tanks (11.2%); and (iv) cranes (9.9%). The mix of rental equipment at each of
the Company's locations is a function of the demands of the local customer
base and the focus of the local business. At December 31, 1997, on a pro forma
basis, the original equipment cost of the Company's rental fleet was
approximately $263.3 million and the weighted average age of the Company's
rental equipment fleet was approximately three years. Approximately 66.9% of
the Company's total revenues for the year ended December 31, 1997, on a pro
forma basis, were derived from the rental of equipment.
Sales of Rental Equipment. The Company routinely sells rental equipment to
adjust the size and composition of its rental fleet to changing market
conditions and as part of its ongoing commitment to maintain a new, top
quality fleet. The Company achieves favorable sales prices for its rental
equipment due to its strong preventive maintenance program and its practice of
selling rental equipment before it becomes irreparable or obsolete. Senior
management works with local operating management to optimize the timing of
sales of rental equipment by taking into account maintenance costs, rental
demand patterns and resale prices. The Company sells rental equipment to its
existing rental customers, as well as to domestic and international used
equipment buyers. For the year ended December 31, 1997, on a pro forma basis,
revenues from the sale of rental equipment accounted for approximately 8.3% of
the Company's total revenues.
Sales of New Equipment. The Company is a distributor for certain original
equipment manufacturers, including JLG Industries, Inc., Genie Industries,
Condor (a division of TIME Manufacturing Company), Strato-Lift and Terex Corp.
(d/b/a Marklift) (aerial work platforms and booms), Manitex Crane and
Broderson Crane (cranes), The Gradall Company, Sky Trak, Gehl Equipment and
Tovel Mfg. (rough-terrain forklifts), Atlas-Copco Industrial Compressors, Inc.
and Mitsui Inc. (d/b/a Airman) (air compressors), Mustang Manufacturing, Inc.
(skid steer loaders), Thompson Pump & Manufacturing Co. (pumps), Multiquip
Inc. (generators) and Komatsu Forklift USA, Inc. (industrial forklifts). The
Company believes that the volume of its equipment purchases creates
significant purchasing power with suppliers, which leads to favorable prices
and terms on equipment purchased for its rental fleet and for sale as new
equipment. The Company's ability to sell new equipment offers flexibility to
its customers and enhances the Company's customer relations. Approximately
15.1% of the Company's total revenues for the year ended December 31, 1997, on
a pro forma basis, were derived from the sale of new equipment.
Sales of Parts and Merchandise; Service and Repair. The Company sells a wide
range of parts and merchandise, including saw blades, drill bits, shovels,
goggles, hard hats and other safety gear, as a complement to its core
equipment rental business. These sales enable the Company to attract and
retain customers by offering the convenience of "one-stop shopping." The
Company also provides repair and maintenance services in connection with the
equipment it sells as a compliment to its core business. Revenues from the
sale of parts and merchandise and service and repair accounted for
approximately 9.7% of the Company's total revenues, on a pro forma basis, for
the year ended December 31, 1997.
CUSTOMERS
Management estimates that the Company currently has more than 10,000
customers, ranging from "Fortune 500" companies to small contractors. For the
year ended December 31, 1997, on a pro forma basis, no one customer accounted
for more than 1.0% of the Company's total revenues, and the Company's top five
customers
33
<PAGE>
represented less than 3.0% of total revenues. Customers look to the Company as
an ongoing, comprehensive source of rental equipment because of the economic
advantages and convenience of renting, as well as the high costs associated
with equipment ownership. The Company's primary customer base can be
classified by the following categories: (i) industrial, including
manufacturers, petrochemical facilities, chemical companies, paper mills and
public utilities and (ii) commercial and residential construction, repair and
renovation, including contractors. In addition to maintaining its historically
strong relationship with local customers, the Company is increasing its
emphasis on larger national and multi-regional accounts. For the year ended
December 31, 1997, on a pro forma basis, industrial, construction and other
customers accounted for approximately 52.6%, 44.4% and 3.0% of the Company's
total revenues, respectively.
Industrial. The Company's industrial customers, many of whom operate 24
hours per day, utilize the Company to outsource their equipment requirements
to reduce the capital investment and minimize the ongoing maintenance, repair
and storage costs associated with equipment ownership. Management believes
that the Company is well-positioned to take advantage of the increasing trend
among industrial customers to outsource equipment needs. In addition, the
Company's specialty products, such as hoists and tanks, are tailored to meet
the needs of industrial end-users. Management believes that given its multi-
regional presence, NES is well positioned to increase its industrial revenue
base. The Company intends to expand its industrial customer base by providing
additional equipment and services to its existing industrial customers and
establishing new relationships through its existing businesses as well as
through acquisitions.
Construction. The Company's construction customers include "Fortune 500"
companies, national and regional contractors and subcontractors involved in
construction projects such as (i) chemical plants and other manufacturing
facilities, (ii) roads, bridges and highways, (iii) schools, hospitals and
airports, and (iv) residential developments and apartment buildings. According
to a survey published in 1997 by The CIT Group, contractors intended to
increase the percentage of equipment they rent without a purchase option to an
estimated 15% of their total equipment requirements in 1997 from an estimated
5% in 1994. Management believes the Company is a leading supplier of rental
equipment to contractors in its markets and is well positioned to benefit from
any increased rental of equipment by such customers.
OPERATIONS
The Company's equipment rental yards typically include: (i) a customer
service center and showroom displaying selected rental equipment, new
equipment offered for sale and related merchandise; (ii) an equipment service
area; and (iii) equipment storage facilities. Each rental center is staffed by
an average of approximately 14 employees, including a manager, an assistant
manager, sales people, back office clerks, truck drivers, mechanics and yard
personnel. The rental center employees' knowledge of the equipment enables
them to recommend the best equipment for a customer's particular application.
Each rental center manager is responsible for all aspects of the center's
operation, including establishing rental rates, selecting equipment and
determining employee compensation at such location.
SALES
The Company offers rental equipment and related services primarily through
its sales force, consisting of 40 sales managers who oversee 150 sales people.
The sales force at each location is knowledgeable about all of the services
and products provided at that location. Sales managers and representatives
regularly call on contractors' job sites and industrial facilities in their
sales territories, often assisting customers in planning for their equipment
requirements. The Company also provides its sales force with extensive
training, including frequent in-house training by supplier representatives,
regarding the operating features and maintenance requirements of its
equipment. Members of the Company's sales force generally earn commissions on
all equipment rentals and sales that they generate.
PURCHASING AND SUPPLIERS
Management believes that, as a result of the Company's size, it is able to
purchase equipment directly from manufacturers at favorable prices. The
Company has developed strong relationships with many leading original
equipment manufacturers, including JLG Industries, Inc., Genie Industries,
Condor (a division of TIME
34
<PAGE>
Manufacturing Company), Strato-Lift, Terex Corp. (d/b/a Marklift), Manitex
Crane, Broderson Crane, The Gradall Company, Sky Trak, Gehl Equipment, Tovel
Mfg., Atlas-Copco Industrial Compressors, Inc., Mitsui Inc. (d/b/a Airman),
Mustang Manufacturing, Inc., Thompson Pump & Manufacturing Co., Multiquip,
Inc. and Komatsu Forklift USA, Inc., and operates as a distributor for certain
lines of equipment in several of its markets. The Company intends to acquire
businesses that are distributors for other vendors, thus allowing the Company
to purchase from additional sources. During the year ended December 31, 1997,
on a pro forma basis, the Company purchased approximately $86 million of
rental equipment, of which approximately 36.0% was obtained from its top five
suppliers. No single supplier accounted for more than 18.0% of the Company's
total purchases. The Company believes it could readily replace any of its
suppliers if necessary.
LOCATIONS AND PROPERTIES
The Company operates 77 equipment rental locations in the following 19
states: Alabama (6), Florida (1), Georgia (4), Indiana (4), Kentucky (5),
Louisiana (4), Maine (5), Massachusetts (1), Michigan (6), Mississippi (1),
Missouri (1), Nevada (2), New Hampshire (1), New York (6), Pennsylvania (1),
Tennessee (5), Texas (22), Vermont (1) and Virginia (1). The Company's
properties typically include an outside storage yard and a small building
containing offices, a maintenance center and, in certain locations, a retail
showroom. The Company owns 12 of its equipment rental locations and leases the
other 64, as well as its approximately 1,400 square foot headquarters space in
Evanston, Illinois. The net book value of owned facilities was approximately
$4.4 million at December 31, 1997, on a pro forma basis, and the average
annual lease expense on each leased facility was approximately $47,000 in
1997. The Company's leases have terms expiring from 1998 to 2007, with the
majority of its leases having renewal options. Management believes that none
of the Company's leased facilities, individually, is material to the Company's
operations and that all of these leases can be readily replaced at similar
terms. The Company's interests in each of these properties secure borrowings
under the Credit Facility.
COMPETITION
The equipment rental industry is highly fragmented and competitive. Many of
the markets in which the Company operates are served by numerous competitors,
ranging from national and multi-regional companies such as Hertz Equipment
Rental Corporation (an affiliate of Ford Motor Company), U.S. Rentals, Inc.,
Rental Service Corporation and Prime Services, Inc., to small, independent
businesses with a limited number of locations. Management believes that
participants in the equipment rental industry compete on the basis of
availability and quality of equipment, service, delivery, time and price.
Geographic territories for competition are usually limited to 50 to 75 miles
due to servicing requirements and transportation costs of the equipment.
Certain specialized equipment renters, such as Industrial Hoist Services,
compete on a larger regional or national basis. In general, management
believes that national and multi-regional operators, such as the Company,
enjoy substantial competitive advantages over small, independent rental
businesses that cannot afford to maintain the comprehensive rental equipment
fleet and high level of maintenance and service that the Company offers. See
"Risk Factors--Competition."
EMPLOYEES
At March 31, 1998, the Company had a total of 1,072 employees. Only 92 of
the Company's employees are represented by unions, and management believes
that its relationship with all of its employees is excellent. The Company is
committed to, and has realized significant benefits from, its formal employee
training programs. Management believes that this investment in training and
safety awareness programs for employees is a competitive advantage that
positions the Company to be responsive to customer needs.
GOVERNMENTAL AND ENVIRONMENTAL REGULATION
The Company's facilities are subject to various evolving federal, state and
local environmental requirements, including those relating to discharges to
air, water and land, the handling and disposal of solid and hazardous waste
and the cleanup of properties affected by hazardous substances. Certain
environmental laws impose substantial penalties for noncompliance, and others,
such as the federal Comprehensive Environmental Response, Compensation, and
Liability Act, as amended, impose strict, retroactive, joint and several
liability upon persons responsible for releases of hazardous substances.
35
<PAGE>
In connection with its corporate acquisitions, the Company usually obtains
environmental assessments from independent environmental consultants. These
assessments generally consist of a site visit, historical record review,
interviews with key personnel and preparation of a report. The purpose of the
consultant's work is to identify potential environmental conditions or
compliance issues associated with the subject property and operations. Based
on these assessments, the Company believes that its operations have been and
are operated in substantial compliance with environmental requirements and
that it has no material liabilities arising under environmental requirements.
Some risk of environmental liability is inherent in the nature of the
Company's business, however, and the Company might in the future incur
material costs to meet current or more stringent compliance, cleanup or other
obligations pursuant to environmental laws.
The Company is currently evaluating whether it must take additional steps at
some locations to ensure compliance with certain environmental laws, including
those relating to the discharge of stormwater and wastewater from the washing
of vehicles and other equipment. The Company does not believe any costs
associated with these efforts will have a material adverse effect on the
Company's operating results or financial position.
The Company dispenses petroleum products from aboveground and underground
storage tanks located at some locations that it operates. The Company
maintains an environmental compliance program designed to minimize the
potential for leaks and spills, to ensure proper maintenance of records and to
keep track of the regular testing and monitoring of tank systems. There can be
no assurance, however, that these tank systems have been or will at all times
remain free from leaks or that the use of these tanks has not or will not
result in spills or other releases. The Company does not believe that the
presence or operation of these tanks will have a material adverse effect on
the Company's operating results or financial position.
The Company uses hazardous substances, such as solvents, to clean and
maintain its rental equipment fleet and generates wastes, such as used motor
oil, radiator fluid and solvents, that are stored on site and disposed of at
off-site locations. Under various environmental laws, the Company could be
liable for contamination at sites where hazardous substances used in its
operations have been disposed of or otherwise released.
The Company believes that its compliance with environmental laws has not had
a material adverse effect on the Company's operating results, financial
condition or competitive position to date. See "Risk Factors--Environmental
Liabilities."
LEGAL PROCEEDINGS
From time to time, the Company has been and is involved in various legal
proceedings, all of which management believes are routine in nature and
incidental to the conduct of its business. The ultimate legal and financial
liability of the Company with respect to such proceedings cannot be estimated
with certainty, but the Company believes, based on its examination of such
matters, that none of such proceedings, if determined adversely to the
Company, would have a material adverse effect on the financial condition or
results of operations of the Company.
36
<PAGE>
MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth certain information as of March 31, 1998 with
respect to the directors and executive officers of the Company and each of the
Subsidiary Guarantors. Officers of the Company and each of the Subsidiary
Guarantors serve at the discretion of the respective board of directors.
<TABLE>
<CAPTION>
NAME AGE POSITIONS
- ------------------------ --- -------------------------------------------------------------
<S> <C> <C>
Kevin Rodgers........... 47 Director of the Company, NES Acquisition Corp. ("NES
Acquisition"), Albany Ladder Company Inc. ("Albany"), BAT
Acquisition Corp. ("BAT"), NES Michigan Acquisition Corp.
("NES Michigan"), NES East Acquisition Corp. ("NES East"),
Chief Executive Officer of NES Acquisition, Chief Executive
Officer and President of the Company, Albany, BAT, NES
Michigan and NES East
Dennis O'Connor......... 48 Chief Financial Officer of the Company, NES Acquisition,
Albany, BAT, NES Michigan and NES East
Paul Ingersoll.......... 32 Vice President of Corporate Development and Secretary of the
Company, Vice President, Secretary and Treasurer of NES
Acquisition, Albany, BAT, NES Michigan and NES East
Carl Thoma.............. 49 Chairman of the Board of the Company, Director of NES
Acquisition, Albany, BAT, NES Michigan and NES East
William Kessinger....... 31 Director of the Company, NES Acquisition, Albany, BAT, NES
Michigan and NES East
Ronald St. Clair........ 60 Director of the Company
</TABLE>
The Company's by-laws provide that the size of the Board shall be fixed from
time to time by resolution of the Board and that vacancies on the Board may be
filled by the remaining directors. The Board currently consists of four
directors. The Stockholders Agreement provides that Golder Thoma Fund V has
the right to designate all but one of the members of the Board of Directors of
the Company and to increase the size of the Board. Upon completion of the
Initial Stock Offering, the Stockholders Agreement will be terminated. See
"Certain Relationships and Related Transactions--Stockholders Agreement and
Registration Agreement."
Prior to consummation of the Initial Stock Offering, the Company expects to
increase the size of the Board to directors, divided into three classes.
Within 90 days after the consummation of the Initial Stock Offering, the
Company expects to appoint an additional director who is not an employee of
the Company or any affiliate of the Company.
Kevin Rodgers. Mr. Rodgers has been President, Chief Executive Officer and a
director of the Company since he founded the Company with Golder Thoma Fund V
in June 1996. Prior thereto, Mr. Rodgers served as Chief Executive Officer of
Brambles Equipment Services, Inc. and Brambles Records Management, Inc. from
1991 to June 1996. From 1991 to 1996, Mr. Rodgers also held the position of
Executive Director of Brambles USA, a subsidiary of Brambles Industries
Limited, an Australian public company with worldwide revenues of over US $2.5
billion. From 1979 to 1990, Mr. Rodgers held several positions at Morgan
Equipment Company, a privately held heavy equipment dealership with worldwide
sales of approximately $300 million, including Chief Executive Officer of
Morgan Equipment's Australian operations from 1986 to 1990.
Dennis O'Connor. Mr. O'Connor has been Chief Financial Officer of the
Company since August 1996. Prior thereto, Mr. O'Connor served as Chief
Financial Officer of Brambles Equipment Services, Inc. from November 1991 to
August 1996, where Mr. O'Connor directed the financial and administrative
functions for its seven operating divisions and assisted in operations
management. From May 1986 to May 1990, Mr. O'Connor held various positions at
Morgan Equipment Company, including Chief Financial Officer and General
Manager.
37
<PAGE>
Paul Ingersoll. Mr. Ingersoll has been Vice President of Corporate
Development and Secretary of the Company since June 1996. Prior thereto, Mr.
Ingersoll served as Assistant to the Executive Director of Brambles USA from
March 1992 to May 1996 and as Financial Analyst from November 1989 to March
1992. During his tenure at Brambles, Mr. Ingersoll closed 19 acquisitions
related to equipment services and records management.
Carl Thoma. Mr. Thoma is Chairman of the Board of the Company and has served
as a director since its founding in June 1996. Mr. Thoma co-founded and has
been a Principal and General Partner with Golder Thoma, the general partner of
Golder Thoma Fund V and its predecessor funds, in Chicago, Illinois, since
1980 and has been the Managing Partner of Golder Thoma since 1993. Mr. Thoma
is also a director of Global Imaging, Inc., dITI Marketing Services, PageNet
Inc. and Outsource Partners, Inc.
William Kessinger. Mr. Kessinger has served as a director of the Company
since its founding in June 1996. Mr. Kessinger joined Golder Thoma in May 1995
and became a Principal in September 1997. Prior thereto, Mr. Kessinger was a
Principal with The Parthenon Group from July 1994 to May 1995. From August
1992 to June 1994, Mr. Kessinger attended Harvard Business School and received
his MBA. Prior to that time, Mr. Kessinger served as an Associate with
Prudential Asset Management Asia from August 1988 to June 1992. Mr. Kessinger
is also a director of Answerthink Consulting Group, Inc., Capitol Office
Products, Inc., Excaliber, Inc., Global Imaging, Inc. and Users, Inc.
Ronald St. Clair. Mr. St. Clair has served as a director of the Company
since October 1997. Mr. St. Clair founded High Reach Equipment, an aerial
platform rental company headquartered in Baton Rouge, Louisiana. In 1993, Mr.
St. Clair sold High Reach Equipment to Brambles Equipment Services, Inc. In
1994, Mr. St. Clair retired from High Reach Equipment.
COMPENSATION OF DIRECTORS
Directors who are employees of the Company or its subsidiaries are not
entitled to receive any fees for serving as directors. Non-employee directors
of the Company do not receive cash fees for serving as directors, except for
Mr. St. Clair who receives an annual fee of $40,000. All directors are
reimbursed for out-of-pocket expenses related to their service as directors.
COMPENSATION OF EXECUTIVE OFFICERS
The compensation of executive officers of the Company will be determined by
the Board of Directors of the Company. The following table sets forth
information regarding the compensation paid or accrued by the Company to the
Chief Executive Officer and each of the Company's other executive officers
(the "Named Executive Officers") for services rendered to the Company in all
capacities during 1997 and 1996.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION LONG-TERM COMPENSATION
------------------------------------- -------------------------------
AWARDS PAYOUTS
----------------------- -------
SECURITIES
OTHER ANNUAL RESTRICTED UNDERLYING LTIP ALL OTHER
NAME AND SALARY BONUS COMPENSATION STOCK OPTIONS/SARS PAYOUTS COMPENSATION
PRINCIPAL POSITION YEAR ($) ($) ($) AWARDS ($) ($) ($) ($)
- ------------------------ ---- ------- ------- ------------ ---------- ------------ ------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Kevin Rodgers(1)........ 1997 225,000 112,500 -- -- -- -- 10,125(2)
President, Chief 1996 131,250(3) -- -- -- -- -- --
Executive Officer and
Director
Dennis O'Connor(4)...... 1997 125,000 62,500 -- -- -- -- 4,545(5)
Chief Financial Officer 1996 44,015(6) -- -- -- -- -- 30,741(7)
Paul Ingersoll(8)....... 1997 80,000 40,000 -- -- -- -- 3,200(9)
Vice President and 1996 52,464(10) -- -- -- -- -- --
Secretary
</TABLE>
- --------
38
<PAGE>
(1) Mr. Rodgers became an employee of the Company effective June 4, 1996.
(2) The amount shown includes $4,500 of Company 401(k) matching contributions
under the Savings Plan and a $5,625 profit sharing contribution under the
Savings Plan (as defined).
(3) The amount shown includes $43,750 of accrued salary paid in 1997 pursuant
to Mr. Rodgers' employment agreement upon the Company's acquisition of
equipment rental businesses meeting certain financial criteria.
(4) Mr. O'Connor became an employee of the Company effective August 19, 1996.
(5) The amount shown includes $2,045 of Company 401(k) matching contributions
under the Savings Plan and a $2,500 profit sharing contribution under the
Savings Plan.
(6) The amount shown includes $10,909 of accrued salary paid in 1997 pursuant
to Mr. O'Connor's employment agreement upon the Company's acquisition of
equipment rental businesses meeting certain financial criteria.
(7) The amount shown represents reimbursement for relocation and moving
expenses.
(8) Mr. Ingersoll became an employee of the Company effective June 4, 1996.
(9) The amount shown includes $1,600 of Company 401(k) matching contributions
under the Savings Plan and a $1,600 profit sharing contribution under the
Savings Plan.
(10) The amount shown includes $13,116 of accrued salary paid in 1997 pursuant
to Mr. Ingersoll's employment agreement upon the Company's acquisition of
equipment rental businesses meeting certain financial criteria. In
addition, the amount shown includes $5,797 of salary paid by the Company
for work Mr. Ingersoll performed for Golder Thoma prior to June 4, 1996
to prepare for the organization and formation of the Company.
MANAGEMENT EMPLOYMENT AGREEMENTS
Kevin Rodgers. Mr. Rodgers is party to a senior management agreement with
the Company dated as of June 4, 1996, as amended. Under the agreement, Mr.
Rodgers will receive an annual base salary of $250,000, which amount shall be
reviewed (but not reduced) annually by the Board in its sole discretion. Mr.
Rodgers will be eligible for a bonus of up to 50% of his base salary, which
the Board anticipates awarding if Mr. Rodgers meets or exceeds annual
operational and financial objectives agreed to by the Board and Mr. Rodgers.
If the Company has not met or exceeded its financial or operational
objectives, the Board in its discretion may award Mr. Rodgers a bonus of less
than 50% of his base salary. Mr. Rodgers will also be entitled to all other
benefits as are approved by the Board and made available to the Company's
senior management.
Under the agreement, Mr. Rodgers purchased 96 shares of Class B Common Stock
at a price of $10 per share. In addition, under the agreement, Mr. Rodgers
agreed to purchase (upon consummation of certain additional investments by
Golder Thoma Fund V in the Company) up to an additional 7,904 shares of Class
B Common Stock at a price of $10 per share; provided that Mr. Rodgers was
entitled to purchase all or any portion of such shares at a price of $10 per
share at such earlier time as Mr. Rodgers determined. Mr. Rodgers purchased
all 7,904 of such additional shares in January 1997. All shares of Class B
Common Stock owned by Mr. Rodgers will vest over a five-year period beginning
March 1997.
Mr. Rodgers' employment with the Company will continue until terminated by
the resignation, death or disability of Mr. Rodgers or by the Board in its
good faith judgment that termination of Mr. Rodgers' employment is in the best
interests of the Company. In the event Mr. Rodgers' employment is terminated
(i) by the Company without cause, (ii) by Mr. Rodgers with good reason or
(iii) as a result of Mr. Rodgers' death or disability, until the end of the
six-month period commencing on the date of his termination, the Company shall
pay to Mr. Rodgers (or his estate) his annual base salary and allow Mr.
Rodgers to continue to participate in all of the Company's medical, disability
and life insurance plans to the extent permitted by the Company's insurance
carriers at a cost not materially in excess of the Company's cost for such
insurance immediately prior to the date of termination. In addition, the
Company shall have the option to extend the severance period to the second
anniversary of the date of termination, during which period the Company shall
pay to Mr. Rodgers (or his estate)
39
<PAGE>
his annual base salary and allow Mr. Rodgers to continue to participate in all
of the Company's medical, disability and life insurance plans to the extent
permitted by the Company's insurance carriers at a cost not materially in
excess of the Company's cost for such insurance immediately prior to the date
of termination. Mr. Rodgers has agreed not to compete with the Company during
the term of his employment and for six months thereafter and during the
extended period (if any) and has agreed not to solicit any employees or
customers of the Company during the two years following the date of
termination of his employment.
Dennis O'Connor. Mr. O'Connor is party to a senior management agreement with
the Company dated as of December 31, 1996, as amended. Under the agreement,
Mr. O'Connor will receive an annual base salary of $165,000, which amount
shall be reviewed (but not reduced) annually by the Company's Chief Executive
Officer with the approval of the Board in its sole discretion. Mr. O'Connor
will also be entitled to all other benefits as are approved by the Board and
made available to the Company's senior management.
Under the agreement, Mr. O'Connor purchased 24 shares of Class B Common
Stock at a price of $10 per share. In addition, under the agreement, Mr.
O'Connor agreed to purchase (upon consummation of certain additional
investments by Golder Thoma Fund V in the Company) up to an additional 1,976
shares of Class B Common Stock at a price of $10 per share; provided that Mr.
O'Connor was entitled to purchase all or any portion of such shares at a price
of $10 per share at such earlier time or times as Mr. O'Connor determined. Mr.
O'Connor purchased all 1,976 of such additional shares in January 1997. All
shares of Class B Common Stock owned by Mr. O'Connor will vest over a five-
year period beginning March 1997.
Mr. O'Connor's employment with the Company will continue until terminated by
the resignation, death or disability of Mr. O'Connor or by the Board in its
good faith judgment that termination of Mr. O'Connor's employment is in the
best interests of the Company. In the event Mr. O'Connor's employment is
terminated (i) by the Company without cause, (ii) by Mr. O'Connor with good
reason or (iii) as a result of Mr. O'Connor's death or disability, until the
end of the six-month period commencing on the date of his termination, the
Company shall pay to Mr. O'Connor (or his estate) his annual base salary and
allow Mr. O'Connor to continue to participate in all of the Company's medical,
disability and life insurance plans to the extent permitted by the Company's
insurance carriers at a cost not materially in excess of the Company's cost
for such insurance immediately prior to the date of termination. In addition,
the Company shall have the option to extend the severance period to the second
anniversary of the date of termination, during which period the Company shall
pay to Mr. O'Connor (or his estate) his annual base salary and allow Mr.
O'Connor to continue to participate in all of the Company's medical,
disability and life insurance plans to the extent permitted by the Company's
insurance carriers at a cost not materially in excess of the Company's cost
for such insurance immediately prior to the date of termination. Mr. O'Connor
has agreed not to compete with the Company during the term of his employment
and for six months thereafter and during the extended period (if any) and has
agreed not to solicit any employees or customers of the Company during the two
years following the date of termination of his employment.
Paul Ingersoll. Mr. Ingersoll is party to a senior management agreement with
the Company dated as of June 4, 1996, as amended. Under the agreement, Mr.
Ingersoll will receive an annual base salary of $120,000, which amount shall
be reviewed (but not reduced) annually by the Company's Chief Executive
Officer with the approval of the Board in its sole discretion. Mr. Ingersoll
will also be entitled to all other benefits as are approved by the Board and
made available to the Company's senior management.
Under the agreement, Mr. Ingersoll purchased 12 shares of Class B Common
Stock at a price of $10 per share. In addition, under the agreement, Mr.
Ingersoll agreed to purchase (upon consummation of certain additional
investments by Golder Thoma Fund V in the Company) up to an additional 988
shares of Class B Common Stock at a price of $10 per share; provided that Mr.
Ingersoll was entitled to purchase all or any portion of such shares at a
price of $10 per share at such earlier time or times as Mr. Ingersoll
determined. Mr. Ingersoll purchased all 988 of such additional shares in
January 1997. All shares of Class B Common Stock owned by Mr. Ingersoll will
vest over a five-year period beginning March 1997.
40
<PAGE>
Mr. Ingersoll's employment with the Company will continue until terminated
by the resignation, death or disability of Mr. Ingersoll or by the Board in
its good faith judgment that termination of Mr. Ingersoll's employment is in
the best interests of the Company. In the event Mr. Ingersoll's employment is
terminated (i) by the Company without cause, (ii) by Mr. Ingersoll with good
reason or (iii) as a result of Mr. Ingersoll's death or disability, until the
end of the six-month period commencing on the date of his termination, the
Company shall pay to Mr. Ingersoll (or his estate) his annual base salary and
allow Mr. Ingersoll to continue to participate in all of the Company's
medical, disability and life insurance plans to the extent permitted by the
Company's insurance carriers at a cost not materially in excess of the
Company's cost for such insurance immediately prior to the date of
termination. In addition, the Company shall have the option to extend the
severance period to the second anniversary of the date of termination, during
which period the Company shall pay to Mr. Ingersoll (or his estate) his annual
base salary and allow Mr. Ingersoll to continue to participate in all of the
Company's medical, disability and life insurance plans to the extent permitted
by the Company's insurance carriers at a cost not materially in excess of the
Company's cost for such insurance immediately prior to the date of
termination. Mr. Ingersoll has agreed not to compete with the Company during
the term of his employment and for six months thereafter and during the
extended period (if any) and has agreed not to solicit any employees or
customers of the Company during the two years following the date of
termination of his employment.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
In 1997, the Company had no compensation committee or other committee of the
Board performing similar functions. Accordingly, decisions concerning
compensation of executive officers were made by the entire Board. Other than
Kevin Rodgers, there were no officers or employees of the Company who
participated in deliberations concerning such compensation matters.
401(K) PROFIT SHARING PLAN
The Company maintains a savings plan (the "Savings Plan") qualified under
Section 401(a) and 401(k) of the Internal Revenue Code. Generally, all
employees of the Company in the United States who are at least 21 years of age
and who have completed six months of service are eligible to participate in
the Savings Plan. For each employee who elects to participate in the Savings
Plan and makes a contribution thereto, the Company makes a matching
contribution of 50% of the first 5% of annual compensation contributed. In
addition, the Company may make discretionary profit sharing contributions
under the Savings Plan. The maximum contribution for any participant for any
year is the maximum amount permitted under Internal Revenue Code.
COMMITTEES OF THE BOARD OF DIRECTORS
The Company currently has no committees of its Board of Directors. Upon the
selection and election of a second qualified independent director, the Board
of Directors expects to establish both an audit committee and a compensation
committee, all of which is expected to occur within 90 days from the date of
the Initial Stock Offering.
Once created, the audit committee will be responsible for making
recommendations to the Board of Directors regarding the selection of
independent auditors, reviewing the results and scope of the audit and other
services provided by the Company's independent accountants and reviewing and
evaluating the Company's audit and control functions.
The compensation committee will make recommendations regarding the Company's
employee stock option plan and decisions concerning salaries and incentive
compensation for executive officers, key employees and consultants of the
Company.
The Board of Directors may also create other committees, including an
executive committee and a nominating committee.
41
<PAGE>
STOCK OPTIONS
Prior to consummation of the Initial Stock Offering, the Company expects to
grant options to purchase shares of Common Stock to certain members of
management. Such options will vest in equal installments beginning on the
first anniversary of the grant date. The options are expected to have a term
of ten years. The Company expects that the options will provide that in the
event that the optionee ceases to be employed by the Company for any reason
(i) any portion of the option that was not vested at that time will expire and
(ii) any portion of the option that was vested will expire 90 days after such
termination date. Under such option agreements, the Company is expected to
have the right to repurchase at fair market value the shares of Common Stock
issuable upon the exercise of such options (the "Option Shares") in the event
the optionee ceases to be employed by the Company. In addition, the option
agreements are expected to: (i) restrict the transfer of the Option Shares,
subject to certain exceptions; and (ii) require each optionee to consent to a
sale of the Company approved by the holders of a majority of the shares of
Common Stock held by the existing stockholders. The repurchase right and
foregoing restrictions are expected to terminate upon completion of the
Initial Stock Offering.
INCENTIVE STOCK OPTION PLAN
Prior to the completion of the Initial Stock Offering, the Company will
establish the National Equipment Services, Inc. Incentive Stock Option Plan
(the "Stock Option Plan"). A maximum of shares of Common Stock, subject
to adjustment, have been initially authorized for the granting of stock
options under the Stock Option Plan. To date, no options have been granted
pursuant to the Stock Option Plan. Options granted under the Stock Option Plan
may be either "incentive stock options," which qualify for special tax
treatment under the Internal Revenue Code, or nonqualified stock options. The
purposes of the Stock Option Plan are to advance the interests of the Company
and stockholders by providing Company employees with an additional incentive
to continue their efforts on behalf of the Company, as well as to attract to
the Company people of experience and ability. The Stock Option Plan is
intended to comply with Rule 16b-3 of the Exchange Act.
It is expected that all officers, directors and other key employees and
consultants of the Company or its subsidiaries will be eligible to participate
under the Stock Option Plan, as deemed appropriate by the Compensation
Committee of the Board of Directors. Eligible employees will not pay any cash
consideration to the Company to receive the options. The Stock Option Plan
will be administered by the Compensation Committee of the Board of Directors.
The exercise price for incentive stock options must be no less than the fair
market value of the Common Stock on the date of grant. The exercise price of
nonqualified stock options is not subject to any limitation based upon the
then current market value of the Common Stock. Options will expire no later
than the tenth anniversary of the date of grant. An option holder will be able
to exercise options from time to time, subject to vesting. Options will vest
immediately upon death or disability of a participant and upon certain change
of control events. Upon termination for cause or at will by the Company, the
unvested portion of the options will be forfeited. Subject to the above
conditions, the exercise price, duration of the options and vesting provisions
will be set by the Compensation Committee of the Board of Directors in its
discretion.
42
<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information with respect to the
beneficial ownership of the Company's Class A Common Stock and Class B Common
Stock as of March 31, 1998 by (i) each stockholder known by the Company to own
beneficially five percent or more of the outstanding shares of the Company's
Common Stock, (ii) each current director of the Company, (iii) each Named
Executive Officer of the Company and (iv) all directors of the Company and
executive officers of the Company as a group. As of March 31, 1998, there were
25,221.001 shares of Class A Common Stock and 90,100 shares of Class B Common
Stock outstanding. To the knowledge of the Company, each stockholder has sole
voting and investment power with respect to the shares indicated as
beneficially owned, unless otherwise indicated in a footnote. Unless otherwise
indicated, the business address of each person is the Company's corporate
address.
<TABLE>
<CAPTION>
CLASS A CLASS B
COMMON STOCK(A) COMMON STOCK(A)
----------------- -----------------
NUMBER OF NUMBER OF
SHARES PERCENT SHARES PERCENT
--------- ------- --------- -------
<S> <C> <C> <C> <C>
Golder Thoma Fund V(b)..................... 23,750 94.0% 75,000 83.2%
Kevin Rodgers.............................. -- -- 8,000 8.9%
Dennis O'Connor............................ -- -- 2,000 2.2%
Paul Ingersoll............................. -- -- 1,000 1.1%
Carl Thoma(c).............................. 23,750 94.0% 75,000 83.2%
William Kessinger(c)....................... 23,750 94.0% 75,000 83.2%
Ronald St. Clair........................... 97 * 300 *
All Directors and Executive Officers as a
Group (6 persons)(c)...................... 24,494 97.7% 88,550 98.3%
</TABLE>
- --------
* Less than one percent.
(a) See note 9 to the Consolidated Financial Statements of NES included
elsewhere herein.
(b) Includes 172.22 shares of Class A Common Stock and Class B Common Stock
held by GTCR Associates V, a partnerhship affiliated with Golder Thoma
Fund V. The address of GTCR Associates V is 6100 Sears Tower, Chicago,
Illinois 60606.
(c) Includes 23,750 shares of Class A Common Stock and 75,000 shares of Class
B Common Stock held by Golder Thoma Fund V, of which GTCR V, L.P. is the
general partner. Each of Messrs. Thoma and Kessinger is a principal of
Golder Thoma, the general partner of GTCR V, L.P., and therefore may be
deemed to share investment and voting control over the shares of Common
Stock held by Golder Thoma Fund V. Each of Messrs. Thoma and Kessinger
disclaims beneficial ownership of the shares of Common Stock owned by
Golder Thoma Fund V. The address of each of these holders is 6100 Sears
Tower, Chicago, Illinois 60606.
43
<PAGE>
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
CERTAIN LOANS TO EXECUTIVES
The Company loaned $64,000 to Mr. Rodgers, $20,000 to Mr. O'Connor and
$10,000 to Mr. Ingersoll pursuant to promissory notes (the "Executive Notes")
to finance their purchase of the Company's securities. See "Business--
Management Employment Agreements." Each of the Executive Notes is secured by a
pledge of the securities purchased with such Executive Note pursuant to an
Executive Stock Pledge Agreement between the Company and each of Messrs.
Rodgers, O'Connor and Ingersoll. The Executive Notes bear interest at a rate
per annum equal to the applicable federal rate as set forth in Section 1274(d)
of the Internal Revenue Code of 1986, as amended. The principal amount of the
Executive Notes and all interest accrued thereon mature in part on June 4,
2006, with the remainder maturing on January 6, 2007. The Executive Notes may
be prepaid in full or in part at any time.
PROFESSIONAL SERVICES AGREEMENT
The Company has a Professional Services Agreement (the "Professional
Services Agreement") with Golder Thoma pursuant to which Golder Thoma provides
financial and management consulting services to the Company. Under the
Professional Services Agreement, Golder Thoma receives an annual management
fee of $200,000 (plus reimbursement of out-of-pocket expenses) and a fee of 1%
of the amount of debt or equity capital raised by the Company from any source,
for their assistance in obtaining such capital. Golder Thoma agreed to waive
the fee which was payable upon consummation of the Initial Offering. For the
period from inception (June 4, 1996) through December 31, 1996, the Company
had paid or accrued $0 in fees under the Professional Services Agreement. For
the year ended December 31, 1997, the Company had paid or accrued $1,047,238
in fees under the Professional Service Agreement. The Professional Services
Agreement will be terminated automatically upon Golder Thoma Fund V ceasing to
own at least 10% of the Company's Common Stock. In addition, the agreement
will be terminated prior to the consummation of the Initial Stock Offering.
STOCKHOLDERS AGREEMENT AND REGISTRATION AGREEMENT
The Company and its stockholders entered into a Stockholders Agreement dated
as of June 4, 1996 (the "Stockholders Agreement") which (i) provides for the
designation of the Board of Directors of the Company, (ii) imposes certain
restrictions on the transfer of shares of the Company, (iii) requires the
stockholders to take certain actions upon the approval by a majority of the
stockholders in connection with an initial public offering or a sale of the
Company, (iv) requires the Company to offer to sell shares to the stockholders
under certain circumstances upon authorization of an issuance or sale of
additional shares, and (v) grants certain of the stockholders certain
participation rights in connection with a sale of shares by other
stockholders.
The Company and its stockholders entered into a Registration Agreement dated
as of June 4, 1996 (the "Registration Agreement") pursuant to which the
stockholders have the right in certain circumstances and, subject to certain
conditions, to require the Company to register shares of the Company's Common
Stock held by them under the Securities Act. Under the Registration Agreement,
except in limited circumstances, the Company is obligated to pay all expenses
in connection with such registration.
44
<PAGE>
DESCRIPTION OF CREDIT FACILITY
On July 1, 1997 (the "Borrowing Date"), the Company, NES Acquisition, and
BAT (collectively, the "Borrowers") entered into a credit agreement (as
amended, the "Credit Facility") with First Union Commercial Corporation, as
agent, and certain other financial institutions (the "Banks"). NES Michigan
Acquisition Corp., NES East Acquisition Corp. and Albany Ladder Company, Inc.
joined as additional borrowers under the Credit Facility on April 7, 1998.
The Credit Facility provides for a revolving credit facility (with a letter
of credit subfacility not to exceed $1,000,000) and a term loan facility to
the Borrowers for up to $140.0 million of revolving loans (based on
calculation of a borrowing base which is based on a percentage of eligible
receivables, eligible parts and supplies inventory, eligible rental equipment
and eligible new equipment). Subject to certain restrictions, the Credit
Facility may be used to finance future acquisitions and capital expenditures
and for ongoing working capital and general corporate purposes of the Company.
The Credit Facility ranks senior in right of payment to the Notes.
Repayment. Outstanding revolving loans under the Credit Facility must be
repaid on the fifth anniversary of the Borrowing Date. Revolving loans made
pursuant to the Credit Facility may be borrowed, repaid and reborrowed,
without premium or penalty, from time to time until the fifth anniversary of
the Borrowing Date, subject to the satisfaction of certain conditions on the
date of any such borrowing.
Security; Guaranty. The obligations of the Borrowers under the Credit
Facility are jointly and severally secured by all of the Borrowers' existing
and future property, subject to certain exceptions. In addition, the Company
has pledged the stock of each of its subsidiaries as further security for the
obligations under the Credit Facility.
Interest. At the Borrowers' option, the interest rate per annum applicable
to the loans under the Credit Facility will be a fluctuating rate of interest
measured by reference to one or a combination (at the Company's election) of
the following: (i) the Base Rate (as defined in the Credit Facility), plus the
applicable borrowing margin, or (ii) the relevant Eurodollar Rate (as defined
in the Credit Facility), plus the applicable borrowing margin. The applicable
borrowing margin under the Credit Facility will range from 0.00% to 0.75% for
Base Rate-based borrowings and 1.50% to 2.25% for Eurodollar Rate-based
borrowings. Both Base Rate and Eurodollar Rate interest on the Credit Facility
are determined quarterly based on the ratio of Consolidated Funded
Indebtedness (as defined in the Credit Facility) to Consolidated EBITDA (as
defined in the Credit Facility).
Fees. The Borrowers have agreed to pay certain fees in connection with the
Credit Facility, including (i) letter of credit fees, (ii) agency and lender's
fees and (iii) unused line fees. Unused line fees are payable monthly at a
rate per annum ranging from 0.30% to 0.375% on the undrawn amounts of the
revolving loan commitment under the Credit Facility based on the Leverage
Ratio (as defined in the Credit Facility) of the Company and its subsidiaries.
Covenants. The Credit Facility requires the Company to meet certain
financial tests, including maintaining a (i) maximum total debt leverage ratio
of 5.0 to 1.0; (ii) a maximum senior debt leverage ratio of 3.5 to 1.0; (iii)
a minimum fixed charge coverage ratio of 1.75 to 1.0; and (iv) a minimum
consolidated net worth of (A) $21,000,000 during the period commencing on
December 31, 1997 through and including December 30, 1998, (B) $22,500,000
during the period commencing on December 31, 1998 through and including
December 30, 1999, (C) $25,000,000 during the period commencing on December
31, 1999 through and including December 30, 2000 and (D) $28,000,000 at all
times thereafter. As of March 31, 1998, the Company was in default under its
Credit Facility with respect to its interest/rental expense to senior debt
covenant. This covenant was eliminated pursuant to an amendment to the Credit
Facility entered into among the Borrowers and the Banks in April 1998. The
Credit Facility also contains covenants which, among other things, restrict
the ability of the Borrowers (subject to certain exceptions) to incur liens,
incur indebtedness, sell assets, engage in mergers, amend its certificate of
incorporation or bylaws, guarantee debt, declare dividends or redeem or
repurchase capital stock, make loans and investments, transact with
affiliates, issue additional securities, modify material contracts, grant
45
<PAGE>
liens, engage in sale-leaseback transactions and make capital expenditures.
The Credit Facility also requires the Borrowers to satisfy certain customary
affirmative covenants and to make certain customary indemnifications to the
Banks and the agent under the Credit Facility.
Events of Default. The Credit Facility contains customary events of default,
including payment defaults, breach of representations or warranties, covenant
defaults, certain events of bankruptcy and insolvency, ERISA violations,
judgment defaults, cross-defaults to certain other indebtedness and a change
in control of the Company. Upon the occurrence of an event of default under
the Credit Facility the Banks could, among other things, (1) make a demand for
immediate payment of all amounts due and owing under the Credit Facility, (2)
terminate all commitments to make revolving loans under the Credit Facility,
and (3) the enforce their rights under the Credit Facility and the security
documents relating thereto, either judicially or otherwise, including, among
other things, the right to sell the Company's assets and retain the proceeds
to the extent of amounts due and owing under the Credit Facility.
46
<PAGE>
DESCRIPTION OF EXCHANGE NOTES
GENERAL
The Exchange Notes offered hereby will be issued as a separate series
pursuant to the Indenture (the "Indenture") dated November 25, 1995 among the
Company, the Subsidiary Guarantors and Harris Trust and Savings Bank, as
trustee (the "Trustee"). The form and terms of the Exchange Notes are the same
as the form and terms of the Old Notes (which they replace) except that (i)
the Exchange Notes bear a Series B designation and a different CUSIP number
from the Old Notes, (ii) the Exchange Notes have been registered under the
Securities Act and, therefore, will not bear legends restricting the transfer
thereof, and (iii) the holders of Exchange Notes will not be entitled to
certain rights under the Registration Rights Agreement, including the
provisions providing for an increase in the interest rate on the Old Notes in
certain circumstances relating to the timing of the Exchange Offer, which
rights will terminate when the Exchange Offer is consummated. The terms of the
Exchange Notes include those stated in the Indenture and those made part of
the Indenture by reference to the Trust Indenture Act of 1939 (the "Trust
Indenture Act"). The Exchange Notes are subject to all such terms, and Holders
of Exchange Notes are referred to the Indenture and the Trust Indenture Act
for a statement thereof. Any Old Notes that remain outstanding after
completion of the Exchange Offer, together with the Exchange Notes issued in
connection with the Exchange Offer, will be treated as a single class of
securities under the Indenture. The following summary of the material
provisions of the Indenture does not purport to be complete and is qualified
in its entirety by reference to the Indenture, including the definitions
therein of certain terms used below. Copies of the proposed form of Indenture
and Registration Rights Agreement are available as set forth below under "--
Additional Information." The definitions of certain terms used in the
following summary are set forth below under "--Certain Definitions." For
purposes of this summary, the term "Company" refers only to National Equipment
Services, Inc. and not to any of its Subsidiaries.
The Notes will be general unsecured obligations of the Company and will be
subordinated in right of payment to all current and future Senior Debt. As of
March 31, 1998, there was $95.1 million of Senior Debt of the Company and the
Subsidiary Guarantors outstanding and $98.8 million of Indebtedness of the
Company that ranked pari passu in right of payment to the Subsidiary
Guarantees outstanding. As of December 31, 1997, the Company, through its
Subsidiaries, had liabilities (including trade payables) aggregating
approximately $104.7 million. The Indenture permits the incurrence of
additional Senior Debt in the future.
All of the Company's current Subsidiaries are Restricted Subsidiaries.
However, under certain circumstances, the Company is able to designate current
or future Subsidiaries as Unrestricted Subsidiaries. Unrestricted Subsidiaries
are not subject to many of the restrictive covenants set forth in the
Indenture.
PRINCIPAL, MATURITY AND INTEREST
The Notes are limited in aggregate principal amount to $100.0 million and
will mature on November 30, 2004. Interest on the Notes will accrue at the
rate of 10% per annum and will be payable semi-annually in arrears on May 30
and November 30, commencing on May 30, 1998, to Holders of record on the
immediately preceding May 15 and November 15. Interest on the Notes will
accrue from the most recent date to which interest has been paid or, if no
interest has been paid, from the date of original issuance. Interest will be
computed on the basis of a 360-day year comprised of twelve 30-day months.
Principal, premium, if any, and interest and Liquidated Damages on the Notes
will be payable at the office or agency of the Company maintained for such
purpose within the City and State of New York or, at the option of the
Company, payment of interest and Liquidated Damages may be made by check
mailed to the Holders of the Notes at their respective addresses set forth in
the register of Holders of Notes; provided that all payments of principal,
premium, interest and Liquidated Damages with respect to Notes the Holders of
which have given wire transfer instructions to the Company will be required to
be made by wire transfer of immediately available funds to the accounts
specified by the Holders thereof. Until otherwise designated by the Company,
the Company's office or agency in New York will be the office of the Trustee
maintained for such purpose. The Notes will be issued in denominations of
$1,000 and integral multiples thereof.
47
<PAGE>
SUBORDINATION
The payment of principal of, premium, if any, and interest on the Notes will
be subordinated in right of payment, as set forth in the Indenture, to the
prior payment in full of all Senior Debt, whether outstanding on the date of
the Indenture or thereafter incurred.
Upon any distribution to creditors of the Company in a liquidation or
dissolution of the Company or in a bankruptcy, reorganization, insolvency,
receivership or similar proceeding relating to the Company or its property, an
assignment for the benefit of creditors or any marshalling of the Company's
assets and liabilities, the holders of Senior Debt will be entitled to receive
payment in full of all Obligations due in respect of such Senior Debt
(including interest after the commencement of any such proceeding at the rate
specified in the applicable Senior Debt) before the Holders of Notes will be
entitled to receive any payment with respect to the Notes, and until all
Obligations with respect to Senior Debt are paid in full, any distribution to
which the Holders of Notes would be entitled shall be made to the holders of
Senior Debt (except that Holders of Notes may receive and retain Permitted
Junior Securities and payments made from the trust described under "--Legal
Defeasance and Covenant Defeasance").
The Company also may not make any payment upon or in respect of the Notes
(except in Permitted Junior Securities or from the trust described under "--
Legal Defeasance and Covenant Defeasance") if (i) a default in the payment of
the principal of, premium, if any, or interest on Designated Senior Debt
occurs and is continuing beyond any applicable period of grace or (ii) any
other default occurs and is continuing with respect to Designated Senior Debt
that permits holders of the Designated Senior Debt as to which such default
relates to accelerate its maturity and the Trustee receives a notice of such
default (a "Payment Blockage Notice") from the Company or the holders of any
Designated Senior Debt. Payments on the Notes may and shall be resumed (a) in
the case of a payment default, upon the date on which such default is cured or
waived and (b) in case of a nonpayment default, the earlier of the date on
which such nonpayment default is cured or waived or 179 days after the date on
which the applicable Payment Blockage Notice is received, unless the maturity
of any Designated Senior Debt has been accelerated. No new period of payment
blockage may be commenced unless and until (i) 360 days have elapsed since the
effectiveness of the immediately prior Payment Blockage Notice and (ii) all
scheduled payments of principal, premium, if any, and interest on the Notes
that have come due have been paid in full in cash. No nonpayment default that
existed or was continuing on the date of delivery of any Payment Blockage
Notice to the Trustee shall be, or be made, the basis for a subsequent Payment
Blockage Notice unless such default shall have been cured or waived for a
period of not less than 90 consecutive days.
The Indenture requires that the Company promptly notify holders of Senior
Debt if payment of the Notes is accelerated because of an Event of Default.
As a result of the subordination provisions described above, in the event of
a liquidation or insolvency, Holders of Notes may recover less ratably than
creditors of the Company who are holders of Senior Debt. $95.1 million of
Senior Debt and $98.8 million of Indebtedness of the Company that ranked pari
passu in right of payment to the Subsidiary Guarantees was outstanding at
March 31, 1998. The Indenture will limit, subject to certain financial tests,
the amount of additional Indebtedness, including Senior Debt, that the Company
and its Subsidiaries can incur. See "--Certain Covenants--Incurrence of
Indebtedness and Issuance of Preferred Stock."
SUBSIDIARY GUARANTEES
The Company's payment obligations under the Notes will be fully and
unconditionally and jointly and severally guaranteed (the "Subsidiary
Guarantees") by the Subsidiary Guarantors. The Subsidiary Guarantee of each
Subsidiary Guarantor will be subordinated to the prior payment in full of all
Senior Debt of such Subsidiary Guarantor. The obligations of each Subsidiary
Guarantor under its Subsidiary Guarantee will be limited so as not to
constitute a fraudulent conveyance under applicable law. See, however, "Risk
Factors--Fraudulent Conveyance."
The Indenture provides that no Subsidiary Guarantor may consolidate with or
merge with or into (whether or not such Subsidiary Guarantor is the surviving
Person), another corporation, Person or entity whether or not
48
<PAGE>
affiliated with such Subsidiary Guarantor unless (i) except in the case of a
merger of such Subsidiary Guarantor with or into the Company or another
Subsidiary Guarantor and subject to the provisions of the following paragraph,
the Person formed by or surviving any such consolidation or merger (if other
than such Subsidiary Guarantor) assumes all the obligations of such Subsidiary
Guarantor pursuant to a supplemental indenture in form and substance
reasonably satisfactory to the Trustee, under the Notes, the Indenture and the
Registration Rights Agreement, (ii) immediately after giving effect to such
transaction, no Event of Default exists and (iii) except in the case of a
merger of such Subsidiary Guarantor with or into the Company or another
Subsidiary Guarantor, the Company would be permitted by virtue of the
Company's pro forma Fixed Charge Coverage Ratio, immediately after giving
effect to such transaction, to incur at least $1.00 of additional Indebtedness
pursuant to the Fixed Charge Coverage Ratio test set forth in the covenant
described below under the caption "--Certain Covenants--Incurrence of
Indebtedness and Issuance of Preferred Stock."
The Indenture provides that in the event of a sale or other disposition of
all of the assets of any Subsidiary Guarantor, by way of merger, consolidation
or otherwise, or a sale or other disposition of all of the capital stock of
any Subsidiary Guarantor, then such Subsidiary Guarantor (in the event of a
sale or other disposition, by way of such a merger, consolidation or
otherwise, of all of the capital stock of such Subsidiary Guarantor) or the
corporation acquiring the property (in the event of a sale or other
disposition of all of the assets of such Subsidiary Guarantor) will be
released and relieved of any obligations under its Subsidiary Guarantee;
provided that the Net Proceeds of such sale or other disposition are applied
in accordance with the applicable provisions of the Indenture. See "--
Repurchase at Option of Holders--Asset Sales."
OPTIONAL REDEMPTION
Except as described in the following paragraphs, the Notes will not be
redeemable at the Company's option prior to November 30, 2001. Thereafter, the
Notes will be subject to redemption at any time at the option of the Company,
in whole or in part, upon not less than 30 nor more than 60 days' notice, at
the redemption prices (expressed as percentages of principal amount) set forth
below plus accrued and unpaid interest and Liquidated Damages, if any, thereon
to the applicable redemption date, if redeemed during the twelve-month period
beginning on November 30 of the years indicated below:
<TABLE>
<CAPTION>
YEAR PERCENTAGE
---- ----------
<S> <C>
2001........................................ 105.000%
2002........................................ 102.500%
2003 and thereafter......................... 100.000%
</TABLE>
Notwithstanding the foregoing, during the first 36 months after the date of
the Indenture, the Company may on any one or more occasions redeem up to 33%
of the aggregate principal amount of Notes originally issued under the
Indenture at a redemption price of 110% of the principal amount thereof, plus
accrued and unpaid interest and Liquidated Damages thereon, if any, to the
redemption date, with the net cash proceeds of a public offering of common
stock of the Company; provided that at least 67% of the aggregate principal
amount of Notes remain outstanding immediately after the occurrence of such
redemption (excluding Notes held by the Company and its Subsidiaries); and
provided, further, that such redemption shall occur within 45 days of the date
of the closing of such public offering.
In addition, at any time on or prior to November 30, 2001, the Notes may be
redeemed as a whole but not in part at the option of the Company upon the
occurrence of or in connection with a Change of Control, upon not less than 30
nor more than 60 days' notice (but in no event may any such redemption occur
prior to or more than 90 days after the occurrence of such Change of Control),
at a redemption price equal to 100% of the principal amount thereof plus the
Applicable Premium as of, and plus accrued and unpaid interest and Liquidated
Damages, if any, to the redemption date, subject to the right of Holders on
the relevant record date to receive interest due on the relevant interest
payment date.
"Applicable Premium" means, with respect to a Note at any redemption date,
the greater of (i) 1.0% of the principal amount of such Note or (ii) the
excess of (A) the present value at such time of (1) the redemption price
49
<PAGE>
of such Note at November 30, 2001 (such redemption price being set forth in
the table above) plus (2) all required interest payments due on such Note
through November 30, 2001 (excluding accrued but unpaid interest), computed
using a discount rate equal to the Treasury Rate plus 75 basis points, over
(B) the principal amount of such Note.
"Treasury Rate" means the yield to maturity at the time of computation of
United States Treasury securities with a constant maturity (as compiled and
published in the most recent Federal Reserve Statistical Release H. 15(519)
which has become publicly available at least two Business Days prior to the
redemption date (or, if such Statistical Release is no longer published, any
publicly available source or similar market data)) most nearly equal to the
period from the redemption date to November 30, 2001, provided, however, that
if the period from the redemption date to November 30, 2001 is not equal to
the constant maturity of a United States Treasury security for which a weekly
average yield is given, the Treasury Rate shall be obtained by linear
interpolation (calculated to the nearest one-twelfth of a year) from the
weekly average yields of United States Treasury securities for which such
yields are given, except that if the period from the redemption date to
November 30, 2001 is less than one year, the weekly average yield on actually
traded United States Treasury securities adjusted to a constant maturity of
one year shall be used.
SELECTION AND NOTICE
If less than all of the Notes are to be redeemed at any time, selection of
Notes for redemption will be made by the Trustee in compliance with the
requirements of the principal national securities exchange, if any, on which
the Notes are listed, or, if the Notes are not so listed, on a pro rata basis,
by lot or by such method as the Trustee shall deem fair and appropriate;
provided that no Notes of $1,000 or less shall be redeemed in part. Notices of
redemption shall be mailed by first class mail at least 30 but not more than
60 days before the redemption date to each Holder of Notes to be redeemed at
its registered address. If any Note is to be redeemed in part only, the notice
of redemption that relates to such Note shall state the portion of the
principal amount thereof to be redeemed. A new Note in principal amount equal
to the unredeemed portion thereof will be issued in the name of the Holder
thereof upon cancellation of the original Note. Notes called for redemption
become due on the date fixed for redemption. On and after the redemption date,
interest ceases to accrue on Notes or portions of them called for redemption.
MANDATORY REDEMPTION
The Company is not required to make mandatory redemption or sinking fund
payments with respect to the Notes.
REPURCHASE AT THE OPTION OF HOLDERS
Change of Control
Upon the occurrence of a Change of Control, each Holder of Notes will have
the right to require the Company to repurchase all or any part (equal to
$1,000 or an integral multiple thereof) of such Holder's Notes pursuant to the
offer described below (the "Change of Control Offer") at an offer price in
cash equal to 101% of the aggregate principal amount thereof plus accrued and
unpaid interest and Liquidated Damages thereon, if any, to the date of
purchase (the "Change of Control Payment"). Within 30 days following any
Change of Control, the Company will mail a notice to each Holder describing
the transaction or transactions that constitute the Change of Control and
offering to repurchase Notes on the date specified in such notice, which date
shall be no earlier than 30 days and no later than 60 days from the date such
notice is mailed (the "Change of Control Payment Date"), pursuant to the
procedures required by the Indenture and described in such notice. The Company
will comply with the requirements of Rule 14e-1 under the Exchange Act and any
other securities laws and regulations thereunder to the extent such laws and
regulations are applicable in connection with the repurchase of the Notes as a
result of a Change of Control.
On the Change of Control Payment Date, the Company will, to the extent
lawful, (1) accept for payment all Notes or portions thereof properly tendered
pursuant to the Change of Control Offer, (2) deposit with the Paying
50
<PAGE>
Agent an amount equal to the Change of Control Payment in respect of all Notes
or portions thereof so tendered and (3) deliver or cause to be delivered to
the Trustee the Notes so accepted together with an Officers' Certificate
stating the aggregate principal amount of Notes or portions thereof being
purchased by the Company. The Paying Agent will promptly mail to each Holder
of Notes so tendered the Change of Control Payment for such Notes, and the
Trustee will promptly authenticate and mail (or cause to be transferred by
book entry) to each Holder a new Note equal in principal amount to any
unpurchased portion of the Notes surrendered, if any; provided that each such
new Note will be in a principal amount of $1,000 or an integral multiple
thereof. The Company will issue a press release announcing the results of the
Change of Control Offer on or as soon as practicable after the Change of
Control Payment Date.
The Change of Control provisions described above will be applicable whether
or not any other provisions of the Indenture are applicable. Except as
described above with respect to a Change of Control, the Indenture does not
contain provisions that permit the Holders of the Notes to require that the
Company repurchase or redeem the Notes in the event of a takeover,
recapitalization or similar transaction.
In the event of a Change of Control, there can be no assurance that the
Company will have or be able to acquire sufficient funds to pay to purchase
price for all of the Notes that the Company might be required to purchase. In
addition, the Credit Facility currently prohibits the Company from purchasing
any Notes prior to maturity, and also provides that certain change of control
events with respect to the Company would constitute a default thereunder. Any
future credit agreements or other agreements relating to Senior Debt to which
the Company becomes a party may contain similar restrictions and provisions.
In the event a Change of Control occurs at a time when the Company is
prohibited from purchasing Notes, the Company could seek the consent of its
lenders to the purchase of Notes or could attempt to refinance the borrowings
that contain such prohibition. If the Company does not obtain such a consent
or repay such borrowings, the Company will remain prohibited from purchasing
Notes. In such case, the Company's failure to purchase tendered Notes would
constitute an Event of Default under the Indenture which would, in turn,
constitute as default under the Credit Facility. In such circumstances, the
subordination provisions in the Indenture would restrict payments to the
Holders of Notes.
The Company will not be required to make a Change of Control Offer upon a
Change of Control if a third party makes the Change of Control Offer in the
manner, at the times and otherwise in compliance with the requirements set
forth in the Indenture applicable to a Change of Control Offer made by the
Company and purchases all Notes validly tendered and not withdrawn under such
Change of Control Offer.
"Change of Control" means the occurrence of any of the following: (i) the
sale, lease, transfer, conveyance or other disposition (other than by way of
merger or consolidation), in one or a series of related transactions, of all
or substantially all of the assets of the Company and its Restricted
Subsidiaries taken as a whole to any "person" (as such term is used in Section
13(d)(3) of the Exchange Act) other than a Principal or a Related Party of a
Principal (as defined below); (ii) the adoption by the Company of a plan
relating to its liquidation or dissolution; (iii) the consummation of any
transaction (including, without limitation, any merger or consolidation) the
result of which is that any "person" (as defined above), other than the
Principals and their Related Parties, becomes the "beneficial owner" (as such
term is defined in Rule 13d-3 and Rule 13d-5 under the Exchange Act, except
that a person shall be deemed to have "beneficial ownership" of all securities
that such person has the right to acquire, whether such right is currently
exercisable or is exercisable only upon the occurrence of a subsequent
condition), directly or indirectly, of more than 50% of the Voting Stock of
the Company (measured by voting power rather than number of shares); or (iv)
the first day on which a majority of the members of the Board of Directors of
the Company are not Continuing Directors. The definition of Change of Control
includes any transaction described in the preceding sentence that is approved
by the Board of Directors.
The definition of Change of Control includes a phrase relating to the sale,
lease, transfer, conveyance or other disposition of "all or substantially all"
of the assets of the Company and its Restricted Subsidiaries taken as a whole.
Although there is a developing body of case law interpreting the phrase
"substantially all," there is no precise established definition of the phrase
under applicable law. Accordingly, the ability of a Holder of Notes
51
<PAGE>
to require the Company to repurchase such Notes as a result of a sale, lease,
transfer, conveyance or other disposition of less than all of the assets of
the Company and its Restricted Subsidiaries taken as a whole to another Person
or group may be uncertain.
"Continuing Directors" means, as of any date of determination, any member of
the Board of Directors of the Company who (i) was a member of such Board of
Directors on the date of the Indenture, (ii) was nominated for election or
elected to such Board of Directors with the approval of a majority of the
Continuing Directors who were members of such Board at the time of such
nomination or election or (iii) was nominated for election or elected to such
Board of Directors pursuant to Golder Thoma Fund V's rights under the
Stockholders Agreement.
"Principals" means Golder Thoma Fund V and its affiliates and Messrs. Kevin
Rodgers, Dennis O'Connor and Paul Ingersoll, members of their immediate
families and trusts of which such persons are the beneficiaries.
"Related Party" with respect to any Principal means (A) any controlling
stockholder, 80% (or more) owned Subsidiary, or spouse or immediate family
member (in the case of an individual) of such Principal or (B) any trust,
corporation, partnership or other entity, the beneficiaries, stockholders,
partners, owners or Persons beneficially holding an 80% or more controlling
interest of which consist of such Principal and/or such other Persons referred
to in the immediately preceding clause (A).
Asset Sales
The Indenture provides that the Company will not, and will not permit any of
its Restricted Subsidiaries to, consummate an Asset Sale unless (i) the
Company (or the Restricted Subsidiary, as the case may be) receives
consideration at the time of such Asset Sale at least equal to the fair market
value (evidenced by a resolution of the Board of Directors set forth in an
Officers' Certificate delivered to the Trustee) of the assets or Equity
Interests issued or sold or otherwise disposed of and (ii) at least 75% of the
consideration therefor received by the Company or such Restricted Subsidiary
is in the form of cash; provided that the amount of (x) any liabilities (as
shown on the Company's or such Restricted Subsidiary's most recent balance
sheet), of the Company or any Restricted Subsidiary (other than contingent
liabilities and liabilities that are by their terms subordinated to the Notes
or any guarantee thereof) that are assumed by the transferee of any such
assets and as to which the Company or such Restricted Subsidiary is released
from further liability and (y) any securities, notes or other obligations
received by the Company or any such Restricted Subsidiary from such transferee
that are contemporaneously (subject to ordinary settlement periods) converted
by the Company or such Restricted Subsidiary into cash (to the extent of the
cash received), shall be deemed to be cash for purposes of this provision.
Within 360 days after the receipt of any Net Proceeds from an Asset Sale,
the Company may apply such Net Proceeds, at its option, (a) to repay Senior
Debt, or (b) to the acquisition of a majority of the assets of, or a majority
of the Voting Stock of, another Permitted Business, the making of a capital
expenditure or the acquisition of other long-term assets or properties
(including, without limitation, equipment) that are used or useful in a
Permitted Business. Pending the final application of any such Net Proceeds,
the Company may temporarily reduce revolving credit borrowings or otherwise
invest such Net Proceeds in any manner that is not prohibited by the
Indenture. Any Net Proceeds from Asset Sales that are not applied or invested
as provided in the first sentence of this paragraph will be deemed to
constitute "Excess Proceeds." When the aggregate amount of Excess Proceeds
exceeds $7.0 million, the Company will be required to make an offer to all
Holders of Notes and all holders of pari passu Indebtedness containing
provisions similar to those set forth in the Indenture with respect to offers
to purchase or redeem with the proceeds of sales of assets (an "Asset Sale
Offer") to purchase the maximum principal amount of Notes and such other
Indebtedness that may be purchased out of the Excess Proceeds, at an offer
price in cash in an amount equal to 100% of the principal amount thereof plus
accrued and unpaid interest and Liquidated Damages thereon, if any, to the
date of purchase, in accordance with the procedures set forth in the Indenture
and such other Indebtedness. To the extent that any Excess Proceeds remain
after consummation of an Asset Sale Offer, the Company may use such Excess
Proceeds for any purpose not otherwise prohibited by the Indenture. If the
aggregate principal amount of Notes and such other Indebtedness
52
<PAGE>
tendered into such Asset Sale Offer surrendered by Holders thereof exceeds the
amount of Excess Proceeds, the Trustee shall select the Notes and such other
Indebtedness to be purchased on a pro rata basis. Upon completion of such
offer to purchase, the amount of Excess Proceeds shall be reset at zero.
CERTAIN COVENANTS
Restricted Payments
The Indenture provides that the Company will not, and will not permit any of
its Restricted Subsidiaries to, directly or indirectly: (i) declare or pay any
dividend or make any other payment or distribution on account of the Company's
or any of its Restricted Subsidiaries' Equity Interests (including, without
limitation, any payment in connection with any merger or consolidation
involving the Company or any of its Restricted Subsidiaries) or to the direct
or indirect holders of the Company's or any of its Restricted Subsidiaries'
Equity Interests in their capacity as such (other than dividends or
distributions payable in Equity Interests (other than Disqualified Stock) of
the Company or to the Company or a Restricted Subsidiary of the Company); (ii)
purchase, redeem or otherwise acquire or retire for value (including, without
limitation, in connection with any merger or consolidation involving the
Company) any Equity Interests of the Company or any direct or indirect parent
of the Company; (iii) make any payment on or with respect to, or purchase,
redeem, defease or otherwise acquire or retire for value any Indebtedness that
is pari passu with or subordinated to the Notes, except a payment of interest
or principal at Stated Maturity; or (iv) make any Restricted Investment (all
such payments and other actions set forth in clauses (i) through (iv) above
being collectively referred to as "Restricted Payments"), unless, at the time
of and after giving effect to such Restricted Payment:
(a) no Default or Event of Default shall have occurred and be continuing
or would occur as a consequence thereof; and
(b) the Company would, at the time of such Restricted Payment and after
giving pro forma effect thereto as if such Restricted Payment had been made
at the beginning of the applicable four-quarter period, have been permitted
to incur at least $1.00 of additional Indebtedness pursuant to the Fixed
Charge Coverage Ratio test set forth in the first paragraph of the covenant
described below under caption "--Incurrence of Indebtedness and Issuance of
Preferred Stock"; and
(c) such Restricted Payment, together with the aggregate amount of all
other Restricted Payments made by the Company and its Restricted
Subsidiaries after the date of the Indenture (excluding Restricted Payments
permitted by clauses (ii), (iii), (iv), (vi) and (viii) of the next
succeeding paragraph), is less than the sum, without duplication, of (i)
50% of the Consolidated Net Income of the Company for the period (taken as
one accounting period) from the beginning of the first fiscal quarter
commencing after the date of the Indenture to the end of the Company's most
recently ended fiscal quarter for which internal financial statements are
available at the time of such Restricted Payment (or, if such Consolidated
Net Income for such period is a deficit, less 100% of such deficit), plus
(ii) 100% of the aggregate net cash proceeds received by the Company since
the date of the Indenture as a contribution to its common equity capital or
from the issue or sale of Equity Interests of the Company (other than
Disqualified Stock) or from the issue or sale of Disqualified Stock or debt
securities of the Company that have been converted into such Equity
Interests (other than Equity Interests (or Disqualified Stock or
convertible debt securities) sold to a Subsidiary of the Company), plus
(iii) to the extent that any Restricted Investment that was made after the
date of the Indenture is sold for cash or otherwise liquidated or repaid
for cash, the lesser of (A) the cash return of capital with respect to such
Restricted Investment (less the cost of disposition, if any) and (B) the
initial amount of such Restricted Investment, plus (iv) in the event the
Company or any Restricted Subsidiary makes any Investment in a Person that,
as a result of or in connection with such Investment, becomes a Restricted
Subsidiary, an amount equal to the Company's or any Restricted Subsidiary's
existing Restricted Investment in such Person that was previously treated
as a Restricted Payment.
The foregoing provisions do not prohibit (i) the payment of any dividend
within 60 days after the date of declaration thereof, if at said date of
declaration such payment would have complied with the provisions of the
Indenture, (ii) the redemption, repurchase, retirement, defeasance or other
acquisition of any pari passu or subordinated Indebtedness or Equity Interests
of the Company in exchange for, or out of the net cash proceeds
53
<PAGE>
of the substantially concurrent sale (other than to a Subsidiary of the
Company) of, other Equity Interests of the Company (other than any
Disqualified Stock); provided that the amount of any such net cash proceeds
that are utilized for any such redemption, repurchase, retirement, defeasance
or other acquisition shall be excluded from clause (c)(ii) of the preceding
paragraph, (iii) the defeasance, redemption, repurchase or other acquisition
of pari passu or subordinated Indebtedness with the net cash proceeds from an
incurrence of Permitted Refinancing Indebtedness, (iv) the payment of any
dividend by a Restricted Subsidiary of the Company to the holders of any class
of its common Equity Interests on a pro rata basis, (v) the repurchase,
redemption or other acquisition or retirement for value of any Equity
Interests of the Company or any Restricted Subsidiary of the Company held by
any member of the Company's (or any of its Restricted Subsidiaries')
management pursuant to any management equity subscription agreement or stock
option agreement; provided that the aggregate price paid for all such
repurchased, redeemed, acquired or retired Equity Interests shall not exceed
$1.0 million in any twelve-month period and no Default or Event of Default
shall have occurred and be continuing immediately after such transaction, (vi)
the making and consummation of an Asset Sale Offer to holders of Indebtedness
pari passu with or subordinate to the Notes in accordance with the provisions
described above under "Asset Sales," (vii) the making of loans to officers and
directors of the Company or any Restricted Subsidiary, the proceeds of which
are contemporaneously used to purchase common stock of the Company, in an
amount not to exceed $5.0 million at any one time outstanding, (viii) the
repurchase, redemption, defeasance, retirement, refinancing or acquisition for
value or payment of principal of subordinated or pari passu Indebtedness at a
purchase price not greater than 101% of the principal amount of such
subordinated or pari passu Indebtedness in the event of a Change of Control
pursuant to a provision similar to the "--Repurchase at the Option of the
Holders--Change of Control" provisions above; provided, however, that prior to
the repurchase of any subordinated Indebtedness and concurrently with the
repurchase of any pari passu Indebtedness, the Company has made an offer to
purchase as provided in "Repurchase at the Option of the Holders--Change of
Control" above with respect to the Notes and has repurchased all Notes validly
tendered for payment in connection with such offer to purchase and (ix) the
making of additional Restricted Payments in an amount not to exceed $5.0
million.
The amount of all Restricted Payments (other than cash) shall be the fair
market value on the date of the Restricted Payment of the asset(s) or
securities proposed to be transferred or issued by the Company or such
Restricted Subsidiary, as the case may be, pursuant to the Restricted Payment.
The fair market value of any non-cash Restricted Payment shall be determined
by the Board of Directors whose resolution with respect thereto shall be
delivered to the Trustee, such determination to be based upon an opinion or
appraisal issued by an accounting, appraisal or investment banking firm of
national standing selected by the Board of Directors if such fair market value
exceeds $5.0 million. Not later than the date of making any Restricted
Payment, the Company shall deliver to the Trustee an Officers' Certificate
stating that such Restricted Payment is permitted and setting forth the basis
upon which the calculations required by the covenant "Restricted Payments"
were computed, together with a copy of any fairness opinion or appraisal
required by the Indenture.
The Board of Directors may designate any Restricted Subsidiary to be an
Unrestricted Subsidiary if such designation would not cause a Default. For
purposes of making such determination, all outstanding Investments by the
Company and its Restricted Subsidiaries (except to the extent repaid in cash)
in the Subsidiary so designated will be deemed to be Restricted Payments at
the time of such designation and will reduce the amount available for
Restricted Payments under the first paragraph of this covenant. All such
outstanding Investments will be deemed to constitute Investments in an amount
equal to the fair market value of such Investments at the time of such
designation. Such designation will only be permitted if such Restricted
Payment would be permitted at such time and if such Restricted Subsidiary
otherwise meets the definition of an Unrestricted Subsidiary.
Incurrence of Indebtedness and Issuance of Preferred Stock
The Indenture provides that the Company will not, and will not permit any of
its Subsidiaries to, directly or indirectly, create, incur, issue, assume,
guarantee or otherwise become directly or indirectly liable, contingently or
otherwise, with respect to (collectively, "incur") any Indebtedness (including
Acquired Debt) and that the Company will not issue any Disqualified Stock and
will not permit any of its Restricted Subsidiaries to issue any shares of
preferred stock; provided, however, that the Company may incur Indebtedness
(including Acquired
54
<PAGE>
Debt) or issue shares of Disqualified Stock and the Subsidiary Guarantors may
incur Indebtedness or issue preferred stock if the Fixed Charge Coverage Ratio
for the Company's most recently ended four full fiscal quarters for which
internal financial statements are available immediately preceding the date on
which such additional Indebtedness is incurred or such Disqualified Stock or
preferred stock is issued would have been at least 2.0 to 1, determined on a
pro forma basis (including a pro forma application of the net proceeds
therefrom), as if the additional Indebtedness had been incurred, or the
Disqualified Stock or preferred stock had been issued, as the case may be, at
the beginning of such four-quarter period.
The provisions of the first paragraph of this covenant will not apply to the
incurrence of any of the following items of Indebtedness (collectively,
"Permitted Debt"):
(i) the incurrence by the Company and the Subsidiary Guarantors of
Indebtedness under the Credit Facility; provided that the aggregate
principal amount of all Indebtedness (with letters of credit being deemed
to have a principal amount equal to the maximum potential liability of the
Company and the Subsidiary Guarantors thereunder) outstanding under the
Credit Facility after giving effect to such incurrence does not exceed the
greater of (a) $115.0 million or (b) the Borrowing Base;
(ii) the incurrence by the Company and its Restricted Subsidiaries of the
Existing Indebtedness;
(iii) the incurrence by the Company and the Subsidiary Guarantors of
Indebtedness represented by the Notes and the Subsidiary Guarantees;
(iv) the incurrence by the Company or any of the Subsidiary Guarantors of
Indebtedness represented by Capital Lease Obligations, mortgage financings
or purchase money obligations, in each case incurred for the purpose of
financing all or any part of the purchase price or cost of construction or
improvement of property, plant or equipment used in the business of the
Company or such Subsidiary Guarantor, in an aggregate principal amount not
to exceed $10.0 million at any time outstanding;
(v) the incurrence by the Company or any of the Subsidiary Guarantors of
Indebtedness in connection with the acquisition of assets or a new
Subsidiary; provided that such Indebtedness was incurred by the prior owner
of such assets or such Subsidiary prior to such acquisition by the Company
or one of the Subsidiary Guarantors and was not incurred in connection
with, or in contemplation of, such acquisition by the Company or one of the
Subsidiary Guarantors; and provided further that the principal amount (or
accreted value, as applicable) of such Indebtedness, together with any
other outstanding Indebtedness incurred pursuant to this clause (v) and any
Permitted Refinancing Indebtedness incurred to refund, refinance or replace
any Indebtedness incurred pursuant to this clause (v), does not exceed
$10.0 million at any time outstanding;
(vi) the incurrence by the Company or any of its Restricted Subsidiaries
of Permitted Refinancing Indebtedness in exchange for, or the net proceeds
of which are used to refund, refinance or replace Indebtedness (other than
intercompany Indebtedness) that was permitted by the Indenture to be
incurred under the first paragraph hereof or clauses (i), (ii) or (iii) of
this paragraph or this clause (vi);
(vii) the incurrence by the Company or any of the Subsidiary Guarantors
of intercompany Indebtedness or preferred stock between or among the
Company and any of the Subsidiary Guarantors; provided, however, that (A)
any subsequent issuance or transfer of Equity Interests that results in any
such Indebtedness or preferred stock being held by a Person other than the
Company or a Subsidiary Guarantor and (B) any sale or other transfer of any
such Indebtedness or preferred stock to a Person that is not either the
Company or a Subsidiary Guarantor shall be deemed, in each case, to
constitute an incurrence of such Indebtedness or an issuance of such
preferred stock by the Company or such Subsidiary Guarantor, as the case
may be, that was not permitted by this clause (vii);
(viii) the incurrence by the Company or any of the Subsidiary Guarantors
of Hedging Obligations;
(ix) the guarantee by the Company or any of the Subsidiary Guarantors of
Indebtedness of the Company or a Subsidiary Guarantor that was permitted to
be incurred by another provision of this covenant;
(x) the incurrence by the Company or any of the Subsidiary Guarantors of
additional Indebtedness in an aggregate principal amount (or accreted
value, as applicable) at any time outstanding, including all
55
<PAGE>
Permitted Refinancing Indebtedness incurred to refund, refinance or replace
any Indebtedness incurred pursuant to this clause (x), not to exceed $10.0
million; and
(xi) the incurrence by the Company's Unrestricted Subsidiaries of Non-
Recourse Debt, provided, however, that if any such Indebtedness ceases to
be Non-Recourse Debt of an Unrestricted Subsidiary, such event shall be
deemed to constitute an incurrence of Indebtedness by a Restricted
Subsidiary of the Company that was not permitted by this clause (xi).
For purposes of determining compliance with this covenant, in the event that
an item of Indebtedness meets the criteria of more than one of the categories
of Permitted Debt described in clauses (i) through (xi) above or is entitled
to be incurred pursuant to the first paragraph of this covenant, the Company
shall, in its sole discretion, classify such item of Indebtedness in any
manner that complies with this covenant. Accrual of interest, accretion or
amortization of original issue discount, the payment of interest on any
Indebtedness in the form of additional Indebtedness with the same terms, and
the payment of dividends on Disqualified Stock in the form of additional
shares of the same class of Disqualified Stock will not be deemed to be an
incurrence of Indebtedness or an issuance of Disqualified Stock for purposes
of this covenant; provided, in each such case, that the amount thereof is
included in Fixed Charges of the Company as accrued.
Liens
The Indenture provides that the Company will not, and will not permit any of
its Subsidiaries to, directly or indirectly, create, incur, assume or suffer
to exist any Lien securing Indebtedness or trade payables on any asset now
owned or hereafter acquired, or any income or profits therefrom or assign or
convey any right to receive income therefrom, except Permitted Liens.
Dividend and Other Payment Restrictions Affecting Subsidiaries
The Indenture provides that the Company will not, and will not permit any of
its Restricted Subsidiaries to, directly or indirectly, create or otherwise
cause or suffer to exist or become effective any encumbrance or restriction on
the ability of any Restricted Subsidiary to (i)(a) pay dividends or make any
other distributions to the Company or any of its Restricted Subsidiaries (1)
on its Capital Stock or (2) with respect to any other interest or
participation in, or measured by, its profits, or (b) pay any Indebtedness
owed to the Company or any of its Restricted Subsidiaries, (ii) make loans or
advances to the Company or any of its Restricted Subsidiaries or (iii)
transfer any of its properties or assets to the Company or any of its
Restricted Subsidiaries. However, the foregoing restrictions do not apply to
encumbrances or restrictions existing under or by reason of (a) Existing
Indebtedness as in effect on the date of the Indenture, (b) the Credit
Facility as in effect as of the date of the Indenture, and any amendments,
modifications, restatements, renewals, increases, supplements, refundings,
replacements or refinancings thereof, provided that such amendments,
modifications, restatements, renewals, increases, supplements, refundings,
replacements or refinancings are not materially more restrictive, taken as a
whole, with respect to such dividend and other payment restrictions than those
contained in the Credit Facility as in effect on the date of the Indenture,
(c) the Indenture and the Notes, (d) applicable law, (e) any instrument or
contract of a Person acquired by the Company or any of its Restricted
Subsidiaries as in effect at the time of such acquisition (except to the
extent such instrument or contract was entered into in connection with or in
contemplation of such acquisition), which encumbrance or restriction is not
applicable to any Person, or the properties or assets of any Person, other
than the Person, or the property or assets of the Person, so acquired, (f)
customary non-assignment provisions in leases and other agreements entered
into in the ordinary course of business and consistent with past practices,
(g) purchase money obligations for property acquired in the ordinary course of
business that impose restrictions of the nature described in clause (iii)
above on the property so acquired, (h) any agreement for the sale of a
Restricted Subsidiary that restricts distributions by that Restricted
Subsidiary pending its sale, (i) Permitted Refinancing Indebtedness, provided
that the restrictions contained in the agreements governing such Permitted
Refinancing Indebtedness are no more restrictive, taken as a whole, than those
contained in the agreements governing the Indebtedness being refinanced (as
determined in good faith by the Board of Directors), (j) secured Indebtedness
otherwise permitted to be incurred pursuant to the provisions of the covenant
described above under the caption "--Liens" that limits the right of the
debtor to dispose of the
56
<PAGE>
assets securing such Indebtedness, (k) provisions with respect to the
disposition or distribution of assets or property in joint venture agreements
and other similar agreements entered into in the ordinary course of business
and (l) restrictions on cash or other deposits or net worth imposed by
customers under contracts entered into in the ordinary course of business.
Additional Subsidiary Guarantees
The Indenture provides that if the Company or any of its Restricted
Subsidiaries shall acquire or create another Subsidiary after the date of the
Indenture (other than an Unrestricted Subsidiary), then such newly acquired or
created Subsidiary shall become a Subsidiary Guarantor and execute a
Supplemental Indenture in accordance with the terms of the Indenture.
Merger, Consolidation, or Sale of Assets
The Indenture provides that the Company may not consolidate or merge with or
into (whether or not the Company is the surviving corporation), or sell,
assign, transfer, lease, convey or otherwise dispose of all or substantially
all of its properties or assets in one or more related transactions, to
another corporation, Person or entity unless (i) the Company is the surviving
corporation or the entity or the Person formed by or surviving any such
consolidation or merger (if other than the Company) or to which such sale,
assignment, transfer, lease, conveyance or other disposition shall have been
made is a corporation organized or existing under the laws of the United
States, any state thereof or the District of Columbia, (ii) the entity or
Person formed by or surviving any such consolidation or merger (if other than
the Company) or the entity or Person to which such sale, assignment, transfer,
lease, conveyance or other disposition shall have been made assumes all the
obligations of the Company under the Registration Rights Agreement, the Notes
and the Indenture pursuant to a supplemental indenture in a form reasonably
satisfactory to the Trustee, (iii) immediately after such transaction no Event
of Default exists and (iv) except in the case of a merger of the Company with
or into a Subsidiary Guarantor, the Company or the entity or Person formed by
or surviving any such consolidation or merger (if other than the Company), or
to which such sale, assignment, transfer, lease, conveyance or other
disposition shall have been made will, at the time of such transaction and
after giving pro forma effect thereto as if such transaction had occurred at
the beginning of the applicable four-quarter period, be permitted to incur at
least $1.00 of additional Indebtedness pursuant to the Fixed Charge Coverage
Ratio test set forth in the first paragraph of the covenant described above
under the caption "--Incurrence of Indebtedness and Issuance of Preferred
Stock."
Transactions with Affiliates
The Indenture provides that the Company will not, and will not permit any of
its Restricted Subsidiaries to, make any payment to, or sell, lease, transfer
or otherwise dispose of any of its properties or assets to, or purchase any
property or assets from, or enter into or make or amend any transaction,
contract, agreement, understanding, loan, advance or guarantee with, or for
the benefit of, any Affiliate (each of the foregoing, an "Affiliate
Transaction"), unless (i) such Affiliate Transaction is on terms that are no
less favorable to the Company or the relevant Restricted Subsidiary than those
that would have been obtained in a comparable transaction by the Company or
such Restricted Subsidiary with an unrelated Person and (ii) the Company
delivers to the Trustee (a) with respect to any Affiliate Transaction or
series of related Affiliate Transactions involving aggregate consideration in
excess of $1.0 million, a resolution of the Board of Directors set forth in an
Officers' Certificate certifying that such Affiliate Transaction complies with
clause (i) above and that such Affiliate Transaction has been approved by a
majority of the disinterested members of the Board of Directors and (b) with
respect to any Affiliate Transaction or series of related Affiliate
Transactions involving aggregate consideration in excess of $10.0 million, an
opinion as to the fairness to the Holders of such Affiliate Transaction from a
financial point of view issued by an accounting, appraisal or investment
banking firm of national standing selected by the Board of Directors.
Notwithstanding the foregoing, the following items shall not be deemed to be
Affiliate Transactions: (i) any employment agreement entered into by the
Company or any of its Restricted Subsidiaries in the ordinary course of
business; (ii) transactions between or among the Company and/or its Restricted
Subsidiaries; (iii) payment of reasonable directors fees to Persons who are
not otherwise Affiliates of the Company; (iv) Restricted
57
<PAGE>
Payments that are permitted by the provisions of the Indenture described above
under the caption "--Restricted Payments" as well as transactions that do not
constitute Restricted Payments by virtue of exceptions set forth in the
definitions of "Investments" and "Permitted Investments" set forth below under
the caption "Certain Definitions;" (v) reasonable indemnity provided on behalf
of officers, directors, employees, consultants or agents of the Company or any
of its Restricted Subsidiaries as determined in good faith by the Company's
Board of Directors; and (vi) any transactions undertaken pursuant to any
contractual obligations or rights in existence on the date of the Indenture
(as in effect on such date) as described herein under the caption "Certain
Relationships and Related Transactions."
Anti-Layering
The Indenture provides that (i) the Company will not incur, create, issue,
assume, guarantee or otherwise become liable for any Indebtedness that is
subordinate or junior in right of payment to any Senior Debt and senior in any
respect in right of payment to the Notes, and (ii) no Subsidiary Guarantor
will incur, create, issue, assume, guarantee or otherwise become liable for
any Indebtedness that is subordinate or junior in right of payment to the
Senior Debt of such Subsidiary Guarantor and senior in any respect in right of
payment to the Subsidiary Guarantees.
Business Activities
The Company will not, and will not permit any Restricted Subsidiary to,
engage in any business other than Permitted Businesses, except to such extent
as would not be material to the Company and its Restricted Subsidiaries taken
as a whole.
Payments for Consent
The Indenture provides that neither the Company nor any of its Subsidiaries
will, directly or indirectly, pay or cause to be paid any consideration,
whether by way of interest, fee or otherwise, to any Holder of any Notes for
or as an inducement to any consent, waiver or amendment of any of the terms or
provisions of the Indenture or the Notes unless such consideration is offered
to be paid or is paid to all Holders of the Notes that consent, waive or agree
to amend in the time frame, on the terms and subject to the conditions set
forth in the solicitation documents relating to such consent, waiver or
agreement.
Reports
The Indenture provides that, whether or not required by the rules and
regulations of the Securities and Exchange Commission (the "Commission"), so
long as any Notes are outstanding, the Company will furnish to the Holders of
Notes (i) all quarterly and annual financial information that would be
required to be contained in a filing with the Commission on Forms 10-Q and 10-
K if the Company were required to file such Forms, including a "Management's
Discussion and Analysis of Financial Condition and Results of Operations" that
describes the financial condition and results of operations of the Company and
its consolidated Subsidiaries and, with respect to the annual information
only, a report thereon by the Company's certified independent accountants and
(ii) all current reports that would be required to be filed with the
Commission on Form 8-K if the Company were required to file such reports, in
each case within the time periods specified in the Commission's rules and
regulations. In addition, whether or not required by the rules and regulations
of the Commission, the Company will file a copy of all such information and
reports with the Commission for public availability within the time periods
specified in the Commission's rules and regulations (unless the Commission
will not accept such a filing) and make such information available to
securities analysts and prospective investors upon request. In addition, the
Company has agreed that, for so long as is required for an offer or sale of
the Notes to qualify for an exemption under Rule 144A, it will furnish to the
Holders and to securities analysts and prospective investors, upon their
request, the information required to be delivered pursuant to Rule 144A(d)(4)
under the Securities Act.
EVENTS OF DEFAULT AND REMEDIES
The Indenture provides that each of the following constitutes an Event of
Default: (i) default for 30 days in the payment when due of interest on, or
Liquidated Damages with respect to, the Notes (whether or not
58
<PAGE>
prohibited by the subordination provisions of the Indenture); (ii) default in
payment when due of the principal of or premium, if any, on the Notes (whether
or not prohibited by the subordination provisions of the Indenture); (iii)
failure by the Company or any of its Subsidiaries to comply with the
provisions described under the captions "--Repurchase at the Option of
Holders--Change of Control," "--Asset Sales," "--Certain Covenants--Restricted
Payments" or "--Incurrence of Indebtedness and Issuance of Preferred Stock,"
and such default continues for ten days; (iv) failure by the Company or any of
its Subsidiaries for 60 days after notice to comply with any of its other
agreements in the Indenture or the Notes; (v) default under any mortgage,
indenture or instrument under which there may be issued or by which there may
be secured or evidenced any Indebtedness for money borrowed by the Company or
any of its Restricted Subsidiaries (or the payment of which is guaranteed by
the Company or any of its Subsidiaries) whether such Indebtedness or guarantee
now exists, or is created after the date of the Indenture, which default (a)
is caused by a failure to pay principal of or premium, if any, or interest on
such Indebtedness prior to the expiration of the grace period provided in such
Indebtedness on the date of such default (a "Payment Default") or (b) results
in the acceleration of such Indebtedness prior to its express maturity and, in
each case, the principal amount of any such Indebtedness, together with the
principal amount of any other such Indebtedness under which there has been a
Payment Default or the maturity of which has been so accelerated, aggregates
$10 million or more; (vi) failure by the Company or any of its Subsidiaries to
pay final judgments aggregating in excess of $10 million, not covered by
insurance, which judgments are not paid, discharged or stayed for a period of
60 days; (vii) certain events of bankruptcy or insolvency with respect to the
Company or any of its Significant Subsidiaries; and (viii) except as permitted
by the Indenture, any Subsidiary Guarantee shall be held in any judicial
proceeding to be unenforceable or invalid or shall cease for any reason to be
in full force and effect or any Subsidiary Guarantor, or any Person acing on
behalf of any Subsidiary Guarantor, shall deny or disaffirm its obligations
under its Subsidiary Guarantee (other than by reason of release pursuant to
the Indenture).
If any Event of Default occurs and is continuing, the Trustee or the Holders
of at least 25% in principal amount of the then outstanding Notes may declare
all the Notes to be due and payable immediately. Notwithstanding the
foregoing, in the case of an Event of Default arising from certain events of
bankruptcy or insolvency, with respect to the Company, any Significant
Subsidiary or any group of Restricted Subsidiaries that, taken together, would
constitute a Significant Subsidiary, all outstanding Notes will become due and
payable without further action or notice. Holders of the Notes may not enforce
the Indenture or the Notes except as provided in the Indenture. Subject to
certain limitations, Holders of a majority in principal amount of the then
outstanding Notes may direct the Trustee in its exercise of any trust or
power. The Trustee may withhold from Holders of the Notes notice of any
continuing Default or Event of Default (except a Default or Event of Default
relating to the payment of principal or interest) if it determines that
withholding notice is in their interest.
The Holders of a majority in aggregate principal amount of the Notes then
outstanding by notice to the Trustee may on behalf of the Holders of all of
the Notes waive any existing Default or Event of Default and its consequences
under the Indenture except a continuing Default or Event of Default in the
payment of interest on, or the principal of, the Notes.
The Company is required to deliver to the Trustee annually a statement
regarding compliance with the Indenture, and the Company is required upon
becoming aware of any Default or Event of Default, to deliver to the Trustee a
statement specifying such Default or Event of Default.
NO PERSONAL LIABILITY OF DIRECTORS, OFFICERS, EMPLOYEES AND STOCKHOLDERS
No director, officer, employee, incorporator or stockholder of the Company,
as such, shall have any liability for any obligations of the Company under the
Notes, the Indenture or for any claim based on, in respect of, or by reason
of, such obligations or their creation. Each Holder of Notes by accepting a
Note waives and releases all such liability. The waiver and release are part
of the consideration for issuance of the Notes. Such waiver may not be
effective to waive liabilities under the federal securities laws and it is the
view of the Commission that such a waiver is against public policy.
59
<PAGE>
LEGAL DEFEASANCE AND COVENANT DEFEASANCE
The Company may, at its option and at any time, elect to have all of its
obligations and the obligations of the Subsidiary Guarantors discharged with
respect to the outstanding Notes ("Legal Defeasance") except for (i) the
rights of Holders of outstanding Notes to receive payments in respect of the
principal of, premium, if any, and interest and Liquidated Damages on such
Notes when such payments are due from the trust referred to below, (ii) the
Company's obligations with respect to the Notes concerning issuing temporary
Notes, registration of Notes, mutilated, destroyed, lost or stolen Notes and
the maintenance of an office or agency for payment and money for security
payments held in trust, (iii) the rights, powers, trusts, duties and
immunities of the Trustee, and the Company's obligations in connection
therewith and (iv) the Legal Defeasance provisions of the Indenture. In
addition, the Company may, at its option and at any time, elect to have the
obligations of the Company released with respect to certain covenants that are
described in the Indenture ("Covenant Defeasance") and thereafter any omission
to comply with such obligations shall not constitute a Default or Event of
Default with respect to the Notes. In the event Covenant Defeasance occurs,
certain events (not including non-payment, bankruptcy, receivership,
rehabilitation and insolvency events) described under "Events of Default" will
no longer constitute an Event of Default with respect to the Notes.
In order to exercise either Legal Defeasance or Covenant Defeasance, (i) the
Company must irrevocably deposit with the Trustee, in trust, for the benefit
of the Holders of the Notes, cash in U.S. dollars, non-callable Government
Securities, or a combination thereof, in such amounts as will be sufficient,
in the opinion of a nationally recognized firm of independent public
accountants, to pay the principal of, premium, if any, and interest and
Liquidated Damages on the outstanding Notes on the stated maturity or on the
applicable redemption date, as the case may be, and the Company must specify
whether the Notes are being defeased to maturity or to a particular redemption
date, (ii) in the case of Legal Defeasance, the Company shall have delivered
to the Trustee an opinion of counsel in the United States reasonably
acceptable to the Trustee confirming that (A) the Company has received from,
or there has been published by, the Internal Revenue Service a ruling or (B)
since the date of the Indenture, there has been a change in the applicable
federal income tax law, in either case to the effect that, and based thereon
such opinion of counsel shall confirm that, the Holders of the outstanding
Notes will not recognize income, gain or loss for federal income tax purposes
as a result of such Legal Defeasance and will be subject to federal income tax
on the same amounts, in the same manner and at the same times as would have
been the case if such Legal Defeasance had not occurred, (iii) in the case of
Covenant Defeasance, the Company shall have delivered to the Trustee an
opinion of counsel in the United States reasonably acceptable to the Trustee
confirming that the Holders of the outstanding Notes will not recognize
income, gain or loss for federal income tax purposes as a result of such
Covenant Defeasance and will be subject to federal income tax on the same
amounts, in the same manner and at the same times as would have been the case
if such Covenant Defeasance had not occurred, (iv) no Default or Event of
Default shall have occurred and be continuing on the date of such deposit
(other than a Default or Event of Default resulting from the borrowing of
funds to be applied to such deposit) or insofar as Events of Default from
bankruptcy or insolvency events are concerned, at any time in the period
ending on the 91st day after the date of deposit, (v) such Legal Defeasance or
Covenant Defeasance will not result in a breach or violation of, or constitute
a default under any material agreement or instrument (other than the
Indenture) to which the Company or any of its Subsidiaries is a party or by
which the Company or any of its Subsidiaries is bound, including, without
limitation, the Credit Facility, (vi) the Company must have delivered to the
Trustee an opinion of counsel to the effect that after the 91st day following
the deposit, the trust funds will not be subject to the effect of any
applicable bankruptcy, insolvency, reorganization or similar laws affecting
creditors' rights generally, (vii) the Company must deliver to the Trustee an
Officers' Certificate stating that the deposit was not made by the Company
with the intent of preferring the Holders of Notes over the other creditors of
the Company with the intent of defeating, hindering, delaying or defrauding
creditors of the Company or others and (viii) the Company must deliver to the
Trustee an Officers' Certificate and an opinion of counsel, each stating that
all conditions precedent provided for relating to the Legal Defeasance or the
Covenant Defeasance have been complied with.
TRANSFER AND EXCHANGE
A Holder may transfer or exchange Notes in accordance with the Indenture.
The Registrar and the Trustee may require a Holder, among other things, to
furnish appropriate endorsements and transfer documents and the
60
<PAGE>
Company may require a Holder to pay any taxes and fees required by law or
permitted by the Indenture. The Company is not required to transfer or
exchange any Note selected for redemption. Also, the Company is not required
to transfer or exchange any Note for a period of 15 days before a selection of
Notes to be redeemed.
The registered Holder of a Note will be treated as the owner of it for all
purposes.
AMENDMENT, SUPPLEMENT AND WAIVER
Except as provided in the next two succeeding paragraphs, the Indenture, the
Notes or the Subsidiary Guarantees may be amended or supplemented with the
consent of the Holders of at least a majority in principal amount of the Notes
then outstanding (including, without limitation, consents obtained in
connection with a purchase of, or tender offer or exchange offer for, Notes),
and any existing default or compliance with any provision of the Indenture,
the Notes or the Subsidiary Guarantees may be waived with the consent of the
Holders of a majority in principal amount of the then outstanding Notes
(including, without limitation, consents obtained in connection with a
purchase of, or tender offer or exchange offer for, Notes).
Without the consent of each Holder affected, an amendment or waiver may not
(with respect to any Notes held by a non-consenting Holder): (i) reduce the
principal amount of Notes whose Holders must consent to an amendment,
supplement or waiver; (ii) reduce the principal of or change the fixed
maturity of any Note or alter the provisions with respect to the redemption of
the Notes (other than provisions relating to the covenants described above
under the caption "--Repurchase at the Option of Holders"); (iii) reduce the
rate of or change the time for payment of interest on any Note; (iv) waive a
Default or Event of Default in the payment of principal of or premium, if any,
or interest on the Notes (except a rescission of acceleration of the Notes by
the Holders of at least a majority in aggregate principal amount of the Notes
and a waiver of the payment default that resulted from such acceleration); (v)
make any Note payable in money other than that stated in the Notes; (vi) make
any change in the provisions of the Indenture relating to waivers of past
Defaults or the rights of Holders of Notes to receive payments of principal of
or premium, if any, or interest on the Notes; (vii) waive a redemption payment
with respect to any Note (other than a payment required by one of the
covenants described above under the caption "--Repurchase at the Option of
Holders"); or (viii) make any change in the foregoing amendment and waiver
provisions. In addition, any amendment to the provisions of Article 10 or
Article 12 of the Indenture (which relate to subordination) will require the
consent of the Holders of at least 75% in aggregate principal amount of the
Notes then outstanding if such amendment would adversely affect the rights of
Holders of Notes.
Notwithstanding the foregoing, without the consent of any Holder of Notes,
the Company, the Subsidiary Guarantors and the Trustee may amend or supplement
the Indenture, the Notes or the Subsidiary Guarantees to cure any ambiguity,
defect or inconsistency, to provide for uncertificated Notes in addition to or
in place of certificated Notes, to provide for the assumption of the Company's
obligations to Holders of Notes in the case of a merger or consolidation or
sale of all or substantially all of the Company's assets, to make any change
that would provide any additional rights or benefits to the Holders of Notes
or that does not adversely affect the legal rights under the Indenture of any
such Holder, to comply with requirements of the Commission in order to effect
or maintain the qualification of the Indenture under the Trust Indenture Act
or to provide for additional Subsidiary Guarantors in accordance with the
terms of the Indenture.
CONCERNING THE TRUSTEE
The Indenture contains certain limitations on the rights of the Trustee,
should it become a creditor of the Company, to obtain payment of claims in
certain cases, or to realize on certain property received in respect of any
such claim as security or otherwise. The Trustee will be permitted to engage
in other transactions; however, if it acquires any conflicting interest it
must eliminate such conflict within 90 days, apply to the Commission for
permission to continue or resign.
The Holders of a majority in principal amount of the then outstanding Notes
will have the right to direct the time, method and place of conducting any
proceeding for exercising any remedy available to the Trustee, subject to
certain exceptions. The Indenture provides that in case an Event of Default
shall occur (which shall not be
61
<PAGE>
cured), the Trustee will be required, in the exercise of its power, to use the
degree of care of a prudent man in the conduct of his own affairs. Subject to
such provisions, the Trustee will be under no obligation to exercise any of
its rights or powers under the Indenture at the request of any Holder of
Notes, unless such Holder shall have offered to the Trustee security and
indemnity satisfactory to it against any loss, liability or expense.
ADDITIONAL INFORMATION
Anyone who receives this Offering Memorandum may obtain a copy of the
Indenture and Registration Rights Agreement without charge by writing to
National Equipment Services, Inc., 1800 Sherman Avenue, Evanston, Illinois
60201; Attention: Secretary.
BOOK-ENTRY, DELIVERY AND FORM
Except as set forth in the next paragraph, the Notes to be resold as set
forth herein will initially be issued in the form of one or more Global Notes
(the "Global Notes"). The Global Notes will be deposited on the date of the
closing of the sale of the Notes offered hereby (the "Closing Date") with, or
on behalf of, The Depository Trust Company (the "Depositary") and registered
in the name of Cede & Co., as nominee of the Depositary (such nominee being
referred to herein as the "Global Note Holder").
Notes that are issued as described below under "--Certificated Securities"
will be issued in the form of registered definitive certificates (the
"Certificated Securities"). Upon the transfer of Certificated Securities, such
Certificated Securities may, unless all Global Notes have previously been
exchanged for Certificated Securities, be exchanged for an interest in the
Global Note representing the principal amount of Notes being transferred,
subject to the transfer restrictions set forth in the Indenture.
The Depositary is a limited-purpose trust company that was created to hold
securities for its participating organizations (collectively, the
"Participants" or the "Depositary's Participants") and to facilitate the
clearance and settlement of transactions in such securities between
Participants through electronic book-entry changes in accounts of its
Participants. The Depositary's Participants include securities brokers and
dealers (including the Initial Purchasers), banks and trust companies,
clearing corporations and certain other organizations. Access to the
Depositary's system is also available to other entities such as banks,
brokers, dealers and trust companies (collectively, the "Indirect
Participants" or the "Depositary's Indirect Participants") that clear through
or maintain a custodial relationship with a Participant, either directly or
indirectly. Persons who are not Participants may beneficially own securities
held by or on behalf of the Depositary only thorough the Depositary's
Participants or the Depositary's Indirect Participants.
The Company expects that pursuant to procedures established by the
Depositary (i) upon deposit of the Global Notes, the Depositary will credit
the accounts of Participants with portions of the principal amount of the
Global Notes and (ii) ownership of the Notes evidenced by the Global Notes
will be shown on, and the transfer of ownership thereof will be effected only
through, records maintained by the Depositary (with respect to the interests
of the Depositary's Participants), the Depositary's Participants and the
Depositary's Indirect Participants. Prospective purchasers are advised that
the laws of some states require that certain persons take physical delivery in
definitive form of securities that they own. Consequently, the ability to
transfer Notes evidenced by the Global Note will be limited to such extent.
For certain other restrictions on the transferability of the Notes, see
"Notice to Investors."
So long as the Global Note Holder is the registered owner of any Notes, the
Global Note Holder will be considered the sole Holder under the Indenture of
any Notes evidenced by the Global Notes. Beneficial owners of Notes evidenced
by the Global Notes will not be considered the owners or Holders thereof under
the Indenture for any purpose, including with respect to the giving of any
directions, instructions or approvals to the Trustee thereunder. Neither the
Company nor the Trustee will have any responsibility or liability for any
aspect of the records of the Depositary or for maintaining, supervising or
reviewing any records of the Depositary relating to the Notes.
Payments in respect of the principal of, premium, if any, interest and
Liquidated Damages, if any, on any Notes registered in the name of the Global
Note Holder on the applicable record date will be payable by the
62
<PAGE>
Trustee to or at the direction of the Global Note Holder in its capacity as
the registered Holder under the Indenture. Under the terms of the Indenture,
the Company and the Trustee may treat the persons in whose names Notes,
including the Global Notes, are registered as the owners thereof for the
purpose of receiving such payments. Consequently, neither the Company nor the
Trustee has or will have any responsibility or liability for the payment of
such amounts to beneficial owners of Notes. The Company believes, however,
that it is currently the policy of the Depositary to immediately credit the
accounts of the relevant Participants with such payments, in amounts
proportionate to their respective holdings of beneficial interests in the
relevant security as shown on the records of the Depositary. Payments by the
Depositary's Participants and the Depositary's Indirect Participants to the
beneficial owners of Notes will be governed by standing instructions and
customary practice and will be the responsibility of the Depositary's
Participants or the Depositary's Indirect Participants.
CERTIFICATED SECURITIES
Subject to certain conditions, any person having a beneficial interest in a
Global Note may, upon request to the Trustee, exchange such beneficial
interest for Notes in the form of Certificated Securities. Upon any such
issuance, the Trustee is required to register such Certificated Securities in
the name of, and cause the same to be delivered to, such person or persons (or
the nominee of any thereof). In addition, if (i) the Company notifies the
Trustee in writing that the Depositary is no longer willing or able to act as
a depositary and the Company is unable to locate a qualified successor within
90 days or (ii) the Company, at its option, notifies the Trustee in writing
that it elects to cause the issuance of Notes in the form of Certificated
Securities under the Indenture, then, upon surrender by the Global Note Holder
of its Global Note, Notes in such form will be issued to each person that the
Global Note Holder and the Depositary identify as being the beneficial owner
of the related Notes.
Neither the Company nor the Trustee will be liable for any delay by the
Global Note Holder or the Depositary in identifying the beneficial owners of
Notes and the Company and the Trustee may conclusively rely on, and will be
protected in relying on, instructions from the Global Note Holder or the
Depositary for all purposes.
SAME DAY SETTLEMENT AND PAYMENT
The Indenture requires that payments in respect of the Notes represented by
the Global Note (including principal, premium, if any, interest and Liquidated
Damages, if any) be made by wire transfer of immediately available funds to
the accounts specified by the Global Note Holder. With respect to Certificated
Securities, the Company will make all payments of principal, premium, if any,
interest and Liquidated Damages, if any, by wire transfer of immediately
available funds to the accounts specified by the Holders thereof or, if no
such account is specified, by mailing a check to each such Holder's registered
address. The Company expects that secondary trading in the Certificated
Securities will also be settled in immediately available funds.
CERTAIN DEFINITIONS
Set forth below are certain defined terms used in the Indenture. Reference
is made to the Indenture for a full disclosure of all such terms, as well as
any other capitalized terms used herein for which no definition is provided.
"Acquired Debt" means, with respect to any specified Person, (i)
Indebtedness of any other Person existing at the time such other Person is
merged with or into or became a Subsidiary of such specified Person,
including, without limitation, Indebtedness incurred in connection with, or in
contemplation of, such other Person merging with or into or becoming a
Subsidiary of such specified Person, and (ii) Indebtedness secured by a Lien
encumbering any asset acquired by such specified Person, in each case to the
extent not repaid within five days after the date of the acquisition.
"Affiliate" of any specified Person means any other Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such specified Person. For purposes of this definition, "control"
(including, with correlative meanings, the terms "controlling," "controlled
by" and "under common control with"), as used with respect to any Person,
shall mean the possession, directly or indirectly, of the power to direct or
cause the direction of the management or policies of such Person, whether
through the ownership of voting securities, by agreement or otherwise.
63
<PAGE>
"Asset Sale" means (i) the sale, lease, conveyance or other disposition of
any assets or rights (including, without limitation, by way of a sale and
leaseback) other than sales and leases of inventory and equipment in the
ordinary course of business consistent with past practices (provided that the
sale, lease, conveyance or other disposition of all or substantially all of
the assets of the Company and its Restricted Subsidiaries taken as a whole
will be governed by the provisions of the Indenture described above under the
caption "--Repurchase at the Option of Holders--Change of Control" and/or the
provisions described above under the caption "--Certain Covenants--Merger,
Consolidation or Sale of Assets" and not by the provisions of the Asset Sale
covenant) and (ii) the issue or sale by the Company or any of its Restricted
Subsidiaries of Equity Interests of any of the Company's Restricted
Subsidiaries, in the case of either clause (i) or (ii), whether in a single
transaction or a series of related transactions (a) that have a fair market
value in excess of $2.0 million or (b) for net proceeds in excess of $2.0
million. Notwithstanding the foregoing, the following items shall not be
deemed to be Asset Sales: (i) a transfer of assets by the Company to a Wholly
Owned Restricted Subsidiary or by a Wholly Owned Restricted Subsidiary to the
Company or to another Wholly Owned Restricted Subsidiary; (ii) an issuance of
Equity Interests by a Wholly Owned Restricted Subsidiary to the Company or to
another Wholly Owned Restricted Subsidiary; (iii) a Restricted Payment that is
permitted by the covenant described above under the caption "--Certain
Covenants--Restricted Payments;"(iv) the creation of any Lien not prohibited
by the covenant described above under the caption "Certain Covenants Liens;"
and (v) the conversion of Cash Equivalents into cash.
"Borrowing Base" means, as of any date, an amount equal to the sum of (a)
85% of the face amount of all accounts receivable owned by the Company and its
Restricted Subsidiaries as of such date that are not more than 90 days past
due, plus (b) 50% of the book value of the parts and supplies inventory owned
by the Company and its Restricted Subsidiaries as of such date, plus (c) 80%
of the orderly liquidation value of the rental equipment owned by the Company
and its Restricted Subsidiaries as of such date, plus (d) 80% of the cost of
the new equipment owned by the Company and its Restricted Subsidiaries as of
such date, all calculated on a consolidated basis and in accordance with GAAP.
To the extent that information is not available as to the amount of accounts
receivable or inventory or equipment as of a specific date, the Company may
utilize the most recent available information for purposes of calculating the
Borrowing Base.
"Capital Lease Obligation" means, at the time any determination thereof is
to be made, the amount of the liability in respect of a capital lease that
would at such time be required to be capitalized on a balance sheet in
accordance with GAAP.
"Capital Stock" means (i) in the case of a corporation, corporate stock,
(ii) in the case of an association or business entity, any and all shares,
interests, participations, rights or other equivalents (however designated) of
corporate stock, (iii) in the case of a partnership or limited liability
company, partnership or membership interests (whether general or limited) and
(iv) any other interest or participation that confers on a Person the right to
receive a share of the profits and losses of, or distributions of assets of,
the issuing Person.
"Cash Equivalents" means (i) United States dollars, (ii) securities issued
or directly and fully guaranteed or insured by the United States government or
any agency or instrumentality thereof (provided that the full faith and credit
of the United States is pledged in support thereof) having maturities of not
more than six months from the date of acquisition, (iii) certificates of
deposit and eurodollar time deposits with maturities of one year or less from
the date of acquisition, bankers' acceptances with maturities not exceeding
one year and overnight bank deposits, in each case with any domestic
commercial bank having capital and surplus in excess of $500 million and a
Thompson Bank Watch Rating of "B" or better, (iv) repurchase obligations with
a term of not more than seven days for underlying securities of the types
described in clauses (ii) and (iii) above entered into with any financial
institution meeting the qualifications specified in clause (iii) above, (v)
commercial paper having a rating of at least A-2 by Standard & Poor's
Corporation or at least P-2 by Moody's Investors Service, Inc. or at least an
equivalent rating category of another nationally recognized securities rating
agency and in each case maturing within one year after the date of acquisition
and (vi) money market funds at least 95% of the assets of which constitute
Cash Equivalents of the kinds described in clauses (i)--(v) of this
definition.
64
<PAGE>
"Consolidated Cash Flow" means, with respect to any Person for any period,
the Consolidated Net Income of such Person for such period plus (i) an amount
equal to any extraordinary loss plus any net loss realized in connection with
an Asset Sale (to the extent such losses were deducted in computing such
Consolidated Net Income), plus (ii) provision for taxes based on income or
profits of such Person and its Subsidiaries for such period, to the extent
that such provision for taxes was included in computing such Consolidated Net
Income, plus (iii) consolidated interest expense of such Person and its
Subsidiaries for such period, whether paid or accrued and whether or not
capitalized (including, without limitation, amortization of debt issuance
costs and original issue discount, non-cash interest payments, the interest
component of any deferred payment obligations, the interest component of all
payments associated with Capital Lease Obligation, commissions, discounts and
other fees and charges incurred in respect of letter of credit or bankers'
acceptance financings, and net payments (if any) pursuant to Hedging
Obligations), to the extent that any such expense was deducted in computing
such Consolidated Net Income, plus (iv) depreciation, amortization (including
amortization of goodwill and other intangibles but excluding amortization of
prepaid cash expenses that were paid in a prior period) and other non-cash
expenses (including non-cash write-ups and non-cash charges relating to
inventory and fixed assets) of such Person and its Subsidiaries for such
period to the extent that such depreciation, amortization and other non-cash
expenses were deducted in computing such Consolidated Net Income plus (v) an
amount equal to 1/3 of the Consolidated Lease Expense of such person and its
Subsidiaries for such period, to the extent that any such expense was deducted
in computing such Consolidated Net Income, minus (vi) non-cash items
increasing such Consolidated Net Income for such period, in each case, on a
consolidated basis and determined in accordance with GAAP. Notwithstanding the
foregoing, the provision for taxes based on the income or profits of, and the
depreciation and amortization and other non-cash charges of, a Subsidiary of a
Person shall be added to Consolidated Net Income to compute Consolidated Cash
Flow only to the extent (and in the same proportion) that the Net Income of
such Subsidiary was included in calculating the Consolidated Net Income of
such Person and only if a corresponding amount would be permitted at the date
of determination to be dividended to the Company by such Subsidiary without
prior approval (that has not been obtained), pursuant to the terms of its
charter and all agreements, instruments, judgments, decrees, orders, statutes,
rules and governmental regulations applicable to that Subsidiary or its
stockholders.
"Consolidated Lease Expense" means, with respect to any Person for any
period, the aggregate rental obligations of such Person and its consolidated
Restricted Subsidiaries determined on a consolidated basis in accordance with
GAAP payable in respect of such period under leases of real and/or personal
property (net of income from subleases thereof, but including taxes,
insurance, maintenance and similar expenses that the lessee is obligated to
pay under the terms of such leases), whether or not such obligations are
reflected as liabilities or commitments on a consolidated balance sheet of
such Person and its Restricted Subsidiaries or in the notes thereto.
"Consolidated Net Income" means, with respect to any Person for any period,
the aggregate of the Net Income of such Person and its Restricted Subsidiaries
for such period, on a consolidated basis, determined in accordance with GAAP;
provided that (i) the Net Income (but not loss) of any Person that is not a
Restricted Subsidiary or that is accounted for by the equity method of
accounting shall be included only to the extent of the amount of dividends or
distributions paid in cash to the referent Person or a Wholly Owned Restricted
Subsidiary thereof, (ii) the Net Income of any Restricted Subsidiary shall be
excluded to the extent that the declaration or payment of dividends or similar
distributions by that Restricted Subsidiary of that Net Income is not at the
date of determination permitted without any prior governmental approval (that
has not been obtained) or, directly or indirectly, by operation of the terms
of its charter or any agreement (other than the Credit Facility as in effect
as of the date of the Indenture, and any amendments, modifications,
restatements, renewals, increases, supplements, refundings, replacements or
refinancings thereof, provided that such amendments, modifications,
restatements, renewals, increases, supplements, refundings, replacements or
refinancings are not materially more restrictive, taken as a whole, with
respect to such restrictions on dividends and similar distributions than those
contained in the Credit Facility as in effect on the date of the Indenture),
instrument, judgment, decree, order, statute, rule or governmental regulation
applicable to that Restricted Subsidiary or its stockholders, (iii) the Net
Income of any Person acquired in a pooling of interests transaction for any
period prior to the date of such acquisition shall be excluded, (iv) the
cumulative effect of a change in accounting principles shall be excluded and
(v) the Net
65
<PAGE>
Income (but not loss) of any Unrestricted Subsidiary shall be excluded,
whether or not distributed to the Company or one of its Restricted
Subsidiaries, for purposes of the covenant described under the caption "--
Certain Covenants--Incurrence of Indebtedness and Issuance of Preferred
Stock," and shall be included for purposes of the covenant described under the
caption "--Certain Covenants--Restricted Payments" but only to the extent of
the amount of dividends or distributions paid in cash to the Company or one of
its Restricted Subsidiaries.
"Credit Facility" means that certain Credit Agreement, dated as of July 1,
1997, by and among the Company, NES Acquisition Corp., BAT Acquisition Corp.,
Aerial Platforms, Inc. and MST Enterprises, Inc. (pursuant to a Borrower
Joinder Agreement dated as of July 18, 1997), as Borrowers, First Union
Commercial Corporation, as Agent and Lender, and BankBoston, N.A., American
National Bank and Trust Company of Chicago, Comerica Bank, The CIT
Group/Business Credit, Inc., Bankers Trust Company, Harris Trust and Savings
Bank, Heller Financial, Inc. and Mercantile Business Credit Inc., as Lenders,
providing for revolving credit borrowings, including any related notes,
guarantees, collateral documents, instruments and agreements executed in
connection therewith, in each case as such agreements may be amended
(including any amendment and restatement thereof), supplemented or otherwise
modified from time to time, including any agreement extending the maturity of,
refinancing, replacing or otherwise restructuring (including, without
limitation, increasing the amount of available borrowings thereunder or adding
Subsidiaries of the Company as additional borrowers or guarantors thereunder)
all or any portion of the Indebtedness under such agreement or any successor
or replacement agreement, whether by the same or any other agent, lender or
group of lenders, whether contained in one or more agreements.
"Default" means any event that is or with the passage of time or the giving
of notice or both would be an Event of Default.
"Designated Senior Debt" means (i) any Indebtedness outstanding under the
Credit Facility and (ii) any other Senior Debt permitted under the Indenture
the principal amount of which is $25.0 million or more and that has been
designated by the Company as "Designated Senior Debt."
"Disqualified Stock" means any Capital Stock that, by its terms (or by the
terms of any security into which it is convertible, or for which it is
exchangeable, at the option of the holder thereof), or upon the happening of
any event, matures or is mandatorily redeemable, pursuant to a sinking fund
obligation or otherwise, or redeemable at the option of the Holder thereof, in
whole or in part, on or prior to the date that is 91 days after the date on
which the Notes mature; provided, however, that any Capital Stock that would
constitute Disqualified Stock solely because the holders thereof have the
right to require the Company to repurchase such Capital Stock upon the
occurrence of a Change of Control or an Asset Sale shall not constitute
Disqualified Stock if the terms of such Capital Stock provide that the Company
may not repurchase or redeem any such Capital Stock pursuant to such
provisions unless such repurchase or redemption complies with the covenant
described above under the caption "--Certain Covenants--Restricted Payments."
"Equity Interests" means Capital Stock and all warrants, options or other
rights to acquire Capital Stock (but excluding any debt security that is
convertible into, or exchangeable for, Capital Stock).
"Existing Indebtedness" means up to $2.0 million in aggregate principal
amount of Indebtedness of the Company and its Restricted Subsidiaries (other
than Indebtedness under the Credit Facility) in existence on the date of the
Indenture, until such amounts are repaid.
"Fixed Charges" means, with respect to any Person and its Restricted
Subsidiaries for any period, the sum, without duplication, of (i) the
consolidated interest expense of such Person and its Restricted Subsidiaries
for such period, whether paid or accrued (including, without limitation,
amortization of debt issuance costs (other than debt issuance costs incurred
in connection with the Offering and the original Credit Facility) and original
issue discount, non-cash interest payments, the interest component of any
deferred payment obligations, the interest component of all payments
associated with Capital Lease Obligations, commissions, discounts and other
fees and charges incurred in respect of letter of credit or bankers'
acceptance financings, and net payments (if
66
<PAGE>
any) pursuant to Hedging Obligations) and (ii) the consolidated interest of
such Person and its Restricted Subsidiaries that was capitalized during such
period, and (iii) any interest expense on Indebtedness of another Person that
is Guaranteed by such Person or one of its Restricted Subsidiaries or secured
by a Lien on assets of such Person or one of its Restricted Subsidiaries
(whether or not such Guarantee or Lien is called upon), (iv) the product of
(a) all dividend payments, whether or not in cash, on any series of preferred
stock of such Person or any of its Restricted Subsidiaries, other than
dividend payments on Equity Interests payable solely in Equity Interests of
the Company (other than Disqualified Stock) or to the Company or a Restricted
Subsidiary of the Company, times (b) a fraction, the numerator of which is one
and the denominator of which is one minus the then current combined federal,
state and local statutory tax rate of such Person, expressed as a decimal, in
each case, on a consolidated basis and in accordance with GAAP and (v) an
amount equal to 1/3 of the Consolidated Lease Expense of such Person and its
Restricted Subsidiaries for such period, whether paid or accrued.
"Fixed Charge Coverage Ratio" means with respect to any Person and its
Restricted Subsidiaries for any period, the ratio of the Consolidated Cash
Flow of such Person and its Restricted Subsidiaries for such period to the
Fixed Charges of such Person and its Restricted Subsidiaries for such period.
In the event that the referent Person or any of its Restricted Subsidiaries
incurs, assumes, Guarantees or redeems any Indebtedness (other than revolving
credit borrowings) or issues or redeems preferred stock subsequent to the
commencement of the period for which the Fixed Charge Coverage Ratio is being
calculated but prior to the date on which the event for which the calculation
of the Fixed Charge Coverage Ratio is made (the "Calculation Date"), then the
Fixed Charge Coverage Ratio shall be calculated giving pro forma effect to
such incurrence, assumption, Guarantee or redemption of Indebtedness, or such
issuance or redemption of preferred stock, as if the same had occurred at the
beginning of the applicable four-quarter reference period. In addition, for
purposes of making the computation referred to above, (i) acquisitions that
have been made by the Company or any of its Restricted Subsidiaries, including
through mergers or consolidations and including any related financing
transactions, during the four-quarter reference period or subsequent to such
reference period and on or prior to the Calculation Date shall be deemed to
have occurred on the first day of the four-quarter reference period and
Consolidated Cash Flow for such reference period shall be calculated (A)
without giving effect to clause (iii) of the proviso set forth in the
definition of Consolidated Net Income and (B) after giving pro forma effect to
net cost savings that the Company reasonably believes in good faith could have
been achieved during the four-quarter reference period as a result of such
acquisition, which cost savings could then be reflected in pro forma financial
statements under GAAP, and (ii) the Consolidated Cash Flow attributable to
discontinued operations, as determined in accordance with GAAP, and operations
or businesses disposed of prior to the Calculation Date, shall be excluded,
and (iii) the Fixed Charges attributable to discontinued operations, as
determined in accordance with GAAP, and operations or businesses disposed of
prior to the Calculation Date, shall be excluded, but only to the extent that
the obligations giving rise to such Fixed Charges will not be obligations of
the referent Person or any of its Restricted Subsidiaries following the
Calculation Date.
"GAAP" means generally accepted accounting principles set forth in the
opinions and pronouncements of the Accounting Principles Board of the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board or in such other statements by such
other entity as have been approved by a significant segment of the accounting
profession, which are in effect from time to time.
"Guarantee" means a guarantee (other than by endorsement of negotiable
instruments for collection in the ordinary course of business), direct or
indirect, in any manner (including, without limitation, by way of a pledge of
assets or through letters of credit or reimbursement agreements in respect
thereof), of all or any part of any Indebtedness.
"Hedging Obligations" means, with respect to any Person, the obligations of
such Person under (i) interest rate swap agreements, interest rate cap
agreements and interest rate collar agreements and (ii) other agreements or
arrangements designed to protect such Person against fluctuations in interest
rates.
"Indebtedness" means, with respect to any Person, any indebtedness of such
Person, whether or not contingent, in respect of borrowed money or evidenced
by bonds, notes, debentures or similar instruments or
67
<PAGE>
letters of credit (or reimbursement agreements in respect thereof) or banker's
acceptances or representing Capital Lease Obligations or the balance deferred
and unpaid of the purchase price of any property or representing any Hedging
Obligations, except any such balance that constitutes an accrued expense or
trade payable, if and to the extent any of the foregoing (other than letters
of credit and Hedging Obligations) would appear as a liability upon a balance
sheet of such Person prepared in accordance with GAAP, as well as all
Indebtedness of others secured by a Lien on any asset of such Person (whether
or not such Indebtedness is assumed by such Person) and, to the extent not
otherwise included, the Guarantee by such Person of any indebtedness of any
other Person. The amount of any Indebtedness outstanding as of any date shall
be (i) the accreted value thereof, in the case of any Indebtedness issued with
original issue discount and (ii) the principal amount thereof, together with
any interest thereon that is more than 30 days past due, in the case of any
other Indebtedness.
"Investments" means, with respect to any Person, all investments by such
Person in other Persons (including Affiliates) in the forms of direct or
indirect loans (including guarantees of Indebtedness or other obligations),
advances or capital contributions (excluding commission, travel and similar
advances to officers and employees made in the ordinary course of business),
purchases or other acquisitions for consideration of Indebtedness, Equity
Interests or other securities, together with all items that are or would be
classified as investments on a balance sheet prepared in accordance with GAAP.
If the Company or any Restricted Subsidiary of the Company sells or otherwise
disposes of any Equity Interests of any direct or indirect Restricted
Subsidiary of the Company such that, after giving effect to any such sale or
disposition, such Person is no longer a Subsidiary of the Company, the Company
shall be deemed to have made an Investment on the date of any such sale or
disposition equal to the fair market value of the Equity Interests of such
Subsidiary not sold or disposed of in an amount determined as provided in the
final paragraph of the covenant described above under the caption "--Certain
Covenants--Restricted Payments."
"Lien" means, with respect to any asset, any mortgage, lien, pledge, charge,
security interest or encumbrance of any kind in respect of such asset, whether
or not filed, recorded or otherwise perfected under applicable law (including
any conditional sale or other title retention agreement, any lease in the
nature thereof, any option or other agreement to sell or give a security
interest in and any filing of or agreement to give any financing statement
under the Uniform Commercial Code (or equivalent statutes) of any
jurisdiction).
"Net Income" means, with respect to any Person, the net income (loss) of
such Person, determined in accordance with GAAP and before any reduction in
respect of preferred stock dividends, excluding, however, (i) any gain (but
not loss), together with any related provision for taxes on such gain (but not
loss), realized in connection with (a) any Asset Sale (including, without
limitation, dispositions pursuant to sale and leaseback transactions) or (b)
the disposition of any securities by such Person or any of its Restricted
Subsidiaries or the extinguishment of any Indebtedness of such Person or any
of its Restricted Subsidiaries and (ii) any extraordinary or nonrecurring gain
or loss, together with any related provision for taxes on such extraordinary
or nonrecurring gain or loss.
"Net Proceeds" means the aggregate cash proceeds received by the Company or
any of its Restricted Subsidiaries in respect of any Asset Sale (including,
without limitation, any cash received upon the sale or other disposition of
any non-cash consideration received in any Asset Sale), net of the direct
costs relating to such Asset Sale (including, without limitation, legal,
accounting and investment banking fees, and sales commissions) and any
relocation expenses incurred as a result thereof, taxes paid or payable as a
result thereof (after taking into account any available tax credits or
deductions and any tax sharing arrangements), amounts required to be applied
to the repayment of Indebtedness secured by a Lien on the asset or assets that
were the subject of such Asset Sale, any reserve for adjustment in respect of
the sale price of such asset or assets established in accordance with GAAP and
any reserve established in accordance with GAAP for liabilities associated
with such assets that are the subject of such Asset Sale (including, without
limitation, pension and other post-employment benefit liabilities, liabilities
related to environmental matters and liabilities under any indemnification
obligations associated with such Asset Sale), all as determined in good faith
and reflected in an Officers' Certificate delivered to the Trustee, provided,
that the amount of any such reserve shall be deemed to constitute Net Cash
Proceeds at the time such reserve shall have been reversed or is not otherwise
required to be retained as a reserve.
68
<PAGE>
"Non-Recourse Debt" means Indebtedness (i) as to which neither the Company
nor any of its Restricted Subsidiaries (a) provides credit support of any kind
(including any undertaking, agreement or instrument that would constitute
Indebtedness), (b) is directly or indirectly liable (as a guarantor or
otherwise), or (c) constitutes the lender and (ii) no default with respect to
which (including any rights that the holders thereof may have to take
enforcement action against an Unrestricted Subsidiary) would permit (upon
notice, lapse of time or both) any holder of any other Indebtedness (other
than the Notes) of the Company or any of its Restricted Subsidiaries to
declare a default on such other Indebtedness or cause the payment thereof to
be accelerated or payable prior to its stated maturity; and (iii) as to which
the lenders have been notified in writing that they will not have any recourse
to the stock or assets of the Company or any of its Restricted Subsidiaries.
"Obligations" means any principal, interest (including any interest accruing
subsequent to the filing of a petition of bankruptcy at the rate provided for
in the Credit Facility, whether or not such interest is an allowed claim under
applicable law), penalties, fees, indemnifications, reimbursements, damages
and other liabilities payable under the documentation governing any
Indebtedness.
"Permitted Business" means any business or activities conducted by the
Company on the date of the Indenture, any business or activities related,
ancillary or complementary to such business or activities, and any business or
activities reasonably developed, derived or extended from such business or
activities.
"Permitted Investments" means (a) any Investment in the Company or in a
Subsidiary Guarantor, (b) any Investment in Cash Equivalents, (c) any
Investment by the Company or any Restricted Subsidiary of the Company in a
Person, if as a result of such Investment (i) such Person becomes a Wholly
Owned Restricted Subsidiary of the Company or (ii) such Person is merged,
consolidated or amalgamated with or into, or transfers or conveys
substantially all of its assets to, or is liquidated into, the Company or a
Wholly Owned Restricted Subsidiary of the Company, (d) any Investment made as
a result of the receipt of non-cash consideration from an Asset Sale that was
made pursuant to and in compliance with the covenant described above under the
caption "--Repurchase at the Option of Holders--Asset Sales", (e) any
acquisition of assets solely in exchange for the issuance of Equity Interests
(other than Disqualified Stock) of the Company and (f) other Investments in
any Person having an aggregate fair market value (measured on the date each
such Investment was made and without giving effect to subsequent changes in
value), when taken together with all other Investments made pursuant to this
clause (e) that are at the time outstanding, not to exceed $5.0 million.
"Permitted Junior Securities" means Equity Interests in the Company or any
Subsidiary Guarantor or debt securities that are subordinated to all Senior
Debt (and any debt securities issued in exchange for Senior Debt) to
substantially the same extent as, or to a greater extent than, the Notes are
subordinated to Senior Debt pursuant to Article 10 of the Indenture.
"Permitted Liens" means the following Liens securing Indebtedness or trade
payables: (i) Liens to secure the Notes or the Subsidiary Guarantees; (ii)
Liens in favor of the Company or a Subsidiary Guarantor; (iii) Liens on
property of a Person existing at the time such Person is merged into or
consolidated with the Company or any Subsidiary of the Company; provided that
such Liens were in existence prior to the contemplation of such merger or
consolidation and do not extend to any assets other than those of the Person
merged into or consolidated with the Company; (iv) Liens on property existing
at the time of acquisition thereof by the Company or any Subsidiary of the
Company, provided that such Liens were in existence prior to the contemplation
of such acquisition; (v) Liens to secure the performance of statutory
obligations, surety or appeal bonds, performance bonds or other obligations of
a like nature incurred in the ordinary course of business; (vi) Liens to
secure Indebtedness (including Capital Lease Obligations) permitted by clause
(iv) of the second paragraph of the covenant entitled "Incurrence of
Indebtedness" covering only the assets acquired with such Indebtedness; (vii)
Liens existing on the date of the Indenture; (viii) Liens incurred in the
ordinary course of business of the Company or any Subsidiary of the Company
with respect to obligations that do not exceed $5.0 million at any one time
outstanding and that (a) are not incurred in connection with the borrowing of
money or the obtaining of advances or credit (other than trade credit in the
ordinary course of business) and (b) do not in the aggregate materially
detract from the value of the property or materially impair the use thereof in
the operation of business
69
<PAGE>
by the Company or such Subsidiary; (ix) Liens on stock or assets of
Unrestricted Subsidiaries that secure Non-Recourse Debt of Unrestricted
Subsidiaries; (x) Liens on assets of the Company or any Subsidiary Guarantor
to secure Senior Debt of the Company or such Subsidiary Guarantor that was
permitted by the Indenture to be incurred; and (xi) Liens to secure any
refinancings, renewals, extensions, modifications or replacements
(collectively, "refinancings") (or successive refinancings), in whole or in
part, of any Indebtedness secured by Liens referred to in clauses (iii), (iv),
(vii) and (x) above so long as such Lien does not extend to any other property
(other than improvements thereto).
"Permitted Refinancing Indebtedness" means any Indebtedness of the Company
or any of its Restricted Subsidiaries issued in exchange for, or the net
proceeds of which are used to extend, refinance, renew, replace, defease or
refund other Indebtedness of the Company or any of its Restricted Subsidiaries
(other than intercompany Indebtedness); provided that: (i) the principal
amount (or accreted value, if applicable) of such Permitted Refinancing
Indebtedness does not exceed the principal amount of (or accreted value, if
applicable), plus accrued interest on, the Indebtedness so extended,
refinanced, renewed, replaced, defeased or refunded (plus the amount of
premiums and reasonable expenses incurred in connection therewith); (ii) such
Permitted Refinancing Indebtedness has a final maturity date later than the
final maturity date of, and has a Weighted Average Life to Maturity equal to
or greater than the Weighted Average Life to Maturity of, the Indebtedness
being extended, refinanced, renewed, replaced, defeased or refunded; (iii) if
the Indebtedness being extended, refinanced, renewed, replaced, defeased or
refunded is subordinated in right of payment to the Notes, such Permitted
Refinancing Indebtedness has a final maturity date later than the final
maturity date of, and is subordinated in right of payment to, the Notes on
terms at least as favorable to the Holders of Notes as those contained in the
documentation governing the Indebtedness being extended, refinanced, renewed,
replaced, defeased or refunded; and (iv) such Indebtedness is incurred either
by the Company or by the Restricted Subsidiary who is the obligor on the
Indebtedness being extended, refinanced, renewed, replaced, defeased or
refunded.
"Restricted Investment" means an Investment other than a Permitted
Investment.
"Restricted Subsidiary" of a Person means any Subsidiary of the referent
Person that is not an Unrestricted Subsidiary.
"Senior Debt" means (i) all Indebtedness under the Credit Facility and all
Hedging Obligations with respect thereto, whether outstanding on the date of
the Indenture or thereafter created, (ii) any other Indebtedness permitted to
be incurred by the Company or a Subsidiary Guarantor under the terms of the
Indenture, unless the instrument under which such Indebtedness is incurred
expressly provides that it is on a parity with or subordinated in right of
payment to the Notes or the Subsidiary Guarantees and (iii) all Obligations
with respect to the foregoing. Notwithstanding anything to the contrary in the
foregoing, Senior Debt will not include (w) any liability for federal, state,
local or other taxes owed or owing by the Company or a Subsidiary Guarantor,
(x) any Indebtedness between or among the Company, any of its Subsidiaries or
any of its other Affiliates, (y) any trade payables or (z) that portion of any
Indebtedness that is incurred in violation of the Indenture.
"Significant Subsidiary" means any Subsidiary that would be a "significant
subsidiary" as defined in Article 1, Rule 1-02 of Regulation S-X, promulgated
pursuant to the Act, as such Regulation is in effect on the date hereof.
"Stated Maturity" means, with respect to any installment of interest or
principal on any series of Indebtedness, the date on which such payment of
interest or principal was scheduled to be paid in the original documentation
governing such Indebtedness, and shall not include any contingent obligations
to repay, redeem or repurchase any such interest or principal prior to the
date originally scheduled for the payment thereof.
"Subsidiary" means, with respect to any Person, (i) any corporation,
association or other business entity of which more than 50% of the total
voting power of shares of Capital Stock entitled (without regard to the
occurrence of any contingency) to vote in the election of directors, managers
or trustees thereof is at the time owned or controlled, directly or
indirectly, by such Person or one or more of the other Subsidiaries of that
Person
70
<PAGE>
(or a combination thereof) and (ii) any partnership (a) the sole general
partner or the managing general partner of which is such Person or a
Subsidiary of such Person or (b) the only general partners of which are such
Person or of one or more Subsidiaries of such Person (or any combination
thereof).
"Subsidiary Guarantors" means each of (i) Aerial Platforms, Inc., NES
Acquisition Corp., BAT Acquisition Corp. and MST Enterprises, Inc. and (ii)
any other Subsidiary that executes a Subsidiary Guarantee in accordance with
the provisions of the Indenture, and their respective successors and assigns.
"Unrestricted Subsidiary" means (i) any Subsidiary that is designated by the
Board of Directors as an Unrestricted Subsidiary pursuant to a Board
Resolution; but only to the extent that such Subsidiary: (a) has no
Indebtedness other than Non-Recourse Debt; (b) is not party to any agreement,
contract, arrangement or understanding with the Company or any Restricted
Subsidiary of the Company unless the terms of any such agreement, contract,
arrangement or understanding are no less favorable to the Company or such
Restricted Subsidiary than those that might be obtained at the time from
Persons who are not Affiliates of the Company; (c) is a Person with respect to
which neither the Company nor any of its Restricted Subsidiaries has any
direct or indirect obligation (x) to subscribe for additional Equity Interests
or (y) to maintain or preserve such Person's financial condition or to cause
such Person to achieve any specified levels of operating results; (d) has not
guaranteed or otherwise directly or indirectly provided credit support for any
Indebtedness of the Company or any of its Restricted Subsidiaries; and (e) has
at least one executive officer that is not a director or executive officer of
the Company or any of its Restricted Subsidiaries. Any such designation by the
Board of Directors shall be evidenced to the Trustee by filing with the
Trustee a certified copy of the Board Resolution giving effect to such
designation and an Officers' Certificate certifying that such designation
complied with the foregoing conditions and was permitted by the covenant
described above under the caption "--Certain Covenants--Restricted Payments."
If, at any time, any Unrestricted Subsidiary would fail to meet the foregoing
requirements as an Unrestricted Subsidiary, it shall thereafter cease to be an
Unrestricted Subsidiary for purposes of the Indenture and any Indebtedness of
such Subsidiary shall be deemed to be incurred by a Restricted Subsidiary of
the Company as of such date (and, if such Indebtedness is not permitted to be
incurred as of such date under the covenant described under the caption "--
Certain Covenants--Incurrence of Indebtedness and Issuance of Preferred
Stock," the Company shall be in default of such covenant). The Board of
Directors of the Company may at any time designate any Unrestricted Subsidiary
to be a Restricted Subsidiary; provided that such designation shall be deemed
to be an incurrence of Indebtedness by a Restricted Subsidiary of the Company
of any outstanding Indebtedness of such Unrestricted Subsidiary and such
designation shall only be permitted if (i) such Indebtedness is permitted
under the covenant described under the caption "--Certain Covenants--
Incurrence of Indebtedness and Issuance of Preferred Stock," calculated on a
pro forma basis as if such designation had occurred at the beginning of the
four-quarter reference period, and (ii) no Default or Event of Default would
be in existence following such designation.
"Voting Stock" of any Person as of any date means the Capital Stock of such
Person that is at the time entitled to vote in the election of the Board of
Directors of such Person.
"Weighted Average Life to Maturity" means, when applied to any Indebtedness
at any date, the number of years obtained by dividing (i) the sum of the
products obtained by multiplying (a) the amount of each then remaining
installment, sinking fund, serial maturity or other required payments of
principal, including payment at final maturity, in respect thereof, by (b) the
number of years (calculated to the nearest one-twelfth) that will elapse
between such date and the making of such payment, by (ii) the then outstanding
principal amount of such Indebtedness.
"Wholly Owned Restricted Subsidiary" of any Person means a Restricted
Subsidiary of such Person all of the outstanding Capital Stock or other
ownership interests of which (other than directors' qualifying shares) shall
at the time be owned by such Person or by one or more Wholly Owned Restricted
Subsidiaries of such Person or such Person and one or more Wholly Owned
Restricted Subsidiaries of such Person.
71
<PAGE>
THE EXCHANGE OFFER
PURPOSE AND EFFECT OF THE EXCHANGE OFFER
The Old Notes were originally sold by the Company on November 25, 1997 to
the Initial Purchasers pursuant to the Purchase Agreement. The Initial
Purchasers subsequently resold the Old Notes to qualified institutional buyers
in reliance on Rule 144A under the Securities Act. As a condition to the
Purchase Agreement, the Company, the Subsidiary Guarantors and the Initial
Purchasers entered into the Registration Rights Agreement on the date of the
Initial Offering (the "Issue Date"). Pursuant to the Registration Rights
Agreement, the Company agreed to file with the Commission the Exchange Offer
Registration Statement on the appropriate form under the Securities Act with
respect to the Exchange Notes. Upon the effectiveness of the Exchange Offer
Registration Statement, the Company will offer to the holders of Transfer
Restricted Securities pursuant to the Exchange Offer who are able to make
certain representations the opportunity to exchange their Securities for
Exchange Notes. If (i) the Company is not required to file the Exchange Offer
Registration Statement or permitted to consummate the Exchange Offer because
the Exchange Offer is not permitted by applicable law or Commission policy or
(ii) any holder of Transfer Restricted Securities notifies the Company prior
to the 20th day following consummation of the Exchange Offer that (A) it is
prohibited by law or Commission policy from participating in the Exchange
Offer or (B) that it may not resell the Exchange Notes acquired by it in the
Exchange Offer to the public without delivering a prospectus and the
prospectus contained in the Exchange Offer Registration Statement is not
appropriate or available for such resales or (C) that it is a broker-dealer
and owns Old Notes acquired directly from the Company or an affiliate of the
Company, the Company will file with the Commission a Shelf Registration
Statement to cover resales of the Old Notes by the Holders thereof who satisfy
certain conditions relating to the provision of information in connection with
the Shelf Registration Statement. For purposes of the foregoing, "Transfer
Restricted Securities" means each Old Note until (i) the date on which such
Note has been exchanged by a person other than a broker-dealer for an Exchange
Note in the Exchange Offer, (ii) following the exchange by a broker-dealer in
the Exchange Offer of an Old Note for an Exchange Note, the date on which such
Exchange Note is sold to a purchaser who receives from such broker-dealer on
or prior to the date of such sale a copy of the prospectus contained in the
Exchange Offer Registration Statement, (iii) the date on which such Old Note
has been effectively registered under the Securities Act and disposed of in
accordance with the Shelf Registration Statement or (iv) the date on which
such Old Note is distributed to the public pursuant to Rule 144 under the Act.
The Registration Rights Agreement provides that (i) the Company will file an
Exchange Offer Registration Statement with the Commission on or prior to 90
days after the Closing Date, (ii) the Company will use its best efforts to
have the Exchange Offer Registration Statement declared effective by the
Commission on or prior to 150 days after the Closing Date, (iii) unless the
Exchange Offer would not be permitted by applicable law or Commission policy,
the Company will commence the Exchange Offer and use its best efforts to issue
on or prior to 30 business days after the date on which the Exchange Offer
Registration Statement was declared effective by the Commission, Exchange
Notes in exchange for all Old Notes tendered prior thereto in the Exchange
Offer and (iv) if obligated to file the Shelf Registration Statement, the
Company will use its best efforts to file the Shelf Registration Statement
with the Commission on or prior to 90 days after such filing obligation arises
and to cause the Shelf Registration to be declared effective by the Commission
on or prior to 150 days after such obligation arises. If (a) the Company fails
to file any of the Registration Statements required by the Registration Rights
Agreement on or before the date specified for such filing, (b) any of such
Registration Statements is not declared effective by the Commission on or
prior to the date specified for such effectiveness (the "Effectiveness Target
Date"), or (c) the Company fails to consummate the Exchange Offer within 30
business days of the Effectiveness Target Date with respect to the Exchange
Offer Registration Statement, or (d) the Shelf Registration Statement or the
Exchange Offer Registration Statement is declared effective but thereafter
ceases to be effective or usable in connection with resales of Transfer
Restricted Securities during the periods specified in the Registration Rights
Agreement (each such event referred to in clauses (a) through (d) above a
"Registration Default"), then the Company will pay Liquidated Damages to each
Holder of Old Notes, with respect to the first 90-day period immediately
following the occurrence of the first Registration Default in an amount equal
to $.05 per week per $1,000 principal amount of Old Notes held by such Holder.
The amount of
72
<PAGE>
the Liquidated Damages will increase by an additional $.05 per week per $1,000
principal amount of Old Notes with respect to each subsequent 90-day period
until all Registration Defaults have been cured, up to a maximum amount of
Liquidated Damages for all Registration Defaults of $.50 per week per $1,000
principal amount of Old Notes. All accrued Liquidated Damages will be paid by
the Company on each Damages Payment Date to the Global Old Note Holder by wire
transfer of immediately available funds or by federal funds check and to
Holders of Certificated Securities by wire transfer to the accounts specified
by them or by mailing checks to their registered addresses if no such accounts
have been specified. Following the cure of all Registration Defaults, the
accrual of Liquidated Damages will cease.
Holders of Old Notes will be required to make certain representations to the
Company (as described in the Registration Rights Agreement) in order to
participate in the Exchange Offer and will be required to deliver certain
information to be used in connection with the Shelf Registration Statement and
to provide comments on the Shelf Registration Statement within the time
periods set forth in the Registration Rights Agreement in order to have their
Old Notes included in the Shelf Registration Statement and benefit from the
provisions regarding Liquidated Damages set forth above.
Following the consummation of the Exchange Offer, holders of the Old Notes
who were eligible to participate in the Exchange Offer but who did not tender
their Old Notes will not have any further registration rights and such Old
Notes will continue to be subject to certain restrictions on transfer.
Accordingly, the liquidity of the market for such Old Notes could be adversely
affected.
TERMS OF THE EXCHANGE OFFER
Upon the terms and subject to the conditions set forth in this Prospectus
and in the Letter of Transmittal, the Company will accept any and all Old
Notes validly tendered and not withdrawn prior to 5:00 p.m., New York City
time, on the Expiration Date. The Company will issue $1,000 principal amount
of Exchange Notes in exchange for each $1,000 principal amount of outstanding
Old Notes accepted in the Exchange Offer. Holders may tender some or all of
their Old Notes pursuant to the Exchange Offer. However, Old Notes may be
tendered only in integral multiples of $1,000.
The form and terms of the Exchange Notes are the same as the form and terms
of the Old Notes except that (i) the Exchange Notes bear a Series B
designation and a different CUSIP number from the Old Notes, (ii) the Exchange
Notes have been registered under the Securities Act and hence will not bear
legends restricting the transfer thereof and (iii) the holders of the Exchange
Notes will not be entitled to certain rights under the Registration Rights
Agreement, including the provisions providing for an increase in the interest
rate on the Old Notes in certain circumstances relating to the timing of the
Exchange Offer, all of which rights will terminate when the Exchange Offer is
terminated. The Exchange Notes will evidence the same debt as the Old Notes
and will be entitled to the benefits of the Indenture.
As of the date of the Prospectus, $100,000,000 aggregate principal amount of
Old Notes were outstanding. The Company has fixed the close of business on
, 1998 as the record date for the Exchange Offer for purposes of
determining the persons to whom this Prospectus and the Letter of Transmittal
will be mailed initially.
Holders of Old Notes do not have any appraisal or dissenters' rights under
the General Corporation Law of Delaware or the Indenture in connection with
the Exchange Offer. The Company intends to conduct the Exchange Offer in
accordance with the applicable requirements of the Exchange Act and the rules
and regulations of the Commission thereunder.
The Company shall be deemed to have accepted validly tendered Old Notes
when, as and if the Company has given oral or written notice thereof to the
Exchange Agent. The Exchange Agent will act as agent for the tendering holders
for the purpose of receiving the Exchange Notes from the Company.
If any tendered Old Notes are not accepted for exchange because of an
invalid tender, the occurrence of certain other events set forth herein or
otherwise, the certificates for any such unaccepted Old Notes will be
returned, without expense, to the tendering holder thereof as promptly as
practicable after the Expiration Date.
73
<PAGE>
Holders who tender Old Notes in the Exchange Offer will not be required to
pay brokerage commissions or fees or, subject to the instructions in the
Letter of Transmittal, transfer taxes with respect to the exchange of Old
Notes pursuant to the Exchange Offer. The Company will pay all charges and
expenses, other than transfer taxes in certain circumstances, in connection
with the Exchange Offer. See "-- Fees and Expenses."
EXPIRATION DATE; EXTENSIONS; AMENDMENTS
The term "Expiration Date" shall mean 5:00 p.m., New York City time, on
1998, unless the Company, in its sole discretion, extends the Exchange
Offer, in which case the term "Expiration Date" shall mean the latest date and
time to which the Exchange Offer is extended.
In order to extend the Exchange Offer, the Company will notify the Exchange
Agent of any extension by oral or written notice and will notify the holders
by issuing a press release regarding such extension, each prior to 9:00 a.m.,
New York City time, on the next business day after the previously scheduled
expiration date.
The Company reserves the right, in its sole discretion, (i) to delay
accepting any Old Notes, to extend the Exchange Offer or to terminate the
Exchange Offer if any of the conditions set forth below under "--Conditions"
shall not have been satisfied, by giving oral or written notice of such delay,
extension or termination to the Exchange Agent or (ii) to amend the terms of
the Exchange Offer in any manner. Any such delay in acceptance, extension,
termination or amendment will be followed as promptly as practicable by oral
or written notice thereof to the registered holders.
INTEREST ON THE EXCHANGE NOTES
The Exchange Notes will bear interest from their date of original issuance.
Holders of Old Notes that are accepted for exchange will receive, in cash,
accrued interest thereon to, but not including, the date of issuance of the
Exchange Notes. Such interest will be paid with the first interest payment on
the Exchange Notes on May 30, 1998. Interest on the Old Notes accepted for
exchange will cease to accrue upon issuance of the Exchange Notes.
Interest on the Exchange Notes is payable semi-annually on each May 30 and
November 30, commencing on May 30, 1998.
PROCEDURES FOR TENDERING
Only a holder of Old Notes may tender such Old Notes in the Exchange Offer.
For a holder to tender Old Notes validly pursuant to the Exchange Offer, a
properly completed and duly executed Letter of Transmittal (or facsimile
thereof), with any required signature guarantee, or (in the case of a book-
entry transfer) an Agent's Message in lieu of the Letter of Transmittal, and
any other required documents must be received by the Exchange Agent at the
address set forth under "Exchange Agent" prior to 5:00 p.m., New York City
time, on the Expiration Date. In addition, prior to 5:00 p.m., New York City
time, on the Expiration Date, either (A) certificates for tendered Old Notes
must be received by the Exchange Agent at such address or (B) such Old Notes
must be transferred pursuant to the procedures for book-entry transfer
described below (and a confirmation of such tender received by the Exchange
Agent, including an Agent's Message if the tendering holder has not delivered
a Letter of Transmittal). The term "Agent's Message" means a message,
transmitted by the book-entry transfer facility, The Depository Trust Company
(the "Book-Entry Transfer Facility"), to and received by the Exchange Agent
and forming a part of a book-entry confirmation, which states that the Book-
Entry Transfer Facility has received an express acknowledgment from the
tendering participant that such participant has received and agrees to be
bound by the Letter of Transmittal and that the Company may enforce such
Letter of Transmittal against such participant.
By executing the Letter of Transmittal, (or, in the case of a book-entry
transfer, an Agent's Message in lieu thereof) each holder will make to the
Company the representations set forth above in the third paragraph under the
heading "--Purpose and Effect of the Exchange Offer."
74
<PAGE>
The tender by a holder and the acceptance thereof by the Company will
constitute agreement between such holder and the Company in accordance with
the terms and subject to the conditions set forth herein and in the Letter of
Transmittal.
THE METHOD OF DELIVERY OF OLD NOTES AND THE LETTER OF TRANSMITTAL, INCLUDING
DELIVERY THROUGH DTC AND ANY ACCEPTANCE OF AN AGENT'S MESSAGE TRANSMITTED
THROUGH THE DTC AUTOMATED TENDER OFFER PROGRAM, AND ALL OTHER REQUIRED
DOCUMENTS TO THE EXCHANGE AGENT IS AT THE ELECTION AND SOLE RISK OF THE
HOLDER. AS AN ALTERNATIVE TO DELIVERY BY MAIL, HOLDERS MAY WISH TO CONSIDER
OVERNIGHT OR HAND DELIVERY SERVICE. IN ALL CASES, SUFFICIENT TIME SHOULD BE
ALLOWED TO ASSURE DELIVERY TO THE EXCHANGE AGENT BEFORE THE EXPIRATION DATE.
NO LETTER OF TRANSMITTAL OR OLD NOTES SHOULD BE SENT TO THE COMPANY. HOLDERS
MAY REQUEST THEIR RESPECTIVE BROKERS, DEALERS, COMMERCIAL BANKS, TRUST
COMPANIES OR NOMINEES TO EFFECT THE ABOVE TRANSACTIONS FOR SUCH HOLDERS.
Any beneficial owner whose Old Notes are registered in the name of a broker,
dealer, commercial bank, trust company or other nominee and who wishes to
tender should contact the registered holder promptly and instruct such
registered holder to tender on such beneficial owner's behalf. See
"Instructions to Registered Holder and/or Book-Entry Transfer Facility
Participant from Beneficial Owner" included with the Letter of Transmittal.
Signatures on a Letter of Transmittal or a notice of withdrawal, as the case
may be, must be guaranteed by an Eligible Institution (as defined below)
unless the Old Notes tendered pursuant thereto are tendered (i) by a
registered holder who has not completed the box entitled "Special Registration
Instructions" or "Special Delivery Instructions" on the Letter of Transmittal
or (ii) for the account of an Eligible Institution. In the event that
signatures on a Letter of Transmittal or a notice of withdrawal, as the case
may be, are required to be guaranteed, such guarantee must be by a member firm
of the Medallion System (an "Eligible Institution").
If the Letter of Transmittal is signed by a person other than the registered
holder of any Old Notes listed therein, such Old Notes must be endorsed or
accompanied by a properly completed bond power, signed by such registered
holder as such registered holder's name appears on such Old Notes with the
signature thereon guaranteed by an Eligible Institution.
If the Letter of Transmittal or any Old Notes or bond powers are signed by
trustees, executors, administrators, guardians, attorneys-in-fact, offices of
corporations or others acting in a fiduciary or representative capacity, such
persons should so indicate when signing, and evidence satisfactory to the
Company of their authority to so act must be submitted with the Letter of
Transmittal.
The Company understands that the Exchange Agent will make a request promptly
after the date of this Prospectus to establish accounts with respect to the
Old Notes at the Book-Entry Transfer Facility for the purpose of facilitating
the Exchange Offer, and, subject to the establishment thereof, any financial
institution that is a participant in the Book-Entry Transfer Facility's system
may make book-entry delivery of Old Notes by causing such Book-Entry Transfer
Facility to transfer such Old Notes into the Exchange Agent's account with
respect to the Old Notes in accordance with the Book-Entry Transfer Facility's
procedures for such transfer. Although delivery of the Old Notes may be
effected through book-entry transfer into the Exchange Agent's account at the
Book-Entry Transfer Facility, an appropriate Letter of Transmittal properly
completed and duly executed with any required signature guarantee, or (in the
case of a book-entry transfer) an Agent's Message in lieu of the Letter of
Transmittal, and all other required documents must in each case be transmitted
to and received or confirmed by the Exchange Agent at its address set forth
below on or prior to the Expiration Date, or, if the guaranteed delivery
procedures described below are complied with, within the time period provided
under such procedures. Delivery of documents to the Book-Entry Transfer
Facility does not constitute delivery to the Exchange Agent.
75
<PAGE>
All questions as to the validity, form, eligibility (including time of
receipt), acceptance of tendered Old Notes and withdrawal of tendered Old
Notes will be determined by the Company in its sole discretion, which
determination will be final and binding. The Company reserves the absolute
right to reject any and all Old Notes not properly tendered or any Old Notes
the Company's acceptance of which would, in the opinion of counsel for the
Company, be unlawful. The Company also reserves the right in its sole
discretion to waive any defects, irregularities or conditions of tender as to
particular Old Notes. The Company's interpretation of the terms and conditions
of the Exchange Offer (including the instructions in the Letter of
Transmittal) will be final and binding on all parties. Unless waived, any
defects or irregularities in connection with tenders of Old Notes must be
cured within such time as the Company shall determine. Although the Company
intends to notify holders of defects or irregularities with respect to tenders
of Old Notes, neither the Company, the Exchange Agent nor any other person
shall incur any liability for failure to give such notification. Tenders of
Old Notes will not be deemed to have been made until such defects or
irregularities have been cured or waived. Any Old Notes received by the
Exchange Agent that are not properly tendered and as to which the defects or
irregularities have not been cured or waived will be returned by the Exchange
Agent to the tendering holders, unless otherwise provided in the Letter of
Transmittal, as soon as practicable following the Expiration Date.
GUARANTEED DELIVERY PROCEDURES
Holders who wish to tender their Old Notes and (i) whose Old Notes are not
immediately available, (ii) who cannot deliver their Old Notes, the Letter of
Transmittal (or in the case of a book-entry transfer) an Agent's Message in
lieu thereof) or any other required documents to the Exchange Agent or (iii)
who cannot complete the procedures for book-entry transfer (including delivery
of an Agent's Message), prior to the Expiration Date, may effect a tender if:
(a) the tender is made through an Eligible Institution;
(b) prior to the Expiration Date, the Exchange Agent receives from such
Eligible Institution (i) an Agent's Message with respect to guaranteed
delivery that is accepted by the Company or (ii) a properly completed and
duly executed Notice of Guaranteed Delivery (by facsimile transmission,
mail or hand delivery) setting forth the name and address of the holder,
the certificate number(s) of such Old Notes and the principal amount of Old
Notes tendered, stating that the tender is being made thereby and
guaranteeing that, within three New York Stock Exchange trading days after
the Expiration Date, the Letter of Transmittal (or facsimile thereof) (or,
in the case of a book-entry transfer, an Agent's Message in lieu thereof)
together with the certificate(s) representing the Old Notes (or a
confirmation of book-entry transfer of such Notes into the Exchange Agent's
account at the Book-Entry Transfer Facility), and any other documents
required by the Letter of Transmittal will be deposited by the Eligible
Institution with the Exchange Agent; and
(c) such properly completed and executed Letter of Transmittal (of
facsimile thereof) (or, in the case of a book-entry transfer, an Agent's
Message in lieu thereof), as well as the certificate(s) representing all
tendered Old Notes in proper form for transfer (or a confirmation of book-
entry transfer of such Old Notes into the Exchange Agent's account at the
Book-Entry Transfer Facility), and all other documents required by the
Letter of Transmittal are received by the Exchange Agent within three New
York Stock Exchange trading days after the Expiration Date.
Upon request to the Exchange Agent, a Notice of Guaranteed Delivery will be
sent to holders who wish to tender their Old Notes according to the guaranteed
delivery procedures set forth above.
WITHDRAWAL OF TENDERS
Except as otherwise provided herein, tenders of Old Notes may be withdrawn
at any time prior to 5:00 p.m., New York City time, on the Expiration Date.
To withdraw a tender of Old Notes in the Exchange Offer, a telegram, telex,
letter or facsimile transmission notice of withdrawal must be received by the
Exchange Agent at its address set forth herein prior to 5:00 p.m.,
76
<PAGE>
New York City time, on the Expiration Date. Any such notice of withdrawal must
(i) specify the name of the person having deposited the Old Notes to be
withdrawn (the "Depositor"), (ii) identify the Old Notes to be withdrawn
(including the certificate number(s) and principal amount of such Old Notes,
or, in the case of Old Notes transferred by book-entry transfer, the name and
number of the account at the Book-Entry Transfer Facility to be credited),
(iii) be signed by the holder in the same manner as the original signature on
the Letter of Transmittal by which such Old Notes were tendered (including any
required signature guarantees) or be accompanied by documents of transfer
sufficient to have the Trustee with respect to the Old Notes register the
transfer of such Old Notes into the name of the person withdrawing the tender
and (iv) specify the name in which any such Old Notes are to be registered, if
different from that of the Depositor. All questions as to the validity, form
and eligibility (including time of receipt) of such notices will be determined
by the Company, whose determination shall be final and binding on all parties.
Any Old Notes so withdrawn will be deemed not to have been validly tendered
for purposes of the Exchange Offer and no Exchange Notes will be issued with
respect thereto unless the Old Notes so withdrawn are validly retendered. Any
Old Notes which have been tendered but which are not accepted for exchange
will be returned to the holder thereof without cost to such holder as soon as
practicable after withdrawal, rejection of tender or termination of the
Exchange Offer. Properly withdrawn Old Notes may be retendered by following
one of the procedures described above under "-- Procedures for Tendering" at
any time prior to the Expiration Date.
CONDITIONS
Notwithstanding any other term of the Exchange Offer, the Company shall not
be required to accept for exchange, or exchange Exchange Notes for, any Old
Notes, and may terminate or amend the Exchange Offer as provided herein before
the acceptance of such Old Notes, if:
(a) any action or proceeding is instituted or threatened in any court or
by or before any governmental agency with respect to the Exchange Offer
which, in the sole judgment of the Company, might materially impair the
ability of the Company to proceed with the Exchange Offer or any material
adverse development has occurred in any existing action or proceeding with
respect to the Company or any of its subsidiaries; or
(b) any law, statute, rule, regulation or interpretation by the staff of
the Commission is proposed, adopted or enacted, which, in the sole judgment
of the Company, might materially impair the ability of the Company to
proceed with the Exchange Offer or materially impair the contemplated
benefits of the Exchange Offer to the Company; or
(c) any governmental approval has not been obtained, which approval the
Company shall, in its sole discretion, deem necessary for the consummation
of the Exchange Offer as contemplated hereby.
If the Company determines in its sole discretion that any of the conditions
are not satisfied, the Company may (i) refuse to accept any Old Notes and
return all tendered Old Notes to the tendering holders, (ii) extend the
Exchange Offer and retain all Old Notes tendered prior to the expiration of
the Exchange Offer, subject, however, to the rights of holders to withdraw
such Old Notes (see "-- Withdrawal of Tenders") or (iii) waive such
unsatisfied conditions with respect to the Exchange Offer and accept all
properly tendered Old Notes which have not been withdrawn.
77
<PAGE>
EXCHANGE AGENT
Harris Trust and Savings Bank has been appointed as Exchange Agent for the
Exchange Offer. Questions and requests for assistance, requests for additional
copies of this Prospectus or of the Letter of Transmittal and requests for
Notice of Guaranteed Delivery should be directed to the Exchange Agent
addressed as follows:
HARRIS TRUST AND SAVINGS BANK
c/o Harris Trust Company of New York
By Mail:
By Facsimile Transmission:
Wall Street Station By Overnight Courier or Hand:
(for Eligible Institutions Only)
P.O. Box 1010 (212) 701-7636 Wall Street Plaza
New York, NY 10268-1010 88 Pine Street, 19th Floor
(212) 701-7637 New York, NY 10005
Attention: Reorganization Attention: Reorganization Dept.
Dept.
Confirm by Telephone:
(212) 701-7624
DELIVERY TO AN ADDRESS OTHER THAN SET FORTH ABOVE
WILL NOT CONSTITUTE A VALID DELIVERY.
FEES AND EXPENSES
The expenses of soliciting tenders will be borne by the Company. The
principal solicitation is being made by mail; however, additional solicitation
may be made by telegraph, telecopy, telephone or in person by officers and
regular employees of the Company and its affiliates.
The Company has not retained any dealer-manager in connection with the
Exchange Offer and will not make any payments to brokers, dealers, or others
soliciting acceptances of the Exchange Offer. The Company, however, will pay
the Exchange Agent reasonable and customary fees for its services and will
reimburse it for its reasonable out-of-pocket expenses in connection
therewith.
The cash expenses to be incurred in connection with the Exchange Offer will
be paid by the Company. Such expenses include fees and expenses of the
Exchange Agent and Trustee, accounting and legal fees and printing costs,
among others.
ACCOUNTING TREATMENT
The Exchange Notes will be recorded at the same carrying value as the Old
Notes, which is face value, as reflected in the Company's accounting records
on the date of exchange. Accordingly, no gain or loss for accounting purposes
will be recognized by the Company. The expenses of the Exchange Offer will be
expensed over the term of the Exchange Notes.
CONSEQUENCES OF FAILURE TO EXCHANGE
The Old Notes that are not exchanged for Exchange Notes pursuant to the
Exchange Offer will remain restricted securities. Accordingly, such Old Notes
may be resold only (i) to the Company (upon redemption thereof or otherwise),
(ii) so long as the Old Notes are eligible for resale pursuant to Rule 144A,
to a person inside the United States whom the seller reasonably believes is a
qualified institutional buyer within the meaning of Rule 144A under the
Securities Act in a transaction meeting the requirements of Rule 144A, in
accordance with Rule 144 under the Securities Act, or pursuant to another
exemption from the registration requirements of the Securities Act (and based
upon an opinion of counsel reasonably acceptable to the Company), (iii)
outside the United States to a foreign person in a transaction meeting the
requirements of Rule 904 under the Securities Act, or (iv) pursuant to an
effective registration statement under the Securities Act, in each case in
accordance with any applicable securities laws of any state of the United
States.
78
<PAGE>
RESALE OF THE EXCHANGE NOTES
With respect to resales of Exchange Notes, based on interpretations by the
staff of the Commission set forth in no-action letters issued to third
parties, the Company believes that a holder or other person who receives
Exchange Notes, whether or not such person is the holder (other than a person
that is an "affiliate" of the Company within the meaning of Rule 405 under the
Securities Act) who receives Exchange Notes in exchange for Old Notes in the
ordinary course of business and who is not participating, does not intend to
participate, and has no arrangement or understanding with any person to
participate, in the distribution of the Exchange Notes, will be allowed to
resell the Exchange Notes to the public without further registration under the
Securities Act and without delivering to the purchasers of the Exchange Notes
a prospectus that satisfies the requirements of Section 10 of the Securities
Act. However, if any holder acquires Exchange Notes in the Exchange Offer for
the purpose of distributing or participating in a distribution of the Exchange
Notes, such holder cannot rely on the position of the staff of the Commission
enunciated in such no-action letters or any similar interpretive letters, and
must comply with the registration and prospectus delivery requirements of the
Securities Act in connection with any resale transaction, unless an exemption
from registration is otherwise available. Further, each Participating Broker-
Dealer that receives Exchange Notes for its own account in exchange for Old
Notes, where such Old Notes were acquired by such Participating Broker-Dealer
as a result of market-making activities or other trading activities, must
acknowledge that it will deliver a prospectus in connection with any resale of
such Exchange Notes.
As contemplated by these no-action letters and the Registration Rights
Agreement, each holder accepting the Exchange Offer is required to represent
to the Company in the Letter of Transmittal that (i) the Exchange Notes are to
be acquired by the holder or the person receiving such Exchange Notes, whether
or not such person is the holder, in the ordinary course of business, (ii) the
holder or any such other person (other than a broker-dealer referred to in the
next sentence) is not engaging and does not intend to engage, in the
distribution of the Exchange Notes, (iii) the holder or any such other person
has no arrangement or understanding with any person to participate in the
distribution of the Exchange Notes, (iv) neither the holder nor any such other
person is an "affiliate" of the Company within the meaning of Rule 405 under
the Securities Act, and (v) the holder or any such other person acknowledges
that if such holder or other person participates in the Exchange Offer for the
purpose of distributing the Exchange Notes it must comply with the
registration and prospectus delivery requirements of the Securities Act in
connection with any resale of the Exchange Notes and cannot rely on those no-
action letters. As indicated above, each Participating Broker-Dealer that
receives an Exchange Note for its own account in exchange for Old Notes must
acknowledge that it will deliver a prospectus in connection with any resale of
such Exchange Notes. For a description of the procedures for such resales by
Participating Broker-Dealers, see "Plan of Distribution."
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The following discussion is based on the current provisions of the Internal
Revenue Code of 1986, as amended (the "Code"), applicable Treasury
regulations, judicial authority and administrative rulings and practice. There
can be no assurance that the Internal Revenue Service (the "Service") will not
take a contrary view, and no ruling from the Service has been or will be
sought. Legislative, judicial or administrative changes or interpretations may
be forthcoming that could alter or modify the statements and conditions set
forth herein. Any such changes or interpretations may or may not be
retroactive and could affect the tax consequences to holders. Certain holders
(including insurance companies, tax-exempt organizations, financial
institutions, broker-dealers, foreign corporations and persons who are not
citizens or residents of the United States) may be subject to special rules
not discussed below. The Company recommends that each holder consult such
holder's own tax advisor as to the particular tax consequences of exchanging
such holder's Old Notes for Exchange Notes, including the applicability and
effect of any state, local or foreign tax laws.
The Company believes that the exchange of Old Notes for Exchange Notes
pursuant to the Exchange Offer will not be treated as an "exchange" for
federal income tax purposes because the Exchange Notes will not be considered
to differ materially in kind or extent from the Old Notes. Rather, the
Exchange Notes received by a
79
<PAGE>
holder will be treated as a continuation of the Old Notes in the hands of such
holder. As a result, there will be no federal income tax consequences to
holders exchanging Old Notes for Exchange Notes pursuant to the Exchange
Offer.
PLAN OF DISTRIBUTION
Each Participating Broker-Dealer that receives Exchange Notes for its own
account pursuant to the Exchange Offer must acknowledge that it will deliver a
prospectus in connection with any resale of such Exchange Notes. The
Prospectus, as it may be amended or supplemented from time to time, may be
used by a Participating Broker-Dealer in connection with resales of Exchange
Notes received in exchange for Old Notes where such Old Notes were acquired as
a result of market-making activities or other trading activities. The Company
has agreed that for a period of 180 days after the Expiration Date, it will
make the Prospectus, as amended or supplemented, available to any
Participating Broker-Dealer for use in connection with any such resale. In
addition, until , 1998 (90 days after the commencement of the
Exchange Offer), all dealers effecting transactions in the Exchange Notes may
be required to deliver a prospectus.
The Company will not receive any proceeds from any sales of the Exchange
Notes by Participating Broker Dealers. Exchange Notes received by
Participating Broker-Dealers for their own account pursuant to the Exchange
Offer may be sold from time to time in one or more transactions in the over-
the-counter market, in negotiated transactions, through the writing of options
on the Exchange Notes or a combination of such methods of resale, at market
prices prevailing at the time of resale, at prices related to such prevailing
market prices or negotiated prices. Any such resale may be made directly to
purchasers or to or through brokers or dealers who may receive compensation in
the form of commissions or concessions from any such Participating Broker-
Dealer and/or the purchasers of any such Exchange Notes. Any Participating
Broker-Dealer that resells the Exchange Notes that were received by it for its
own account pursuant to the Exchange Offer and any broker or dealer that
participates in a distribution of such Exchange Notes may be deemed to be an
"underwriter" within the meaning of the Securities Act and any profit on any
such resale of Exchange Notes and any commissions or concessions received by
any such persons may be deemed to be underwriting compensation under the
Securities Act. The Letter of Transmittal states that by acknowledging that it
will deliver and by delivering a prospectus, a Participating Broker-Dealer
will not be deemed to admit that it is an "underwriter" within the meaning of
the Securities Act.
For a period of 180 days after the Expiration Date the Company will promptly
send additional copies of this Prospectus and any amendment or supplement to
this Prospectus to any Participating Broker-Dealer that requests such
documents in the Letter of Transmittal.
EXPERTS
The consolidated financial statements of National Equipment Services, Inc.
as of December 31, 1997 and 1996 and for the year ended December 31, 1997 and
the period from inception (June 4, 1996) through December 31, 1996 included in
this Prospectus have been so included in reliance on the report of Price
Waterhouse LLP, independent accountants, given on the authority of said firm
as experts in auditing and accounting.
The financial statements of Aerial Platforms, Inc. as of January 31, 1997
and February 17, 1997 and for the year ended January 31, 1997 and the
seventeen days ended February 17, 1997 included in this Prospectus have been
so included in reliance on the report of Price Waterhouse LLP, independent
accountants, given on the authority of said firm as experts in auditing and
accounting.
The financial statements of Lone Star Rentals, Inc. as of December 31, 1995
and 1996 and March 16, 1997 and for each of the two years in the period ended
December 31, 1996 and for the period from January 1, 1997 through March 16,
1997 included in this Prospectus have been so included in reliance on the
report of Price Waterhouse LLP, independent accountants, given on the
authority of said firm as experts in auditing and accounting.
80
<PAGE>
The financial statements of BAT Rentals, Inc. as of December 31, 1995 and
1996 and March 31, 1997 and for each of the two years in the period ended
December 31, 1996 and for the three months ended March 31, 1997 included in
this Prospectus have been so included in reliance on the report of Price
Waterhouse LLP, independent accountants, given on the authority of said firm
as experts in auditing and accounting.
The financial statements of Sprintank and Sprintank Mobile Storage
(divisions of Sprint Industrial Services, Inc.) as of December 31, 1995 and
1996 and June 30, 1997 and for each of the two years in the period ended
December 31, 1996 and for the six months ended June 30, 1997 included in this
Prospectus have been so included in reliance on the report of Price Waterhouse
LLP, independent accountants, given on the authority of said firm as experts
in auditing and accounting.
The financial statements of MST Enterprises, Inc. d/b/a Equipco Rentals and
Sales as of October 31, 1995 and 1996 and as of July 17, 1997 and for each of
the two years in the period ended October 31, 1996 and for the period from
November 1, 1996 through July 17, 1997 included in this Prospectus have been
so included in reliance on the report of Price Waterhouse LLP, independent
accountants, given on the authority of said firm as experts in auditing and
accounting.
The consolidated financial statements of Work Safe Supply Co., Inc. as of
December 31, 1996 and 1997 and for each of the three years in the period ended
December 31, 1997 included in this Prospectus have been so included in
reliance on the report of Price Waterhouse LLP, independent accountants, given
on the authority of said firm as experts in auditing and accounting.
The financial statements of Genpower Pump & Equipment, Inc. as of December
31, 1997 and for the year then ended included in this Prospectus have been so
included in reliance on the report of Price Waterhouse LLP, independent
accountants, given on the authority of said firm as experts in auditing and
accounting.
The financial statements of Albany Ladder Company, Inc. as of December 31,
1997 and for the year then ended included in this Prospectus have been so
included in reliance on the report of Price Waterhouse LLP, independent
accountants, given on the authority of said firm as experts in auditing and
accounting.
The financial statements of Dragon Rentals (a wholly owned division of The
Modern Group, Inc.) as of December 31, 1996 and 1997 and for the years then
ended included in this Prospectus have been so included in reliance on the
report of Lawrence, Blackburn Meek Maxey & Co. P.C., independent accountants,
given on the authority of said firm as experts in auditing and accounting.
The financial statements of Cormier Equipment Corporation as of December 31,
1996 and 1997 and for the three years ended December 31, 1997 included in this
Prospectus have been so included in reliance on the report of Albin, Randall &
Bennett, Certified Public Accountants, given on the authority of said firm as
experts in auditing and accounting.
The consolidated financial statements of Falconite, Inc. and subsidiaries as
of December 31, 1997 and for the year then ended included in this Prospectus
have been so included in reliance on the report of Coopers & Lybrand L.L.P.,
independent accountants, given on the authority of said firm as experts in
auditing and accounting.
The consolidated financial statements of Falconite, Inc. and subsidiaries as
of December 31, 1996 and for each of the years in the two-year period ended
December 31, 1996 included in this Prospectus have been so included in
reliance on the report of KPMG Peat Marwick L.L.P., independent accountants,
given on the authority of said firm as experts in auditing and accounting.
LEGAL MATTERS
The validity of the issuance of the Exchange Notes offered hereby will be
passed upon for the Company by Kirkland & Ellis, Chicago, Illinois.
81
<PAGE>
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<S> <C>
NATIONAL EQUIPMENT SERVICES, INC. AND SUBSIDIARIES
Financial Statements -- December 31, 1996 and December 31, 1997
Report of Independent Accountants...................................... F-3
Consolidated Balance Sheets............................................ F-4
Consolidated Statements of Operations.................................. F-5
Consolidated Statements of Cash Flows.................................. F-6
Consolidated Statements of Changes in Stockholders' Equity............. F-7
Notes to Consolidated Financial Statements............................. F-8
AERIAL PLATFORMS, INC.
Financial Statements -- January 31, 1997 and February 17, 1997
Report of Independent Accountants...................................... F-17
Balance Sheets......................................................... F-18
Statements of Operations............................................... F-19
Statements of Cash Flows............................................... F-20
Statements of Changes in Stockholder's Equity.......................... F-21
Notes to Financial Statements.......................................... F-22
LONE STAR RENTALS, INC.
Financial Statements -- December 31, 1995 and 1996 and March 16, 1997
Report of Independent Accountants...................................... F-27
Balance Sheets......................................................... F-28
Statements of Operations............................................... F-29
Statements of Cash Flows............................................... F-30
Statements of Changes in Stockholder's Equity.......................... F-31
Notes to Financial Statements.......................................... F-32
BAT RENTALS, INC.
Financial Statements -- December 31, 1995 and 1996 and March 31, 1997
Report of Independent Accountants...................................... F-38
Balance Sheets......................................................... F-39
Statements of Operations............................................... F-40
Statements of Cash Flows............................................... F-41
Statements of Changes in Stockholder's Equity.......................... F-42
Notes to Financial Statements.......................................... F-43
SPRINTANK AND SPRINTANK MOBILE STORAGE (DIVISIONS OF SPRINT INDUSTRIAL
SERVICES, INC.)
Financial Statements -- December 31, 1995 and 1996 and June 30, 1997
Report of Independent Accountants...................................... F-48
Balance Sheets......................................................... F-49
Statements of Operations............................................... F-50
Statements of Cash Flows............................................... F-51
Statements of Changes in Divisional Equity............................. F-52
Notes to Financial Statements.......................................... F-53
MST ENTERPRISES, INC. D/B/A EQUIPCO RENTALS AND SALES
Financial Statements -- October 31, 1995 and 1996 and July 17, 1997
Report of Independent Accountants...................................... F-58
Balance Sheets......................................................... F-59
Statements of Operations............................................... F-60
Statements of Cash Flows............................................... F-61
Statements of Changes in Stockholder's Equity.......................... F-62
Notes to Financial Statements.......................................... F-63
</TABLE>
F-1
<PAGE>
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
WORK SAFE SUPPLY CO., INC.
Consolidated Financial Statements -- December 31, 1995, 1996 and 1997
Report of Independent Accountants...................................... F-68
Consolidated Balance Sheets............................................ F-69
Consolidated Statements of Operations.................................. F-70
Consolidated Statements of Cash Flows.................................. F-71
Consolidated Statements of Changes in Stockholder's Equity............. F-72
Notes to Consolidated Financial Statements............................. F-73
GENPOWER PUMP & EQUIPMENT, INC.
Financial Statements -- December 31, 1997
Report of Independent Accountants...................................... F-77
Balance Sheet.......................................................... F-78
Statement of Operations................................................ F-79
Statement of Changes in Stockholder's Equity........................... F-80
Statement of Cash Flows................................................ F-81
Notes to Financial Statements.......................................... F-82
CORMIER EQUIPMENT CORPORATION
Financial Statements -- December 31, 1995, 1996 and 1997
Independent Auditors' Report........................................... F-87
Balance Sheets......................................................... F-88
Statement of Earnings and Retained Earnings............................ F-89
Statements of Cash Flows............................................... F-90
Notes to Financial Statements.......................................... F-91
DRAGON RENTALS (DIVISION OF THE MODERN GROUP, INC.)
Financial Statements -- December 31, 1996 and 1997
Report of Independent Accountants...................................... F-93
Balance Sheets......................................................... F-94
Statements of Income and Expenses...................................... F-95
Statements of Cash Flows............................................... F-96
Notes to Financial Statements.......................................... F-97
ALBANY LADDER COMPANY, INC.
Financial Statements -- December 31, 1997
Report of Independent Accountants...................................... F-102
Balance Sheet.......................................................... F-103
Statement of Operations................................................ F-104
Statement of Cash Flows................................................ F-105
Statement of Changes in Stockholder's Equity........................... F-106
Notes to Financial Statements.......................................... F-107
FALCONITE, INC. AND SUBSIDIARIES
Consolidated Financial Statements--December 31, 1995, 1996 and 1997
Reports of Independent Accountants..................................... F-111
Consolidated Balance Sheets............................................ F-113
Consolidated Statements of Income...................................... F-114
Consolidated Statements of Shareholders' Equity........................ F-115
Consolidated Statements of Cash Flows.................................. F-116
Notes to Consolidated Financial Statements............................. F-117
NATIONAL EQUIPMENT SERVICES, INC. AND SUBSIDIARIES UNAUDITED PRO FORMA
COMBINED FINANCIAL STATEMENTS
Introduction to Unaudited Pro Forma Combined Financial Statements...... F-129
Unaudited Pro Forma Combined Statement of Operations................... F-130
Unaudited Pro Forma Combined Balance Sheet............................. F-132
Notes to Unaudited Pro Forma Combined Financial Statements............. F-133
</TABLE>
F-2
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors
of National Equipment Services, Inc.
In our opinion, the accompanying consolidated balance sheets and the related
consolidated statements of operations, of cash flows and of changes in
stockholders' equity, present fairly, in all material respects, the financial
position of National Equipment Services, Inc. and subsidiaries at December 31,
1996 and December 31, 1997, and the results of its operations and its cash
flows for the period from inception (June 4, 1996) through December 31, 1996
and the year ended December 31, 1997 in conformity with generally accepted
accounting principles. These financial statements are the responsibility of
management; our responsibility is to express an opinion on these financial
statements based on our audits. We conducted our audits of these statements in
accordance with generally accepted auditing standards which require that we
plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements, assessing the accounting principles used and
significant estimates made by management, and evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for the opinion expressed above.
/s/ PRICE WATERHOUSE LLP
Chicago, Illinois
April 1, 1998
F-3
<PAGE>
NATIONAL EQUIPMENT SERVICES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31,
1996 1997
------------ ------------
<S> <C> <C>
ASSETS:
Cash and cash equivalents.......................... $ 12 $ 35,682
Accounts receivable, net of allowance for doubtful
accounts of $0 and $254, respectively............. -- 8,356
Inventory, net..................................... -- 2,239
Rental equipment, net.............................. -- 46,801
Property and equipment, net........................ 17 3,012
Intangible assets, net............................. -- 27,937
Loan origination costs, net........................ -- 6,270
Prepaid and other assets, net...................... 187 840
---- --------
Total assets..................................... $216 $131,137
==== ========
LIABILITIES AND STOCKHOLDERS' EQUITY:
Accounts payable................................... $ -- $ 2,489
Accrued interest................................... -- 1,066
Accrued expenses and other liabilities............. 110 2,327
Debt............................................... -- 98,782
---- --------
Total liabilities................................ 110 104,664
Commitments and contingencies (Note 10)
STOCKHOLDERS' EQUITY:
Class A Common stock, $0.01 par, 50,000 shares
authorized, 0 and 25,011, respectively, shares
issued and outstanding............................. -- 1
Class B Common stock, $0.01 par, 150,000 shares
authorized, 30,108 and 89,900, respectively, shares
issued and outstanding............................. 1 1
Additional paid-in capital.......................... 301 25,663
Retained earnings (accumulated deficit)............. (195) 910
Stock subscriptions receivable...................... (1) (102)
---- --------
Total stockholders' equity....................... 106 26,473
---- --------
Total liabilities and stockholders' equity....... $216 $131,137
==== ========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
F-4
<PAGE>
NATIONAL EQUIPMENT SERVICES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS)
<TABLE>
<CAPTION>
FOR THE
PERIOD FROM
INCEPTION
(JUNE 4,
1996) FOR THE
THROUGH YEAR ENDED
DECEMBER 31, DECEMBER 31,
1996 1997
------------ ------------
<S> <C> <C>
REVENUES:
Rental revenues...................................... $ -- $26,398
Rental equipment sales............................... -- 4,186
New equipment sales and other........................ -- 10,704
----- -------
Total revenues..................................... -- 41,288
----- -------
COST OF REVENUES:
Rental equipment depreciation........................ -- 5,009
Cost of rental equipment sales....................... -- 2,935
Cost of new equipment sales.......................... -- 4,872
Other operating expenses............................. -- 12,899
----- -------
Total cost of revenues............................. -- 25,715
----- -------
Gross profit.......................................... -- 15,573
Selling, general and administrative expenses.......... 333 7,910
Non-rental depreciation and amortization.............. 3 1,476
----- -------
Operating income (loss)............................... (336) 6,187
Other income (expense), net........................... -- 72
Interest income (expense), net........................ 4 (4,336)
----- -------
Income (loss) before income taxes..................... (332) 1,923
Income tax expense (benefit).......................... (137) 818
----- -------
Net income (loss)..................................... $(195) $ 1,105
===== =======
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
F-5
<PAGE>
NATIONAL EQUIPMENT SERVICES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
FOR THE
PERIOD FROM
INCEPTION
(JUNE 4, FOR THE
1996 YEAR
THROUGH ENDED
DECEMBER 31, DECEMBER 31,
1996 1997
------------ ------------
<S> <C> <C>
OPERATING ACTIVITIES:
Net income (loss)................................... $(195) $ 1,105
Adjustments to reconcile net income (loss) to net
cash provided by operating activities:
Depreciation and amortization...................... 3 6,892
Gain on sale of equipment.......................... -- (1,446)
Changes in operating assets and liabilities:
Accounts receivable............................... -- (1,335)
Inventory......................................... -- 202
Prepaid and other assets.......................... (187) 139
Accounts payable.................................. -- 1,620
Accrued expenses and other liabilities............ 110 201
----- ---------
Net cash provided by (used in) operating activities. (269) 7,378
----- ---------
INVESTING ACTIVITIES:
Net cash paid for acquisitions...................... -- (68,910)
Purchases of rental equipment....................... -- (15,336)
Proceeds from sale of rental equipment.............. -- 4,186
Purchases of property and equipment................. (20) (1,473)
Proceeds from sale of property and equipment........ -- 36
----- ---------
Net cash used in investing activities............... (20) (81,497)
----- ---------
FINANCING ACTIVITIES:
Proceeds from long-term debt........................ -- 222,307
Payments on long-term debt.......................... -- (131,119)
Net proceeds from sales of common stock............. 301 25,263
Payments of loan origination costs.................. -- (6,662)
----- ---------
Net cash provided by financing activities........... 301 109,789
----- ---------
Net increase in cash and cash equivalents........... 12 35,670
Cash and cash equivalents at beginning of period.... -- 12
----- ---------
Cash and cash equivalents at end of period.......... $ 12 $ 35,682
===== =========
SUPPLEMENTAL NON-CASH FLOW INFORMATION:
Cash paid for interest.............................. $ -- $ 2,707
===== =========
Cash paid for income taxes.......................... $ -- $ 1,113
===== =========
Non cash issuance of stock.......................... $ 1 $ 101
===== =========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
F-6
<PAGE>
NATIONAL EQUIPMENT SERVICES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
(IN THOUSANDS)
<TABLE>
<CAPTION>
COMMON STOCK RETAINED
--------------- ADDITIONAL EARNINGS STOCK TOTAL
CLASS A CLASS B PAID-IN (ACCUMULATED SUBSCRIPTIONS STOCKHOLDERS'
SHARES SHARES CAPITAL DEFICIT) RECEIVABLE EQUITY
------- ------- ---------- ------------ ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Shares issued at
inception
(June 4, 1996)......... $ -- $ 1 $ 301 $ -- $ (1) $ 301
Net loss................ -- -- -- (195) -- (195)
---- --- ------- ------ ----- -------
Balance at December 31,
1996................... -- 1 301 (195) (1) 106
Sale of shares.......... 1 -- 25,362 -- (101) 25,262
Net income.............. -- -- -- 1,105 -- 1,105
---- --- ------- ------ ----- -------
Balance at December 31,
1997................... $ 1 $ 1 $25,663 $ 910 $(102) $26,473
==== === ======= ====== ===== =======
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
F-7
<PAGE>
NATIONAL EQUIPMENT SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION
National Equipment Services, Inc. ("NES") was organized on June 4, 1996
under the laws of Delaware for the purpose of owning and operating equipment
rental facilities by means of acquiring existing businesses. NES is primarily
involved in the rental of equipment to construction and industrial users. NES
operates from locations in Alabama, Georgia, Louisiana, Nevada, Texas and
Virginia.
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include accounts of NES and its
subsidiaries. All intercompany transactions and balances have been eliminated.
FINANCIAL STATEMENT PRESENTATION
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
CASH AND CASH EQUIVALENTS
Cash and cash equivalents are highly liquid investments with original
maturities of three months or less.
INVENTORY
NES's inventories primarily consist of parts and new equipment held for
sale. Inventories are stated at the lower of cost, determined by the first-in,
first-out method, or market.
RENTAL EQUIPMENT
Rental equipment is recorded at invoice cost. Depreciation for rental
equipment acquired is computed using the straight-line method over 5 to 15
year useful lives with no salvage value. Accumulated depreciation on rental
equipment was $4,763,000 at December 31, 1997.
Ordinary repairs and maintenance costs are charged to operations as
incurred. When rental equipment is disposed of, the related cost and
accumulated depreciation are removed from the respective accounts. Proceeds
from the disposal and the related net book value of the equipment are
recognized in the period of disposal and reported as revenue from rental
equipment sales and cost of equipment sales in the statement of operations.
PROPERTY AND EQUIPMENT
Property and equipment is recorded at cost. Depreciation is computed using
the straight-line method over the estimated useful lives of the assets.
The estimated useful lives for property and equipment range from 5 to 7
years for machinery and equipment, 5 to 7 years for furniture and fixtures and
3 to 5 years for vehicles.
Ordinary repairs and maintenance costs are charged to operations as
incurred. When property and equipment is disposed of, the related cost and
accumulated depreciation are removed from the respective accounts, and any
gains or losses are included in results of operations.
F-8
<PAGE>
NATIONAL EQUIPMENT SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
ADOPTION OF NEW ACCOUNTING PRONOUNCEMENT
Since inception, NES adopted Statement of Financial Accounting Standards
(SFAS) No. 121, Accounting for the Impairment of Long-Lived Assets and Long-
Lived Assets to be Disposed of, which requires impairment losses to be
recorded on long-lived assets used in operations when indicators of impairment
are present and the assets' carrying amounts and related goodwill exceed the
undiscounted cash flows estimated to be generated by those assets. SFAS No.
121 also requires impairment losses to be recorded when the carrying amount of
long-lived assets that are expected to be disposed of exceeds their fair
values, net of disposal costs. SFAS No. 121 did not have a material impact on
NES's financial position or results of operations the period from inception
(June 4, 1996) through December 31, 1996 or year ended December 31, 1997.
EARNINGS PER SHARE
In February 1997, the Financial Accounting Standards Board ("FASB") issued
SFAS No. 128 "Earnings per Share." For the company, SFAS No. 128 will be
effective for the year ended December 31, 1997. SFAS No. 128 simplifies the
standards required under current accounting rules for computing earnings per
share and replaces the presentation of primary earnings per share and fully
diluted earnings per share with a presentation of basic earnings per share
("basic EPS") and diluted earnings per share ("diluted EPS"). Basic EPS
excludes dilution and is determined by dividing income available to common
stockholders by the weighted average number of common shares outstanding
during the period. Diluted EPS reflects the potential dilution that could
occur if securities and other contracts to issue common stock were exercised
or converted into common stock. Diluted EPS is computed similarly to fully
diluted earnings per share under current accounting rules. The implementation
of SFAS No. 128 is not expected to have a material effect on the Company's
earnings per share as determined under current accounting rules.
REPORTING COMPREHENSIVE INCOME
In June 1997, the FASB issued SFAS No. 130, "Reporting Comprehensive
Income." SFAS No. 130 establishes standards for reporting and display of
comprehensive income and its components (revenues, expenses, gains, and
losses) in a full set of general-purpose financial statements. The Statement
requires that all items that are required to be recognized under accounting
standards as components of comprehensive income be reported in a financial
statement that is displayed with the same prominence as other financial
statements. SFAS No. 130 requires that an enterprise (a) classify items of
other comprehensive income by their nature in a financial statement and (b)
display the accumulated balance of other comprehensive income separately from
retained earnings and additional paid-in capital in the equity section of a
statement of financial position. The Statement is effective for fiscal years
beginning after December 15, 1997. Reclassification of financial statements
for earlier periods provided for comparative purposes is required. The Company
intends to adopt SFAS No. 130 in 1998.
INTANGIBLE ASSETS
Intangible assets consist of the excess cost over acquired net assets
("goodwill") which has been capitalized and is being amortized on a straight
line basis over 40 years. Whenever events or changes in circumstances indicate
that the carrying amount of goodwill may not be recoverable, NES reviews the
carrying value of goodwill for impairment based on the undiscounted operating
cash flows of the related business unit. Accumulated amortization on goodwill
was $445,000, at December 31, 1997. Non-compete agreements are stated at cost
and amortized over the lives of the agreements.
F-9
<PAGE>
NATIONAL EQUIPMENT SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
LOAN ORIGINATION COSTS
Loan origination costs are stated at cost and amortized to interest expense
using the effective interest method over the life of the loan. Amortization
expense related to loan origination costs aggregated $392,000 for the year
ended December 31, 1997.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying amounts reported in the consolidated balance sheets for cash,
trade accounts receivable, accounts payable and other liabilities approximate
fair value due to the immediate to short-term maturity of these financial
instruments. The fair value of the Senior Subordinated Notes is based on
quoted market prices and approximates the carrying value at December 31, 1997.
The carrying value of bank debt approximates fair value as the interest on the
bank debt is reset every 30 to 90 days to reflect current market rates.
CONCENTRATION OF CREDIT RISK
Financial instruments that potentially subject NES to significant
concentrations of credit risk consist primarily of trade accounts receivable
from construction and industrial customers. Concentrations of credit risk with
respect to trade accounts receivable are limited due to the large number of
customers and NES's geographic dispersion. NES performs credit evaluations of
its customers' financial condition and generally does not require collateral
on accounts receivable. NES maintains an allowance for doubtful accounts on
its receivables based upon expected collectibility. Allowance for doubtful
accounts was $0 and $254,000 at December 31, 1996 and December 31, 1997,
respectively.
RENTAL REVENUES
Rental revenues are recognized ratably over the lease term. Sales revenues
are recognized at the point of delivery.
INCOME TAXES
Provisions are made to record deferred income taxes in recognition of items
reported differently for financial reporting purposes than for federal and
state income tax purposes. NES records deferred income taxes using the
liability method in accordance with Statement of Financial Accounting
Standards No. 109, "Accounting for Income Taxes." The Company and its
subsidiaries will file a consolidated tax return for the year ending December
31, 1997.
RELATED PARTY TRANSACTIONS
As disclosed in these financial statements, NES has participated in certain
transactions with related parties.
2. ACQUISITIONS
In 1997, NES purchased the following rental equipment companies:
<TABLE>
<CAPTION>
ACQUISITION DATE COMPANY LOCATION PURCHASE PRICE
- ---------------- -------------------------------------- ---------------- --------------
<S> <C> <C> <C>
January 6, 1997......... Brazos Rental & Tool, Inc., Industrial
Crane Maintenance Systems, Inc.
and Safe Load Work Product, Inc. Brazoria, TX $ 5,000,000
February 18, 1997....... Aerial Platforms, Inc. Atlanta, GA $ 4,150,000
March 17, 1997.......... Lone Star Rentals, Inc. Houston, TX $10,950,000
April 1, 1997........... BAT Rentals, Inc. Las Vegas, NV $15,900,000
July 1, 1997............ Sprintank Houston, TX $25,300,000
July 18, 1997........... MST Enterprises, Inc. Harrisonburg, VA $ 6,000,000
</TABLE>
F-10
<PAGE>
NATIONAL EQUIPMENT SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
The purchase prices above are subject to a customary purchase price
adjustment mechanism and assumption of certain seller liabilities.
The following pro forma financial information represents the unaudited pro
forma results of operations as if the aforementioned acquisitions had been
completed on January 1, 1996 and January 1, 1997, after giving effect to
certain adjustments including increased depreciation and amortization of
property and equipment and other assets and interest expense for acquisition
debt. These pro forma results have been prepared for comparative purposes only
and do not purport to be indicative of the results of operations which would
have been achieved had these acquisitions been completed as of these dates,
nor are the results indicative of NES's future results of operations.
<TABLE>
<CAPTION>
FOR THE YEAR FOR THE YEAR
ENDED ENDED
DECEMBER 31, DECEMBER 31,
1996 1997
(UNAUDITED) (UNAUDITED)
------------ -------------
(IN THOUSANDS)
<S> <C> <C>
Revenues....................................... $48,040 $56,858
Operating income............................... 9,012 10,382
Net income..................................... 158 1,143
</TABLE>
3. INVENTORY
Inventory consists of the following (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
1997
-------------
<S> <C>
New equipment............................................... $1,127
Parts....................................................... 1,200
Contractor supplies......................................... 382
Other....................................................... 20
------
2,729
Less: reserve............................................... (490)
------
$2,239
======
</TABLE>
4. PROPERTY AND EQUIPMENT
Property and equipment, net, consists of the following (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31,
1996 1997
------------ ------------
<S> <C> <C>
Leasehold improvements.......................... $-- $ 190
Machinery and equipment......................... 20 333
Furniture and fixtures.......................... -- 470
Vehicles........................................ -- 2,641
--- ------
20 3,634
Less: accumulated depreciation.................. (3) (622)
--- ------
$17 $3,012
=== ======
</TABLE>
Property and equipment depreciation expense aggregated $3,000 and $656,000
for the period from inception (June 4, 1996) through December 31, 1996 and the
year ended December 31, 1997, respectively.
F-11
<PAGE>
NATIONAL EQUIPMENT SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
5. INTANGIBLE ASSETS
Intangible assets consists of the following (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
1997
------------
<S> <C>
Non-compete agreements....................................... $ 2,455
Goodwill..................................................... 26,253
Origination costs............................................ 48
-------
28,756
Less: accumulated amortization............................... (819)
-------
$27,937
=======
</TABLE>
Amortization expense aggregated $819,000 for the year ended December 31,
1997.
6. ACCRUED EXPENSES AND OTHER LIABILITIES
Accrued expenses and other liabilities consists of the following (in
thousands):
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31,
1996 1997
------------ ------------
<S> <C> <C>
Accrued salaries and benefits................... $110 $ 589
Sales tax payable............................... -- 244
Accrued income taxes............................ -- 333
Accrued property taxes.......................... -- 314
Other........................................... -- 847
---- ------
$110 $2,327
==== ======
</TABLE>
7. DEBT
Debt consists of the following (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
1997
------------
<S> <C>
Senior subordinated notes, interest at 10% payable semi-
annually, due November 30, 2004............................ $98,782
Revolving credit facility loans, interest at the federal
funds rate plus 0.5% or prime rate both plus 1.0%, or the
eurodollar rate plus 2.5%, due no later than July 1, 2002.. --
Term loan, interest at the federal funds rate plus 0.5% or
prime rate both plus 1.0%, or the eurodollar rate plus
2.5%, principal payments due quarterly of $625 through June
1, 1998, $875 through June 1, 1999 and $1,125 through June
1, 2001.................................................... --
-------
$98,782
=======
</TABLE>
On November 20, 1997, NES issued $100 million of Senior Subordinated Notes
(the "Notes") at a discount netting proceeds of $98,767,000. NES accretes the
original issue discount over the term of the Notes using the effective
interest method. The Notes mature on November 30, 2004. Interest on the Notes
accrues at a rate of 10% per year and is payable semi-annually in arrears on
May 30 and November 30 commencing on May 30, 1998.
F-12
<PAGE>
NATIONAL EQUIPMENT SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
The Notes are redeemable at the option of the Company at any time after
November 30, 2001 at a redemption price of 105% of the principal amount from
November 30, 2001 to November 29, 2002, at 102.5% from November 30, 2002 to
November 29, 2003 and 100% after November 30, 2003, plus accrued and unpaid
interest. The Company may at any time prior to November 30, 2002 on any one or
more occasions redeem up to 33% of the aggregate principal amount of the notes
at a redemption price of 110% or the principal amount plus accrued and unpaid
interest with the net cash proceeds of a public offering of common stock of
NES within 45 days of the closing of such public offering. In addition, at any
time prior to November 30, 2001, the Notes may be redeemed as a whole, at the
option of NES, upon the occurrence of or in connection with a change of
control. Upon certain changes in control, the noteholders will have the right
to require redemption at a cash price of 101% of the principal amount plus
accrued and unpaid interest.
All of the Company's wholly-owned subsidiaries make full, unconditional,
joint and several guarantees of the Notes. The separate financial statements
of each of these wholly-owned subsidiaries are not presented as management
believes they are not individually meaningful for presentation. The Company's
holding company has no operations separate from its investments in these
subsidiaries.
On July 1, 1997, NES entered into a credit facility agreement with First
Union Commercial Corporation (the "Credit Agreement"). The Credit Agreement
provides for a secured revolving line of credit of $100 million and a term
loan of $15 million. Interest accrues at rates of the greater of the annual
Federal Funds Rateplus 0.5% or the prime rate both plus 0.5% to 1.25% based on
NES's leverage ratio or at a rate ofLIBOR/(1 - eurodollar reserve percentage).
Principal payments for credit facility loans (to be applied first to the term
loan and if necessary to revolving loans) are due annually at the lesser of
25% of excess cash flow or $1 million. Principal payments for the term loan
are due quarterly at $625,000 for the first four quarters, $875,000 for the
next four quarters and $1,125,000 for the next eight quarters. Substantially
all assets and stock of NES are pledged as collateral for the credit facility.
NES pays commitment fees of 0.5% to .0375% on the unused portion of the
outstanding line of credit balance on NES's leverage ratio. The term loan was
repaid as of December 31, 1997
The Indenture for the Notes and the Credit Agreement contain a number of
covenants that, among other things, require NES to maintain certain financial
ratios and set certain limitations on the granting of liens, asset sales,
additional indebtedness, transactions with affiliates, restricted payments,
investments and issuances of stock. NES is in compliance with all covenants.
The average interest rate for the year ended December 31, 1997 was 9.8%. NES
incurred interest expense of $76,000 on borrowings from related parties for
the year ended December 31, 1997.
8. INCOME TAXES
The income tax provision is comprised of current federal and state income
tax expense (benefit) of $(137,100) and $818,000 for the period from inception
(June 4, 1996) through December 31, 1996 and year ended December 31, 1997,
respectively. Deferred tax expense (benefit) for such periods has been
immaterial.
The provision for income taxes differs from the amount of income tax
determined by applying the U.S. statutory federal income tax rate of 34% to
income before income taxes as a result of the following (in thousands):
<TABLE>
<CAPTION>
FOR THE PERIOD
FROM INCEPTION
(JUNE 4, 1996) FOR THE
THROUGH YEAR ENDED
DECEMBER 31, DECEMBER 31,
1996 1997
-------------- -------------
<S> <C> <C>
Federal income taxes......................... $(113) $654
State income taxes, net of federal benefit... (16) 94
Other........................................ (8) 70
----- ----
$(137) $818
===== ====
</TABLE>
F-13
<PAGE>
NATIONAL EQUIPMENT SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Deferred income tax assets and liabilities are computed based on temporary
differences between the financial statement and income tax bases of assets and
liabilities using the enacted marginal income tax rate in effect for the year
in which the differences are expected to reverse. Deferred income tax expenses
or credits are based on the changes in the deferred income tax assets or
liabilities from period to period.
Deferred taxes have been provided for the temporary differences between the
financial reporting bases and the tax bases of NES's assets and liabilities as
follows (in thousands):
<TABLE>
<S> <C>
Allowances for doubtful accounts.................................. $ 78
Inventory......................................................... 167
Non-compete agreements............................................ 83
Minimum tax credits............................................... 90
Installment sale income........................................... (23)
Property, plant and equipment..................................... (314)
Goodwill.......................................................... (153)
-----
$ (72)
=====
</TABLE>
9. COMMON STOCK
On June 4, 1996, in connection with the formation of NES, NES authorized
25,000 shares of Class A Common Stock (24,250 of which were reserved for
issuance to NES's majority stockholder), par value $0.01, and 150,000 shares
of Class B Common Stock (75,000 of which were reserved for issuance to NES's
majority stockholder), par value $0.01. On October 28, 1997, the authorized
shares of Class A Common Stock were increased to 50,000.
Each calendar quarter, each share of Class A Common is entitled to a yield
in the amount of 10% per year of the sum of such share's unreturned original
cost plus the unpaid yield for all prior quarters. As of December 31, 1997,
the unpaid yield on the Class A Common aggregated $1,608,000. Class A Common
stockholders, as a class, are entitled to a number of votes equal to 10% of
the number of votes allocable to all Common Stock. Upon any distribution,
Class A Common stockholders are entitled to (i) the unpaid yield, (ii) any
unreturned original cost of the shares and (iii) 10% of any remaining
distribution. Class B Common stockholders are entitled to 90% of any remaining
distribution after payment to the Class A Common stockholders of all payments
under clause (i) and (ii) set forth in the preceding sentence. Additionally,
only in the event of a successful initial public offering can the Class A
Common stockholders require a mandatory redemption of any or all of the shares
attributable to the unpaid yield and original cost of the shares.
NES may not declare additional distributions or dividends other than the
amounts described above for Class A Common shares, issue any debt securities
containing equity features, sell or dispose of more than 5% of the
consolidated assets of the Company in any transaction or series of related
transactions, acquire an interest in a business, acquire a business outside of
the rental equipment industry, or enter into certain related party
transactions, without the consent of a majority of the Class A Common and
Class B Common stockholders.
Class B Common stock sold to executives of NES vests over a 5 year period.
Unpaid notes receivable of $1,000 and $102,000 as of December 31, 1996 and
December 31, 1997, respectively, from executives of NES for shares of Class B
Common stock are classified as stock subscriptions receivable.
10. COMMITMENTS AND CONTINGENCIES
OPERATING LEASES
NES leases certain facilities, office equipment and vehicles under operating
leases some of which contain renewal options. Rental expense was $660 for the
year ended December 31, 1997.
F-14
<PAGE>
NATIONAL EQUIPMENT SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Future minimum rental commitments as of December 31, 1997 under
noncancelable operating leases are (in thousands):
<TABLE>
<S> <C>
1998............................................................... $ 842
1999............................................................... 567
2000............................................................... 507
2001............................................................... 483
2002............................................................... 181
Thereafter......................................................... 213
------
$2,793
======
</TABLE>
LEGAL MATTERS
NES is party to legal proceedings and potential claims arising in the
ordinary course of its business. In the opinion of management, the ultimate
resolution of these matters will have no material adverse effect on NES's
financial position, results of operations or cash flows.
11. EMPLOYEE BENEFIT PLANS
The Company sponsors a profit sharing and 401(k) plan (the "Plan") in which
employees over 21 years of age with greater than one-half year of service are
eligible. Under the Plan, NES contributes a discretionary percentage (2.5% for
the year ended December 31, 1997) of each eligible employee's base annual
wages to a trust out of its net profits. In addition, eligible employees can
defer up to 15% of their salary with a partially matching contribution by NES
of 50% of the first 5% of the employee contribution. The employer
contributions vest over a five year period. Contributions by NES to the Plan
were $165,000 for year ended December 31, 1997.
12. RELATED PARTY TRANSACTIONS
Pursuant to a Professional Services Agreement dated January 6, 1997, NES
pays management fees of $200,000 per year and investment fees of 1% of all
debt and equity financings of NES to an affiliate of NES's majority
stockholder, who owns 95.0% of the Class A Common stock and 83% of the Class B
Common stock. Total fees paid during the year ended December 31, 1997 were
$417,000 and fees owed at December 31, 1997 were $630,000.
In connection with several of the acquisitions, NES entered into lease
agreements for certain facilities with employees of NES who were prior owners
of the acquired companies. Amounts due under these leases are included in the
future minimum rental commitments under noncancelable operating leases
schedule in Note 10 above.
Stock subscriptions receivable of $1,000 and $102,000 as of December 31,
1996 and 1997, respectively, relate to notes due from officers of NES related
to purchases of Class B Common Stock and are secured by the purchased Class B
Common shares. Interest on the notes accrues at the federal funds rate and is
payable in full at maturity on June 4, 2006 or upon termination of employment.
Accrued interest on these notes was $0 and $8,000 for the period from
inception (June 4, 1996) through December 31, 1996 and the year ended December
31, 1997, respectively.
F-15
<PAGE>
NATIONAL EQUIPMENT SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
13. SUBSEQUENT EVENTS
Subsequent to year end, NES purchased the following rental equipment
companies:
<TABLE>
<CAPTION>
PURCHASE
ACQUISITION DATE COMPANY LOCATION PRICE
---------------- ------- -------- -----------
<C> <S> <C> <C>
Genpower Pump and Equipment
January 12, 1998 Co............................. Deer Park, TX $ 8,000,000
January 16, 1998 Eagle Scaffolding and Equipment
Co............................. Las Vegas, NV $ 3,290,000
January 23, 1998 Grand Hi-Reach, Inc............ Byron Center, MI $ 8,120,000
February 4, 1998 Work Safe Supply Company, Inc.. Grandville, MI $ 7,845,000
March 2, 1998 Dragon Rentals (division of The
Modern Group, Inc.)............ Beaumont, TX $23,000,000
March 4, 1998 Cormier Equipment Corporation.. Oakland, ME $27,500,000
March 30, 1998 Albany Ladder.................. Albany, NY $43,454,000
</TABLE>
The purchase prices above are subject to a customary purchase price
adjustment mechanism and assumption of certain seller liabilities. These
acquisitions will be accounted for under the purchase method based on the
purchase prices. Under the purchase method of accounting NES will allocate the
costs of these acquisitions, as of the respective closing dates, to the assets
acquired and liabilities assumed based on their respective fair values.
The operating results of these acquisitions will be included in NES's
consolidated results of operations from the date of acquisition. The following
pro forma financial information represents the unaudited pro forma results of
operations as if the aforementioned acquisitions had been completed on January
1, 1996 and January 1, 1997, after giving effect to certain adjustments
including increased depreciation and amortization of property and equipment
and intangible assets and interest expense for acquisition debt. These pro
forma results have been prepared for comparative purposes only and do not
purport to be indicative of the results of operations which would have been
achieved had these acquisitions been completed as of these dates, nor are the
results indicative of NES's future results of operations.
<TABLE>
<CAPTION>
FOR THE YEAR FOR THE YEAR
ENDED ENDED
DECEMBER 31, DECEMBER 31,
1996 1997
(UNAUDITED) (UNAUDITED)
------------ ------------
(IN THOUSANDS)
<S> <C> <C>
Revenues........................................ $120,475 $146,000
Operating income................................ 19,234 26,821
Net income...................................... 751 5,439
</TABLE>
Additionally, subsequent to year end, NES entered into a definitive purchase
agreement to acquire a rental equipment company with operations in nine
southern and midwestern states. This pending acquisition is expected to close
in the second quarter of 1998.
F-16
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Stockholder of Aerial
Platforms, Inc. and the Board of Directors
of National Equipment Services, Inc.
In our opinion, the accompanying balance sheets and the related statements
of operations, of cash flows and of changes in stockholder's equity, present
fairly, in all material respects, the financial position of Aerial Platforms,
Inc. at January 31, 1997 and February 17, 1997, and the results of its
operations and its cash flows for the year ended January 31, 1997 and the
seventeen days ended February 17, 1997 in conformity with generally accepted
accounting principles. These financial statements are the responsibility of
management; our responsibility is to express an opinion on these financial
statements based on our audits. We conducted our audits of these statements in
accordance with generally accepted auditing standards which require that we
plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements, assessing the accounting principles used and
significant estimates made by management, and evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for the opinion expressed above.
/s/ PRICE WATERHOUSE LLP
Chicago, Illinois
November 4, 1997
F-17
<PAGE>
AERIAL PLATFORMS, INC.
BALANCE SHEETS
(IN THOUSANDS)
<TABLE>
<CAPTION>
JANUARY 31, FEBRUARY 17,
1997 1997
----------- ------------
<S> <C> <C>
ASSETS:
Cash................................................. $ 213 $ 265
Accounts receivable, net............................. 666 654
Inventory............................................ 72 71
Prepaid and other assets............................. 31 57
Rental equipment, net................................ 1,758 1,752
Property and equipment, net.......................... 149 134
------ ------
Total assets....................................... $2,889 $2,933
====== ======
LIABILITIES AND STOCKHOLDER'S EQUITY:
Accounts payable..................................... $ 75 $ 137
Accrued expenses and other liabilities............... 108 133
Income taxes......................................... 148 142
Debt................................................. 1,243 1,214
------ ------
Total liabilities.................................. 1,574 1,626
Commitments and contingencies (Note 7)
Common stock, $0.01 par, 10,000 shares authorized, 500
shares issued and outstanding........................ 1 1
Paid-in capital....................................... -- --
Retained earnings..................................... 1,314 1,306
------ ------
Total stockholder's equity......................... 1,315 1,307
------ ------
Total liabilities and stockholder's equity......... $2,889 $2,933
====== ======
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-18
<PAGE>
AERIAL PLATFORMS, INC.
STATEMENTS OF OPERATIONS
(IN THOUSANDS)
<TABLE>
<CAPTION>
SEVENTEEN
YEAR ENDED DAYS ENDED
JANUARY 31, FEBRUARY 17,
1997 1997
----------- ------------
<S> <C> <C>
REVENUES:
Rental revenues....................................... $3,385 $127
Rental equipment sales................................ 496 24
New equipment sales................................... 693 66
Other................................................. 172 16
------ ----
Total revenues...................................... 4,746 233
------ ----
COST OF REVENUES:
Rental equipment expenses............................. 697 41
Rental equipment depreciation......................... 257 15
Cost of rental equipment sales........................ 184 19
Cost of new equipment sales........................... 569 59
Direct operating expenses............................. 665 35
------ ----
Total cost of revenues.............................. 2,372 169
------ ----
Gross profit........................................... 2,374 64
Selling, general and administrative expenses........... 1,302 64
Non-rental depreciation and amortization............... 74 8
------ ----
Operating (loss) income................................ 998 (8)
Interest income (expense), net......................... (124) (6)
------ ----
Income (loss) before income taxes...................... 874 (14)
Income tax expense (benefit)........................... 353 (6)
------ ----
Net (loss) income...................................... $ 521 $ (8)
====== ====
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-19
<PAGE>
AERIAL PLATFORMS, INC.
STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
SEVENTEEN
YEAR ENDED DAYS ENDED
JANUARY 31, FEBRUARY 17,
1997 1997
----------- ------------
<S> <C> <C>
OPERATING ACTIVITIES:
Net income (loss).................................... $ 521 $ (8)
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation........................................ 331 23
Loss (gain) on sale of equipment.................... (304) 2
Deferred income taxes............................... (118) --
Changes in operating assets and liabilities:
Accounts receivable................................ (231) 12
Inventories........................................ (17) 1
Prepaid and other assets........................... (21) (26)
Accounts payable................................... 22 62
Accrued expenses and other liabilities............. (18) 19
----- ----
Net cash provided by operating activities............ 165 85
----- ----
INVESTING ACTIVITIES:
Purchases of rental equipment........................ (803) (28)
Proceeds from sale of rental equipment............... 496 24
Purchases of property and equipment.................. (12) --
Proceeds from sale of property and equipment......... -- --
----- ----
Net cash used in investing activities................ (319) (4)
----- ----
FINANCING ACTIVITIES:
Proceeds from long-term debt......................... 468 --
Payments on long-term debt........................... (441) (29)
----- ----
Net cash provided by (used in) financing activities.. 27 (29)
----- ----
Net increase (decrease) in cash...................... (127) 52
Cash at beginning of period.......................... 340 213
----- ----
Cash at end of period................................ $ 213 $265
===== ====
SUPPLEMENTAL NON-CASH FLOW INFORMATION:
Cash paid for interest............................... $ 122 $ 12
===== ====
Cash paid for income taxes........................... $ 398 $ --
===== ====
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-20
<PAGE>
AERIAL PLATFORMS, INC.
STATEMENTS OF CHANGES IN STOCKHOLDER'S EQUITY
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
<TABLE>
<CAPTION>
COMMON STOCK
------------- TOTAL
STATED PAID-IN RETAINED STOCKHOLDER'S
SHARES VALUE CAPITAL EARNINGS EQUITY
------ ------ ------- -------- -------------
<S> <C> <C> <C> <C> <C>
Balance at January 31, 1996........ 500 $ 1 $-- $ 793 $ 794
Net income......................... -- -- -- 521 521
--- --- --- ------ ------
Balance at January 31, 1997........ 500 1 -- 1,314 1,315
Net income (loss).................. -- -- -- (8) (8)
--- --- --- ------ ------
Balance at February 17, 1997....... 500 $ 1 $-- $1,306 $1,307
=== === === ====== ======
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-21
<PAGE>
AERIAL PLATFORMS, INC.
NOTES TO FINANCIAL STATEMENTS
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION
Aerial Platforms, Inc. ("Aerial") is a C corporation primarily involved in
the short-term rental of platform aerial lifts, and to a lesser extent,
selling related new and used equipment. Aerial's principal customers are
construction contractors located in the Atlanta, Georgia area. Aerial operates
from one leased facility located in Norcross (Atlanta), Georgia.
FINANCIAL STATEMENT PRESENTATION
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenue and expenses during the
reporting periods. Actual results could differ from those estimates.
RENTAL REVENUE
Rental revenue is recognized ratably over the expected lease term.
RENTAL EQUIPMENT
Rental equipment consists of platform aerial lifts and is recorded at cost.
Depreciation for rental equipment acquired is computed using the straight-line
method over an estimated five to seven year useful life with no salvage value.
Accumulated depreciation on rental equipment was approximately $1,960,000 and
$1,947,000 at January 31, 1997 and February 17, 1997, respectively.
Ordinary repairs and maintenance costs are charged to operations as
incurred. When rental equipment is disposed of, the related cost and
accumulated depreciation are removed from the respective accounts. Proceeds
from the disposal and the related net book value of the equipment are
recognized in the period of disposal and reported as revenue from rental
equipment sales and cost of equipment sales in the statement of operations.
PROPERTY AND EQUIPMENT
Property and equipment is recorded at cost. Depreciation is computed using
the straight-line method over the estimated useful lives of the assets. The
estimated useful lives for property and equipment range from three to five
years for vehicles and delivery equipment, and five to seven years for tools,
yard equipment and furniture and fixtures.
Ordinary repairs and maintenance costs are charged to operations as
incurred. When property and equipment are disposed of, the related cost and
accumulated depreciation are removed from the respective accounts, and any
gains or losses are included in the statement of operations.
ADOPTION OF NEW ACCOUNTING PRONOUNCEMENT
On February 1, 1996, Aerial adopted Statement of Financial Accounting
Standards (SFAS) No. 121, Accounting for the Impairment of Long-Lived Assets
and Long-Lived Assets to be Disposed of, which requires impairment losses to
be recorded on long-lived assets used in operations when indicators of
impairment are present and the assets' carrying amounts exceed the
undiscounted cash flows estimated to be generated by those assets. SFAS No.
121 also requires impairment losses to be recorded when the carrying amount of
long-lived assets that are expected to be disposed of exceed their fair
values, net of disposal costs. Adoption of SFAS No. 121 did not have a
material impact on Aerial's financial position at January 31, 1997 or results
of operations for the year then ended.
F-22
<PAGE>
AERIAL PLATFORMS, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
INVENTORIES
Aerial's inventories of $72,000 and $71,000 at January 31, 1997 and February
17, 1997, respectively, consist primarily of spare parts held for use in
servicing and repairing platform aerial lifts. Inventories are stated at the
lower of cost, determined by the first-in, first-out method, or market.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying amounts reported in the balance sheets for trade accounts
receivable, accounts payable and accrued expenses and other liabilities
approximate fair value due to the short-term nature of these financial
instruments. The fair value of notes receivable and notes payable is
determined using current interest rates for similar instruments as of February
17, 1997 and approximates the carrying value of these notes.
CONCENTRATION OF CREDIT RISK
Financial instruments that potentially subject Aerial to significant
concentrations of credit risk consist primarily of trade accounts receivable
from construction customers located in one geographical location. Aerial
generally does not require collateral on accounts receivable. Aerial maintains
an allowance for doubtful accounts on its receivables based upon expected
collectibility. Allowance for doubtful accounts was $24,000 and $24,250 at
January 31, 1997 and February 17, 1997, respectively.
ADVERTISING COSTS
Aerial advertises primarily through trade journals and the media.
Advertising costs are expensed as incurred.
INCOME TAXES
Deferred income tax assets and liabilities are computed based on temporary
differences between the financial statement and income tax bases of assets and
liabilities using the enacted marginal income tax rate in effect for the year
in which the differences are expected to reverse. Deferred income tax expenses
or benefits are based on the changes in the deferred income tax assets or
liabilities from period to period.
2. PROPERTY AND EQUIPMENT
Property and equipment consists of the following (in thousands):
<TABLE>
<CAPTION>
JANUARY 31, FEBRUARY 17,
1997 1997
----------- ------------
<S> <C> <C>
Vehicles and delivery equipment.................. $122 $ 122
Tools and yard equipment......................... 212 196
Furniture and fixtures........................... 33 33
---- -----
367 351
Less: accumulated depreciation................... (218) (217)
---- -----
$149 $ 134
==== =====
</TABLE>
3. PREPAID AND OTHER ASSETS
Prepaid and other assets consists of the following (in thousands):
<TABLE>
<CAPTION>
JANUARY 31, FEBRUARY 17,
1997 1997
----------- ------------
<S> <C> <C>
Officer and employee advances.................... $22 $36
Other............................................ 9 21
--- ---
$31 $57
=== ===
</TABLE>
F-23
<PAGE>
AERIAL PLATFORMS, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
4. ACCRUED EXPENSES AND OTHER LIABILITIES
Accrued expenses and other liabilities consists of the following (in
thousands):
<TABLE>
<CAPTION>
JANUARY 31, FEBRUARY 17,
1997 1997
----------- ------------
<S> <C> <C>
Sales taxes payable.............................. $ 48 $ 56
Accrued benefit plan contributions............... 53 52
Accrued salaries................................. -- 12
Other............................................ 7 13
---- ----
$108 $133
==== ====
</TABLE>
5. DEBT
<TABLE>
<CAPTION>
JANUARY 31, FEBRUARY 17,
1997 1997
----------- ------------
(IN THOUSANDS)
<S> <C> <C>
Note payable in monthly installments of $16,850 plus
interest at the prime rate plus 1.5% (prime rate at
January 31, 1997 and February 17, 1997 was 8.25%)
with the final payment due in February 1999. (See
Note 9)............................................. $ 421 $ 404
Notes payable in monthly installments of
approximately $12,062 including interest at the
prime rate plus 1.5% with the final payments due at
varying dates through November 2000. (See Note 9)... 219 214
Note payable in monthly installments of approximately
$6,828 including interest at the prime rate plus
1.5% with final payment due July 1999. (See Note 9). 190 190
Note payable in monthly installments of approximately
$7,780 including interest at the prime rate plus
1.5% with final payment due in September 1999. (See
Note 9)............................................. 219 213
Note payable in monthly installments of approximately
$1,993 including interest at the prime rate plus
1.5% with final payment due in September 2001. (See
Note 9)............................................. 59 58
Note payable in monthly installments of approximately
$4,420 including interest at the prime rate plus 2%
with the final payment due in May 1998. (See Note
9).................................................. 65 65
Notes payable in monthly installments of $4,994
including interest of 10%, 9% and 11%, with the
final payments due in February 1997, July 1999 and
February 1999, respectively. (See Note 9)........... 70 70
------ ------
Total debt......................................... $1,243 $1,214
====== ======
</TABLE>
6. INCOME TAXES
The components of the provision for income taxes are as follows (in
thousands):
<TABLE>
<CAPTION>
YEAR ENDED SEVENTEEN DAYS ENDED
JANUARY 31, 1997 FEBRUARY 17, 1997
---------------- --------------------
<S> <C> <C>
CURRENT:
Federal............................ $191 $(5)
State.............................. 34 (1)
DEFERRED:
Federal............................ 109 --
State.............................. 19 --
---- ---
$353 $(6)
==== ===
</TABLE>
F-24
<PAGE>
AERIAL PLATFORMS, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
The provision for income taxes differs from the amount of income tax
determined by applying the U.S. statutory federal income tax rate of 34% to
income before income taxes as a result of the following (in thousands):
<TABLE>
<CAPTION>
YEAR ENDED SEVENTEEN DAYS ENDED
JANUARY 31, 1997 FEBRUARY 17, 1997
---------------- --------------------
<S> <C> <C>
(Loss) income at statutory rate.... $297 $ (5)
Effect of state taxes, net......... 51 (1)
Other.............................. 5 --
---- -----
$353 $ (6)
==== =====
</TABLE>
Deferred tax assets (liabilities) are as follows (in thousands):
<TABLE>
<CAPTION>
JANUARY 31, FEBRUARY 17,
1997 1997
----------- ------------
<S> <C> <C>
Depreciation..................................... $(153) $(153)
Allowance for doubtful accounts.................. 10 10
----- -----
Net deferred tax liability....................... $(143) $(143)
===== =====
</TABLE>
7. COMMITMENTS AND CONTINGENCIES
OPERATING LEASES
Aerial conducts its operations in leased facilities under an operating lease
which expires in May 1998. Aerial also leases vehicles and certain rental
equipment under cancelable and noncancelable lease agreements which expire at
varying dates through July 2000. Rental expense was $658,000 and $45,000 for
the year ended January 31, 1997 and seventeen days ended February 17, 1997,
respectively.
Future minimum rental commitments as of February 17, 1997 under
noncancelable operating leases are (in thousands):
<TABLE>
<S> <C>
1998................................................................. $118
1999................................................................. 95
2000................................................................. 77
2001................................................................. 20
2002................................................................. --
----
$310
====
</TABLE>
LEGAL MATTERS
Aerial is party to legal proceedings and claims arising in the ordinary
course of its business. In the opinion of management, the ultimate resolution
of these matters will have no material adverse effect on Aerial's financial
position, results of operations or cash flows.
8. EMPLOYEE BENEFIT PLAN
During the year ended January 31, 1995, Aerial established a simplified
employee pension plan covering substantially all employees. Employees meeting
certain age and length of service requirements are eligible to participate.
Employee contributions are permitted up to a maximum of 10% of covered
compensation. There are no required matching contributions by Aerial since
Aerial's contributions are at the discretion of the Board of Directors.
Aerial's contributions were $43,000 and $0 for the year ended January 31, 1997
and the seventeen days ended February 17, 1997, respectively.
F-25
<PAGE>
AERIAL PLATFORMS, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
9. SUBSEQUENT EVENTS
On February 17, 1997, Aerial's sole shareholder sold all of the outstanding
common stock of Aerial to National Equipment Services, Inc. ("NES") in
exchange for a $3,750,000 cash payment (subject to a customary purchase price
adjustment mechanism), a $500,000 promissory note ($350,000 of which is in
consideration for the common stock of Aerial and $150,000 of which is in
consideration for certain non-compete covenants given by the sole shareholder
of Aerial's common stock) and the assumption of certain liabilities and
obligations. Aerial's results of operations are included with NES subsequent
to February 17, 1997.
At such closing, NES paid the remaining principal and accrued interest on
the notes payable to Fidelity National Bank in the amount of $1,219,600.
Additionally, NES purchased all of the leased rental equipment at February 17,
1997 for approximately $1,889,000.
F-26
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Stockholder of Lone Star
Rentals, Inc. and the Board of Directors of
National Equipment Services, Inc.
In our opinion, the accompanying balance sheets and the related statements
of operations, of cash flows and of changes in stockholder's equity, present
fairly, in all material respects, the financial position of Lone Star Rentals,
Inc. at December 31, 1995 and 1996 and March 16, 1997, and the results of its
operations and its cash flows for each of the two years in the period ended
December 31, 1996 and for the period ended March 16, 1997, in conformity with
generally accepted accounting principles. These financial statements are the
responsibility of management; our responsibility is to express an opinion on
these financial statements based on our audits. We conducted our audits of
these statements in accordance with generally accepted auditing standards
which require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management,
and evaluating the overall financial statement presentation. We believe that
our audits provide a reasonable basis for the opinion expressed above.
/s/ PRICE WATERHOUSE LLP
Houston, Texas
November 4, 1997
F-27
<PAGE>
LONE STAR RENTALS, INC.
BALANCE SHEETS
(IN THOUSANDS)
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31, MARCH 16,
1995 1996 1997
------------ ------------ ---------
<S> <C> <C> <C>
ASSETS:
Cash...................................... $ 88 $ 89 $ --
Accounts receivable, net.................. 1,338 1,187 1,193
Inventory................................. 338 622 708
Rental equipment, net..................... 7,622 6,952 6,688
Property and equipment, net............... 262 178 165
Prepaid and other assets.................. 446 377 382
------- ------ ------
Total assets............................ $10,094 $9,405 $9,136
======= ====== ======
LIABILITIES AND STOCKHOLDER'S EQUITY:
Accounts payable.......................... $ 236 $ 408 $ 660
Accrued expenses and other liabilities.... 257 293 274
Debt...................................... 5,481 4,529 4,348
Obligations under capital leases.......... 640 454 410
------- ------ ------
Total liabilities....................... 6,614 5,684 5,692
------- ------ ------
Commitments and contingencies (Note 9)
Stockholder's equity....................... 3,480 3,721 3,444
------- ------ ------
Total liabilities and stockholder's
equity................................. $10,094 $9,405 $9,136
======= ====== ======
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-28
<PAGE>
LONE STAR RENTALS, INC.
STATEMENTS OF OPERATIONS
(IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31, PERIOD ENDED
-------------- MARCH 16,
1995 1996 1997
------ ------ ------------
<S> <C> <C> <C>
REVENUES:
Rental revenue.................................... $8,324 $8,168 $1,455
Sales of equipment and supplies................... 1,379 1,181 188
------ ------ ------
Total revenues.................................. 9,703 9,349 1,643
------ ------ ------
COST OF REVENUES:
Rental equipment expense.......................... 2,398 2,485 594
Rental equipment depreciation..................... 1,356 1,440 242
Cost of equipment and supplies.................... 1,079 888 119
Direct operating expenses......................... 1,679 1,739 416
------ ------ ------
Total cost of revenues.......................... 6,512 6,552 1,371
------ ------ ------
Gross profit (loss)................................ 3,191 2,797 272
Selling, general and administrative expense........ 1,918 1,988 475
Non-rental depreciation and amortization........... 170 169 26
------ ------ ------
Operating (loss) income............................ 1,103 640 (229)
Other income....................................... 231 271 139
Interest income (expense) net...................... (608) (530) (164)
------ ------ ------
Net income (loss).................................. $ 726 $ 381 $ (254)
====== ====== ======
Pro forma tax provision (benefit) (unaudited):
Income (loss) before income taxes................. $ 726 $ 381 $ (254)
Pro forma provision (benefit) for income taxes.... 254 133 (89)
------ ------ ------
Pro forma net income (loss)....................... $ 472 $ 248 $ (165)
====== ====== ======
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-29
<PAGE>
LONE STAR RENTALS, INC.
STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31, PERIOD ENDED
---------------- MARCH 16,
1995 1996 1997
------- ------- ------------
<S> <C> <C> <C>
OPERATING ACTIVITIES:
Net income..................................... $ 726 $ 381 $(254)
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation.................................. 1,526 1,609 268
Gain on sale of equipment..................... (184) (175) --
Changes in operating assets and liabilities:
Accounts receivable.......................... (192) 151 (6)
Inventory.................................... 318 (284) (86)
Prepaid and other assets..................... 20 69 (5)
Accounts payable............................. (71) 172 252
Accrued expenses and other liabilities....... 30 36 (19)
------- ------- -----
Net cash provided by operating activities...... 2,173 1,959 150
------- ------- -----
INVESTING ACTIVITIES:
Purchases of rental equipment.................. (3,019) (1,595) 9
Proceeds from sale of rental equipment......... 1,013 733 --
Purchases of property and equipment............ (51) (6) --
Proceeds from sale of property and equipment... 76 2 --
------- ------- -----
Net cash provided by (used in) investing
activities.................................... (1,981) (866) 9
------- ------- -----
FINANCING ACTIVITIES:
Proceeds from debt............................. 2,871 1,640 --
Payments on debt............................... (2,881) (2,592) (225)
Dividends paid................................. (231) (140) (23)
------- ------- -----
Net cash used in financing activities.......... (241) (1,092) (248)
------- ------- -----
Net increase (decrease) in cash................ (49) 1 (89)
Cash at beginning of period.................... 137 88 89
------- ------- -----
Cash at end of period.......................... $ 88 $ 89 $ --
======= ======= =====
SUPPLEMENTAL NON-CASH FLOW INFORMATION:
Cash paid for interest......................... $ 607 $ 529 $ 164
======= ======= =====
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-30
<PAGE>
LONE STAR RENTALS, INC.
STATEMENTS OF CHANGES IN STOCKHOLDER'S EQUITY
(IN THOUSANDS)
<TABLE>
<CAPTION>
STOCKHOLDER'S
EQUITY
-------------
<S> <C>
Balance at December 31, 1994...................................... $2,985
Net income........................................................ 726
Dividends......................................................... (231)
------
Balance at December 31, 1995...................................... 3,480
Net income........................................................ 381
Dividends......................................................... (140)
------
Balance at December 31, 1996...................................... 3,721
Net income........................................................ (254)
Dividends......................................................... (23)
------
Balance at March 16, 1997......................................... $3,444
======
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-31
<PAGE>
LONE STAR RENTALS, INC.
NOTES TO FINANCIAL STATEMENTS
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION
Lone Star Rentals, Inc. ("Lone Star") is an S Corporation primarily involved
in the short-term rental of general purpose construction equipment, and to a
lesser extent, selling complementary parts, merchandise and new and used
equipment to commercial and residential construction companies, industrial
enterprises, homeowners and other customers. Lone Star operates from five
separate locations, four of which are in the Houston, Texas metropolitan area
and one of which is in Corpus Christi, Texas. Lone Star's executive offices
are located in Houston, Texas.
RENTAL REVENUES
Rental revenues are recognized upon the earliest occurrence of either the
return of the equipment or the end of one month's rental term. For rental
contracts greater than one month, rental revenues are recognized notably over
the contract period.
INVENTORY
Lone Star's inventories primarily consist of items such as equipment, hand
tools and accessories held for resale. Inventories are stated at the lower of
cost, determined by the first-in, first-out method and replacement value, or
market.
RENTAL EQUIPMENT
Rental equipment is recorded at cost. Depreciation for rental equipment
acquired is computed using the straight line method over an estimated average
7-year useful life with no salvage value.
Ordinary maintenance and repairs costs are charged to operations as
incurred. When rental equipment is disposed of, the related cost and
accumulated depreciation are removed from the respective accounts. Proceeds
from the disposal and the related net book value of the equipment are
recognized in the period of disposal and reported as revenue from rental
equipment sales and cost of equipment sales in the statement of operations.
PROPERTY AND EQUIPMENT
Property and equipment is recorded at cost. Depreciation is computed using
the straight line method over the estimated useful lives of the assets.
The estimated useful lives for property and equipment range from 7 to 25
years for buildings, 3 to 7 years for vehicles, delivery and yard equipment,
and 1 to 7 years for fixtures and leasehold improvements.
Ordinary maintenance and repairs costs are charged to operations as
incurred. When property and equipment is disposed of, the related cost and
accumulated depreciation are removed from the respective accounts, and any
gains or losses are included in results of operations.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying amounts reported in the balance sheets for trade accounts
receivable, accounts payable and other liabilities approximate fair value due
to the immediate to short-term maturity of these financial instruments. The
fair value of notes receivable and notes payable using current interest rates
for similar instruments as of December 31, 1995 and 1996 and March 16, 1997
approximates their carrying value as the underlying instruments include
provisions to adjust interest rates to approximate fair market value.
F-32
<PAGE>
LONE STAR RENTALS, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
CONCENTRATION OF CREDIT RISK
Financial instruments that potentially subject Lone Star to significant
concentrations of credit risk consist primarily of trade accounts receivable
from construction and industrial customers. Concentrations of credit risk with
respect to trade accounts receivable are limited due to the large number of
customers and Lone Star's geographic dispersion. Lone Star performs credit
evaluations of its customers' financial condition and generally does not
require collateral on accounts receivable.
ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of certain assets and
liabilities, and disclosure of contingent assets and liabilities at the date
of the consolidated financial statements and the related reported amounts of
revenue and expenses during the reporting period. Actual results could differ
from those estimates.
ADVERTISING COSTS
Lone Star advertises primarily through trade journals and the media.
Advertising costs are expensed as incurred.
INCOME TAXES
Lone Star's parent is a subchapter S corporation, taxes are the
responsibility of the individual shareholders of the parent. The pro forma
provision for income taxes approximate what Lone Star's tax provision would be
if subject to income taxes as a C corporation.
RELATED PARTY TRANSACTIONS
As disclosed in these financial statements, Lone Star has participated in
certain transactions with related parties.
2. INVENTORY
Inventory consists of the following (in thousands):
<TABLE>
<CAPTION>
DECEMBER
31,
--------- MARCH 16,
1995 1996 1997
---- ---- ---------
<S> <C> <C> <C>
Equipment............................................. $142 $411 $490
Parts and supplies.................................... 196 211 218
---- ---- ----
$338 $622 $708
==== ==== ====
</TABLE>
F-33
<PAGE>
LONE STAR RENTALS, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
3. RENTAL EQUIPMENT
Rental equipment consists of the following (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
---------------- MARCH 16,
1995 1996 1997
------- ------- ---------
<S> <C> <C> <C>
Air compressors and tools..................... $ 1,479 $ 1,590 $ 1,584
Compaction and concrete....................... 985 919 866
Earth moving equipment........................ 3,913 4,023 3,954
Forklifts, highreach and scaffolding.......... 1,581 1,574 1,365
Generators and lighting....................... 693 620 607
Plumbing and painting......................... 287 273 276
Trenchers and trailers........................ 232 457 455
Pumps......................................... 527 507 510
Welders....................................... 644 570 569
Other......................................... 731 717 719
------- ------- -------
11,072 11,250 10,905
Less: accumulated depreciation................ (3,450) (4,298) (4,217)
------- ------- -------
$ 7,622 $ 6,952 $ 6,688
======= ======= =======
</TABLE>
4. PROPERTY AND EQUIPMENT
Property and equipment consists of the following (in thousands):
<TABLE>
<CAPTION>
DECEMBER
31,
------------ MARCH 16,
1995 1996 1997
----- ----- ---------
<S> <C> <C> <C>
Vehicles and delivery equipment................... $ 303 $ 300 $ 300
Furniture and fixtures............................ 254 268 268
Leasehold improvements............................ 43 43 43
Building improvements............................. 127 127 127
----- ----- -----
727 738 738
Less: accumulated depreciation.................... (465) (560) (573)
----- ----- -----
$ 262 $ 178 $ 165
===== ===== =====
</TABLE>
5. PREPAID AND OTHER ASSETS
Prepaid and other assets consists of the following (in thousands):
<TABLE>
<CAPTION>
DECEMBER
31,
--------- MARCH 16,
1995 1996 1997
---- ---- ---------
<S> <C> <C> <C>
Non-compete agreement................................. $438 $363 $350
Other................................................. 8 14 32
---- ---- ----
$446 $377 $382
==== ==== ====
</TABLE>
Lone Star has entered into a non-compete agreement with a former owner which
expires on December 1, 2002. The original cost of $750,000 is being amortized
over a ten year life using the straight line method.
F-34
<PAGE>
LONE STAR RENTALS, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
6. ACCRUED EXPENSES AND OTHER LIABILITIES
Accrued expenses and other liabilities consists of the following (in
thousands):
<TABLE>
<CAPTION>
DECEMBER
31,
--------- MARCH 16,
1995 1996 1997
---- ---- ---------
<S> <C> <C> <C>
Customer deposits..................................... $ 21 $ 25 $ 30
Sales tax payable..................................... 49 44 24
Payroll tax payable................................... 1 7 --
Accrued property tax payable.......................... 172 173 203
Other................................................. 14 44 17
---- ---- ----
$257 $293 $274
==== ==== ====
</TABLE>
7. DEBT
Debt consists of the following (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
------------- MARCH 16,
1995 1996 1997
------ ------ ---------
<S> <C> <C> <C>
CURRENT PORTION OF DEBT:
Floor plan payable Homelite...................... $ 78 $ 14 $ --
Floor plan payable Kubota........................ 11 171 245
Floor plan payable Nations....................... -- 131 123
Floor plan payable Mitsui........................ 19 -- --
Current notes payable Pinemont................... 400 649 649
Current notes payable Texas Commerce............. -- -- --
Current portion of long-term debt................ 2,290 1,725 1,517
------ ------ ------
Total current debt............................. 2,798 2,690 2,534
------ ------ ------
LONG-TERM PORTION OF DEBT:
Notes payable Pinemont Bank...................... 267 133 133
Merchants Park Bank vehicles..................... 22 11 11
Merchants Park Bank building and land............ 6 1 1
Notes payable Case Credit........................ 515 685 685
Notes payable Chicago Pneumatic.................. 56 18 18
Notes payable Ingersoll Rand..................... 115 25 14
Notes payable John Deere......................... 374 252 252
Notes payable Kubota Credit...................... 203 46 46
Notes payable Mitsui............................. 254 177 163
Notes payable Miller Services.................... 121 19 19
Notes payable Orix............................... 214 28 28
Notes payable Jack Fulton........................ 532 444 444
Notes payable Navistar........................... 4 -- --
------ ------ ------
Total long-term debt........................... 2,683 1,839 1,814
------ ------ ------
Total debt..................................... $5,481 $4,529 $4,348
====== ====== ======
</TABLE>
Interest and principal is payable monthly or quarterly at rates ranging from
5.7% to 12%. The note agreements include restrictions as to limitations upon
certain ratios of liabilities to net worth and upon the minimum net worth of
Lone Star. Lone Star is in compliance with covenants in all agreements.
Substantially all rental equipment, property and equipment, and accounts
receivable of Lone Star are pledged as collateral for the bank line of credit
demand notes, and notes related to purchases of certain businesses.
F-35
<PAGE>
LONE STAR RENTALS, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
On bank notes payable, Lone Star incurred interest expense of $605,000,
$778,000 and $66,000 for the periods ended December 31, 1995 and December 31,
1996 and March 16, 1997, respectively.
Maturities of debt are as follows at March 16, 1997 (in thousands):
<TABLE>
<S> <C>
1997............................................................... $2,534
1998............................................................... 878
1999............................................................... 523
2000............................................................... 287
2001............................................................... 126
------
$4,348
======
</TABLE>
8. OBLIGATIONS UNDER CAPITAL LEASES
Capitalized leases recorded as assets consist of the following (in
thousands):
<TABLE>
<CAPTION>
DECEMBER
31,
------------ MARCH 16,
1995 1996 1997
----- ----- ---------
<S> <C> <C> <C>
Compaction and concrete........................... $ 180 $ 180 $ 180
Forklifts, highreach and scaffolding.............. 81 81 81
Trenchers and trailers............................ 254 254 254
Pumps............................................. 245 245 245
Other............................................. 46 46 46
----- ----- -----
806 806 806
Less: accumulated depreciation.................... (127) (249) (270)
----- ----- -----
$ 679 $ 557 $ 536
===== ===== =====
</TABLE>
Obligations under capital leases consists of the following (in thousands):
<TABLE>
<CAPTION>
DECEMBER
31,
--------- MARCH 16,
1995 1996 1997
---- ---- ---------
<S> <C> <C> <C>
Leases payable AEL/Reli............................... $466 $244 $ 55
Leases payable Associated............................. 73 156 338
Leases payable Bankers Leasing........................ 28 6 --
Leases payable Clark Financials....................... 50 34 14
Leases payable Manifest Group......................... 23 14 3
---- ---- ----
640 454 410
==== ==== ====
Current portion....................................... 267 284 223
---- ---- ----
Long-term portion..................................... $373 $170 $187
==== ==== ====
</TABLE>
Future minimum lease payments as of March 16, 1997 are (in thousands):
<TABLE>
<S> <C>
1997................................................................. $267
1998................................................................. 117
1999................................................................. 51
2000................................................................. 18
Thereafter........................................................... --
----
$453
====
</TABLE>
F-36
<PAGE>
LONE STAR RENTALS, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
9. COMMITMENTS AND CONTINGENCIES
OPERATING LEASES
Lone Star leases certain facilities under operating leases which contain
renewal options and provide for periodic cost of living adjustments. Rental
expense was $241,000 and $236,000 for the years ended December 31, 1995 and
1996 respectively, and $49,000 for the period ended March 16, 1997.
Future minimum rental commitments as of March 16, 1997 under non-cancelable
operating leases are (in thousands):
<TABLE>
<S> <C>
1997............................................................... $ 192
1998............................................................... 242
1999............................................................... 242
2000............................................................... 242
2001............................................................... 242
Thereafter......................................................... 51
------
$1,211
======
</TABLE>
LEGAL MATTERS
Lone Star is party to legal proceedings and potential claims arising in the
ordinary course of its business. Management believes that the ultimate
resolution of these matters will have no material adverse effect on Lone
Star's financial position, results of operations or cash flows.
10. SUBSEQUENT EVENTS
On March 17, 1997, Lone Star's owner sold substantially all of Lone Star's
assets to NES Acquisition Corp., a wholly owned subsidiary of National
Equipment Services, Inc. for a $10,579,711 cash payment (subject to a
customary purchase price adjustment mechanism), a promissory note in the
principal amount of $500,000 ($350,000 of which is in partial consideration
for such assets and $150,000 of which is in consideration for certain non-
compete covenants by Lone Star's former owner) and the assumption of certain
liabilities and obligations.
F-37
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Stockholder
of BAT Rentals, Inc. and the Board of Directors
of National Equipment Services, Inc.
In our opinion, the accompanying balance sheets and the related statements
of operations, of changes in stockholder's equity and of cash flows, present
fairly, in all material respects, the financial position of BAT Rentals, Inc.
at December 31, 1995 and 1996 and March 31, 1997, and the results of its
operations and its cash flows for each of the two years in the period ended
December 31, 1996 and for the three months ended March 31, 1997, in conformity
with generally accepted accounting principles. These financial statements are
the responsibility of management; our responsibility is to express an opinion
on these financial statements based on our audits. We conducted our audits of
these statements in accordance with generally accepted auditing standards
which require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management,
and evaluating the overall financial statement presentation. We believe that
our audits provide a reasonable basis for the opinion expressed above.
/s/ PRICE WATERHOUSE LLP
Chicago, Illinois
November 4, 1997
F-38
<PAGE>
BAT RENTALS, INC.
BALANCE SHEETS
(IN THOUSANDS)
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31, MARCH 31,
1995 1996 1997
------------ ------------ ---------
<S> <C> <C> <C>
ASSETS:
Cash and cash equivalents................. $ 1,879 $ 1,750 $ 1,609
Accounts receivable, net.................. 1,107 1,322 1,574
Inventory, net............................ 672 645 530
Rental equipment, net..................... 4,434 5,779 5,945
Property and equipment, net............... 1,976 1,855 1,808
Prepaid and other assets.................. 43 153 30
------- ------- -------
Total assets............................ $10,111 $11,504 $11,496
======= ======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY:
Accounts payable.......................... $ 126 $ 36 $ 84
Accrued expenses and other liabilities.... 200 121 216
Debt...................................... 3,191 3,302 2,891
------- ------- -------
Total liabilities....................... 3,517 3,459 3,191
Common stock, $10 par, 1,000 shares
authorized, 700 shares issued and
outstanding.............................. 7 7 7
Other paid-in capital..................... 2 2 2
Retained earnings......................... 7,514 8,965 9,225
Treasury stock............................ (929) (929) (929)
------- ------- -------
Total stockholders' equity.............. 6,594 8,045 8,305
------- ------- -------
Total liabilities and stockholders'
equity................................. $10,111 $11,504 $11,496
======= ======= =======
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-39
<PAGE>
BAT RENTALS, INC.
STATEMENTS OF OPERATIONS
(IN THOUSANDS)
<TABLE>
<CAPTION>
FOR THE YEARS ENDED FOR THE THREE
------------------------- MONTHS ENDED
DECEMBER 31, DECEMBER 31, MARCH 31,
1995 1996 1997
------------ ------------ ------------- ---
<S> <C> <C> <C> <C>
REVENUES:
Rental revenues................... $ 4,856 $ 6,328 $1,457
Rental equipment sales............ 2,486 2,879 995
New equipment sales............... 4,733 3,547 1,250
Other............................. 378 386 100
------- ------- ------
Total revenues.................. 12,453 13,140 3,802
------- ------- ------
COST OF REVENUES:
Rental equipment expenses......... 80 184 12
Rental equipment depreciation..... 2,059 2,576 707
Cost of rental equipment sales.... 968 1,411 352
Cost of new equipment sales....... 4,052 2,961 1,010
Direct operating expense.......... 1,653 1,623 450
------- ------- ------
Total cost of revenues.......... 8,812 8,755 2,531
------- ------- ------
Gross profit....................... 3,641 4,385 1,271
Selling, general and administrative
expenses.......................... 1,552 1,399 489
Non-rental depreciation and
amortization...................... 116 109 25
------- ------- ------
Operating income................... 1,973 2,877 757
Other income (expense), net........ 29 120 (1)
Interest income (expense), net..... (103) (196) (46)
------- ------- ------
Net income......................... $ 1,899 $ 2,801 $ 710
======= ======= ======
PRO FORMA TAX PROVISION
(UNAUDITED):
Income before income taxes......... $ 1,899 $ 2,801 $ 710
Pro forma provision for income
taxes.............................. 646 952 241
------- ------- ------
Pro forma net income............... $ 1,253 $ 1,849 $ 469
======= ======= ======
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-40
<PAGE>
BAT RENTALS, INC.
STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
FOR THE YEARS ENDED FOR THE THREE
------------------------- MONTHS ENDED
DECEMBER 31, DECEMBER 31, MARCH 31,
1995 1996 1997
------------ ------------ -------------
<S> <C> <C> <C>
OPERATING ACTIVITIES:
Net income............................ $ 1,899 $ 2,801 $ 710
Adjustments to reconcile net income to
net cash provided by operating
activities:
Depreciation......................... 2,175 2,685 732
Gain on sale of equipment............ (1,527) (1,468) (657)
Changes in operating assets and
liabilities:
Accounts receivable................. (27) (215) (252)
Inventories......................... (42) 26 115
Prepaid and other assets............ 45 (110) 123
Accounts payable.................... 76 (90) 48
Accrued expenses and other
liabilities........................ 110 (79) 95
------- ------- ------
Net cash provided by operating
activities............................ 2,709 3,550 914
------- ------- ------
INVESTING ACTIVITIES:
Purchases of rental equipment......... (3,953) (5,332) (1,211)
Proceeds from sale of rental
equipment............................ 2,486 2,879 995
Purchases of property and equipment... (52) (2) --
Proceeds from sale of property and
equipment............................ -- 14 23
------- ------- ------
Net cash used in investing activities.. (1,519) (2,441) (193)
------- ------- ------
FINANCING ACTIVITIES:
Proceeds from long-term debt.......... 1,303 1,465 --
Payments on long-term debt............ (771) (1,353) (412)
Dividends paid........................ (1,500) (1,350) (450)
------- ------- ------
Net cash used in financing activities.. (968) (1,238) (862)
------- ------- ------
Net increase (decrease) in cash and
cash equivalents...................... 222 (129) (141)
Cash and cash equivalents at beginning
of period............................. 1,657 1,879 1,750
------- ------- ------
Cash and cash equivalents at end of
period................................ $ 1,879 $ 1,750 $1,609
======= ======= ======
SUPPLEMENTAL NON-CASH FLOW INFORMATION:
Cash paid for interest................ $ 227 $ 244 $ 56
======= ======= ======
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-41
<PAGE>
BAT RENTALS, INC.
STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
<TABLE>
<CAPTION>
COMMON STOCK TOTAL
------------------- PAID-IN TREASURY RETAINED STOCKHOLDERS'
SHARES STATED VALUE CAPITAL STOCK EARNINGS EQUITY
------ ------------ ------- -------- -------- -------------
<S> <C> <C> <C> <C> <C> <C>
Balance at December 31,
1994................... 700 $ 7 $ 2 $(929) $ 7,115 $ 6,195
Net income.............. -- -- -- -- 1,899 1,899
Dividends............... -- -- -- -- (1,500) (1,500)
--- --- --- ----- ------- -------
Balance at December 31,
1995................... 700 7 2 (929) 7,514 6,594
Net income.............. -- -- -- -- 2,801 2,801
Dividends............... -- -- -- -- (1,350) (1,350)
--- --- --- ----- ------- -------
Balance at December 31,
1996................... 700 7 2 (929) 8,965 8,045
Net income.............. -- -- -- -- 710 710
Dividends............... -- -- -- -- (450) (450)
--- --- --- ----- ------- -------
Balance at March 31,
1997................... 700 $ 7 $ 2 $(929) $ 9,225 $ 8,305
=== === === ===== ======= =======
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-42
<PAGE>
BAT RENTALS, INC.
NOTES TO FINANCIAL STATEMENTS
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION
BAT Rentals, Inc. ("BAT") is an S corporation primarily involved in the
sale, financing and rental of construction equipment to construction
contractors and industrial companies. BAT operates from one facility in Las
Vegas, Nevada.
FINANCIAL STATEMENT PRESENTATION
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenue and expenses during the
reporting period. Actual results could differ from those estimates.
RENTAL REVENUES
Rental revenues are recognized ratably over the lease term. Sales revenues
are recognized at the point of delivery.
CASH AND CASH EQUIVALENTS
Cash and cash equivalents are short-term highly liquid investments with
original maturities of three months or less.
INVENTORY
BAT's inventories primarily consist of parts and new equipment held for
sale. Inventories are stated at the lower of cost, determined by the first-in,
first-out method, or market.
RENTAL EQUIPMENT
Rental equipment is recorded at cost. Depreciation for rental equipment
acquired is computed using the straight-line and accelerated methods over an
estimated 5 to 7 year useful life with no salvage value.
Ordinary repairs and maintenance costs are charged to operations as
incurred. When rental equipment is disposed of, the related cost and
accumulated depreciation are removed from the respective accounts. Proceeds
from the disposal and the related net book value of the equipment are
recognized in the period of disposal and reported as revenue from rental
equipment sales and cost of equipment sales in the statement of operations.
PROPERTY AND EQUIPMENT
Property and equipment is recorded at cost. Depreciation is computed using
the straight-line and accelerated methods over the estimated useful lives of
the assets.
The estimated useful lives for property and equipment range from 31.5 years
for buildings, 5 to 7 years for machinery and equipment, 5 to 7 years for
furniture and fixtures and 3 to 5 years for vehicles.
Ordinary repairs and maintenance costs are charged to operations as
incurred. When property and equipment is disposed of, the related cost and
accumulated depreciation are removed from the respective accounts, and any
gains or losses are included in results of operations.
ADOPTION OF NEW ACCOUNTING PRONOUNCEMENT
On January 1, 1996, BAT adopted Statement of Financial Accounting Standards
(SFAS) No. 121, Accounting for the Impairment of Long-Lived Assets and Long-
Lived Assets to be Disposed of, which requires
F-43
<PAGE>
BAT RENTALS, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
impairment losses to be recorded on long-lived assets used in operations when
indicators of impairment are present and the assets' carrying amounts exceed
the undiscounted cash flows estimated to be generated by those assets. SFAS
No. 121 also requires impairment losses to be recorded when the carrying
amount of long-lived assets that are expected to be disposed of, exceed their
fair values, net of disposal costs. Adoption of SFAS No. 121 did not have a
material impact on BAT's financial position at March 31, 1997 or results of
operations for the period then ended.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying amounts reported in the balance sheets for trade accounts
receivable, accounts payable and accrued expenses and other liabilities
approximate fair value due to the immediate to short-term maturity of these
financial instruments. The fair value of long-term debt is determined using
current interest rates for similar instruments as of March 31, 1997 and
approximates the carrying value of the debt due to the fact that the
underlying instruments include provisions to adjust note balances and interest
rates to approximate fair market value.
CONCENTRATION OF CREDIT RISK
Financial instruments that potentially subject BAT to significant
concentrations of credit risk consist primarily of trade accounts receivable
from construction and industrial customers. Concentrations of credit risk with
respect to trade accounts receivable are limited due to the large number of
customers and BAT's geographic dispersion. BAT performs credit evaluations of
its customers' financial condition and generally does not require collateral
on accounts receivable. BAT maintains an allowance for doubtful accounts on
its receivables based upon expected collectibility. Allowance for doubtful
accounts was $116,200, $116,200 and $96,300 at March 31, 1997, December 31,
1996 and 1995, respectively.
INCOME TAXES
BAT has elected S corporation status under the U.S. Internal Revenue Code.
Pursuant to this election, BAT's income, deductions and credits are reported
on the income tax returns of BAT's stockholders for federal purposes and,
accordingly, no provision for federal income taxes has been made. Pro forma
income taxes are calculated at a statutory tax rate of 34%.
RELATED PARTY TRANSACTIONS
As disclosed in these financial statements, BAT has participated in certain
transactions with related parties.
2. INVENTORY
Inventory consists of the following (in thousands):
<TABLE>
<CAPTION>
DECEMBER
31,
---------- MARCH 31,
1995 1996 1997
---- ---- ---------
<S> <C> <C> <C>
New equipment....................................... $342 $365 $300
Parts............................................... 418 438 381
Contractor supplies................................. 77 75 76
Other............................................... 7 8 14
---- ---- ----
844 886 771
Less: reserve....................................... (172) (241) (241)
---- ---- ----
Total inventory, net................................ $672 $645 $530
==== ==== ====
</TABLE>
F-44
<PAGE>
BAT RENTALS, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
3. RENTAL EQUIPMENT
Rental equipment consists of the following (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
--------------- MARCH 31,
1995 1996 1997
------ ------- ---------
<S> <C> <C> <C>
Rental equipment............................... $9,387 $11,397 $11,545
Less: accumulated depreciation................. (4,953) (5,618) (5,600)
------ ------- -------
Rental equipment, net.......................... $4,434 $ 5,779 $ 5,945
====== ======= =======
</TABLE>
4. PROPERTY AND EQUIPMENT
Property and equipment, net, consists of the following (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
-------------- MARCH 31,
1995 1996 1997
------ ------ ---------
<S> <C> <C> <C>
Land and land improvements...................... $ 807 $ 807 $ 807
Building........................................ 1,336 1,336 1,336
Machinery and shop equipment.................... 60 63 68
Furniture and fixtures.......................... 424 440 442
Vehicles........................................ 910 889 838
------ ------ ------
Total property and equipment, at cost........... 3,537 3,535 3,491
Less: accumulated depreciation.................. (1,561) (1,680) (1,683)
------ ------ ------
Property and equipment, net..................... $1,976 $1,855 $1,808
====== ====== ======
</TABLE>
5. PREPAID AND OTHER ASSETS
Prepaid and other assets consists of the following (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
------------- MARCH 31,
1995 1996 1997
------ ------ ---------
<S> <C> <C> <C>
Receivable from EPA............................... $ -- $ 108 $--
Prepaid insurance................................. 29 31 5
Prepaid advertising............................... 7 7 3
Other............................................. 7 7 22
----- ------ ---
$ 43 $ 153 $30
===== ====== ===
</TABLE>
6. ACCRUED EXPENSES AND OTHER LIABILITIES
Accrued expenses and other liabilities consist of the following (in
thousands):
<TABLE>
<CAPTION>
DECEMBER
31,
--------- MARCH 31,
1995 1996 1997
---- ---- ---------
<S> <C> <C> <C>
Accrued expenses...................................... $ 72 $ 21 $ 68
Sales tax payable..................................... 52 54 78
Accrued profit sharing................................ -- 46 70
Accrued equipment sales payable....................... 76 -- --
---- ---- ----
$200 $121 $216
==== ==== ====
</TABLE>
F-45
<PAGE>
BAT RENTALS, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
7. DEBT
Debt consists of the following (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
------------- MARCH 31,
1995 1996 1997
------ ------ ---------
<S> <C> <C> <C>
Notes payable, secured by rental equipment,
payable through various dates ending February
2000, interest rates ranging from 7.9% to prime
plus 1%........................................ $1,295 $1,630 $1,428
Notes payable, related party, secured by rental
equipment, with interest ranging from 7.5% to
prime plus 1%.................................. 177 223 188
Notes payable, secured by trust deed on property
and buildings, with interest at prime plus 1%
maturing May 1997.............................. 167 -- --
Notes payable, shareholder, secured by rental
equipment with interest at prime plus 1%,
minimum rate of 9.75%.......................... 328 288 245
Revolving credit line, secured by rental
equipment and inventory, with a limit of
$1,250,000. Interest payable monthly at Bank of
America's reference rate plus 0.65%............ 1,009 814 871
Other contracts payable, secured by rental
equipment and inventory, due upon sale of
collateral or within one year of the date of
purchase if not sold........................... 215 347 159
------ ------ ------
Total debt...................................... $3,191 $3,302 $2,891
====== ====== ======
</TABLE>
BAT's agreement with the bank provides for a secured revolving line of
credit of $1,250,000 maturing no later than May 31, 1997. The bank and senior
note agreements include restrictions as to limitations upon certain ratios of
liabilities to net worth and upon the minimum net worth of BAT. BAT is in
compliance with covenants in all agreements. Substantially all of BAT's assets
are pledged as collateral for the long-term debt.
Maturities of debt are as follows at March 31, 1997 (in thousands):
<TABLE>
<S> <C>
1997............................................................... $1,685
1998............................................................... 800
1999............................................................... 397
2000............................................................... 9
2001............................................................... --
Thereafter......................................................... --
------
$2,891
======
</TABLE>
LEGAL MATTERS
BAT is party to legal proceedings and claims arising in the ordinary course
of its business. Management believes that the ultimate resolution of these
matters will have no material adverse effect on BAT's financial position,
results of operations or cash flows.
F-46
<PAGE>
BAT RENTALS, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
8. EMPLOYEE BENEFIT PLANS
BAT sponsors a profit sharing plan (the "Plan") in which employees with
greater than one year of service are eligible. Under the Plan, BAT contributes
15% of each eligible employee's base annual wages to a trust out of its net
profits. Effective January 1, 1997, five percent of the eligible employee's
wages are deposited into a 401(k) plan and the remaining 10% portion is
contributed to a separate profit sharing plan. In addition, eligible employees
can defer up to 10% of their salary with a partially matching contribution by
BAT. The employer contributions vest over a seven year period. Contributions
by BAT to the Plan were $195,100, $198,500 and $0 for the years ended December
31, 1995 and 1996 and the period ended March 31, 1997, respectively.
9. RELATED PARTY TRANSACTIONS
Paul Bronken, President and beneficial owner of a majority of the shares of
BAT, and H. L. Butler, an employee and officer of BAT, loaned the Company
approximately $110,700 and $325,200 during the years ended December 31, 1995
and 1996, respectively, to finance rental equipment purchases. Interest
expense related to these loans was $46,000, $48,200 and $11,200 for the years
ended December 31, 1995 and 1996 and the three months ended March 31, 1997,
respectively.
10. SUBSEQUENT EVENTS
On April 1, 1997, BAT's owner sold substantially all of BAT's assets to BAT
Acquisition Corp., a wholly owned subsidiary of National Equipment Services,
Inc., for a $15.4 million cash payment.
F-47
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Stockholders of
Sprint Industrial Services, Inc. and
the Board of Directors of
National Equipment Services, Inc.
In our opinion, the accompanying balance sheets and the related statements
of operations, of changes in divisional equity and of cash flows, present
fairly, in all material respects, the financial position of Sprintank and
Sprintank Mobile Storage (divisions of Sprint Industrial Services, Inc.) at
December 31, 1995, December 31, 1996, and June 30, 1997 and the results of its
operations and its cash flows for the years ended December 31, 1995 and 1996
and the six months ended June 30, 1997 in conformity with generally accepted
accounting principles. These financial statements are the responsibility of
management; our responsibility is to express an opinion on these financial
statements based on our audits. We conducted our audits of these statements in
accordance with generally accepted auditing standards which require that we
plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements, assessing the accounting principles used and
significant estimates made by management, and evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for the opinion expressed above.
/s/ PRICE WATERHOUSE LLP
Houston, Texas
November 4, 1997
F-48
<PAGE>
SPRINTANK AND SPRINTANK MOBILE STORAGE
(DIVISIONS OF SPRINT INDUSTRIAL SERVICES, INC.)
BALANCE SHEETS
(IN THOUSANDS)
<TABLE>
<CAPTION>
JUNE
DECEMBER 31, DECEMBER 31, 30,
1995 1996 1997
------------ ------------ -------
<S> <C> <C> <C>
ASSETS:
Cash......................................... $ 14 $ 238 $ 373
Accounts receivable, net..................... 1,922 1,829 2,089
Inventory.................................... -- -- 261
Rental equipment, net........................ 8,118 9,741 10,477
Property and equipment, net.................. 584 607 757
Prepaid expenses and other assets............ 89 131 105
------- ------- -------
Total assets............................... $10,727 $12,546 $14,062
======= ======= =======
LIABILITIES AND DIVISIONAL EQUITY:
Accounts payable............................. $ 201 $ 24 $ 282
Accrued expenses and other liabilities....... 182 263 381
Debt......................................... 7,370 8,987 8,624
------- ------- -------
Total liabilities.......................... 7,753 9,274 9,287
------- ------- -------
Intercompany.................................. 1,382 1,054 837
Commitments and contingencies (Note 8)
Divisional equity............................. 1,592 2,218 3,938
------- ------- -------
Total liabilities and divisional equity.... $10,727 $12,546 $14,062
======= ======= =======
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-49
<PAGE>
SPRINTANK AND SPRINTANK MOBILE STORAGE
(DIVISIONS OF SPRINT INDUSTRIAL SERVICES, INC.)
STATEMENTS OF OPERATIONS
(IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDED
------------------------- SIX MONTHS
DECEMBER 31, DECEMBER 31, ENDED JUNE
1995 1996 30, 1997
------------ ------------ ----------
<S> <C> <C> <C>
REVENUES:
Rental revenues.......................... $7,475 $ 9,172 $5,715
Other income............................. 404 426 327
------ ------- ------
Total revenues......................... 7,879 9,598 6,042
------ ------- ------
COST OF REVENUES:
Rental equipment expenses................ 1,648 1,395 470
Rental equipment depreciation............ 1,376 2,025 1,109
Direct operating expenses................ 257 197 173
------ ------- ------
Total cost of revenues................. 3,281 3,617 1,752
------ ------- ------
Gross profit.............................. 4,598 5,981 4,290
Selling, general and administrative
expenses................................. 2,977 4,333 2,028
Non-rental depreciation and amortization.. 99 145 83
------ ------- ------
Operating income.......................... 1,522 1,503 2,179
Other income (expense), net............... 1 14 (10)
Interest income (expense), net............ (868) (1,037) (553)
------ ------- ------
Net income................................ $ 655 $ 480 $1,616
====== ======= ======
PRO FORMA TAX PROVISION (UNAUDITED):
Income before income taxes............... $ 655 $ 480 $1,616
Pro forma provision for income taxes..... 229 168 566
------ ------- ------
Pro forma net income..................... $ 426 $ 312 $1,050
====== ======= ======
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-50
<PAGE>
SPRINTANK AND SPRINTANK MOBILE STORAGE
(DIVISIONS OF SPRINT INDUSTRIAL SERVICES, INC.)
STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDED
------------------------- SIX MONTHS ENDED
DECEMBER 31, DECEMBER 31, JUNE 30,
1995 1996 1997
------------ ------------ ----------------
<S> <C> <C> <C>
OPERATING ACTIVITIES:
Net income......................... $ 655 $ 480 $ 1,616
Adjustments to reconcile net income
to net cash provided by operating
activities:
Depreciation...................... 1,475 2,170 1,192
Changes in operating assets and
liabilities:
Accounts receivable.............. (779) 93 (260)
Inventory........................ -- -- (261)
Prepaid expenses and other
assets.......................... 206 (42) 26
Accounts payable................. 166 (177) 258
Accrued expenses and other
liabilities..................... 335 (247) (99)
------- ------- -------
Net cash provided by operating
activities......................... 2,058 2,277 2,472
------- ------- -------
INVESTING ACTIVITIES:
Purchases of rental equipment...... (4,725) (3,716) (1,879)
Purchases of property and
equipment......................... (100) (100) (198)
------- ------- -------
Net cash used in investing
activities.......................... (4,825) (3,816) (2,077)
------- ------- -------
FINANCING ACTIVITIES:
Proceeds from long-term debt....... 2,682 2,768 19
Payments on long-term debt......... -- (631) (883)
Capital contribution............... 161 146 114
Net proceeds from (payments on)
line of credit.................... (80) (520) 500
Dividends paid..................... -- -- (10)
------- ------- -------
Net cash provided by (used in)
financing activities............... 2,763 1,763 (260)
------- ------- -------
Net increase (decrease) in cash..... (4) 224 135
Cash at beginning of period......... 18 14 238
------- ------- -------
Cash at end of period............... $ 14 $ 238 $ 373
======= ======= =======
SUPPLEMENTAL NON-CASH FLOW
INFORMATION:
Cash paid for interest............. $ 658 $ 901 $ 460
======= ======= =======
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-51
<PAGE>
SPRINTANK AND SPRINTANK MOBILE STORAGE
(DIVISIONS OF SPRINT INDUSTRIAL SERVICES, INC.)
STATEMENTS OF CHANGES IN DIVISIONAL EQUITY
(IN THOUSANDS)
<TABLE>
<CAPTION>
TOTAL
DIVISIONAL EQUITY
-----------------
<S> <C>
Balance at December 31, 1994.................................. $ 776
Net income.................................................... 655
Capital Contribution.......................................... 161
------
Balance at December 31, 1995.................................. 1,592
Net income.................................................... 480
Capital Contribution.......................................... 146
------
Balance at December 31, 1996.................................. 2,218
Net Income.................................................... 1,616
Capital Contribution.......................................... 114
Dividends..................................................... (10)
------
Balance at June 30, 1997...................................... $3,938
======
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-52
<PAGE>
SPRINTANK AND SPRINTANK MOBILE STORAGE
(DIVISIONS OF SPRINT INDUSTRIAL SERVICES, INC.)
NOTES TO FINANCIAL STATEMENTS
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION
Sprintank and Sprintank Mobile Storage (divisions of Sprint Industrial
Services, Inc.) ("Sprintank") are primarily involved in the short-term rental
of industrial storage equipment to chemical manufacturing, and refining
industries. At June 30, 1997, Sprintank had seven equipment rental locations
in Texas, Louisiana, and Alabama.
FINANCIAL STATEMENT PRESENTATION
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenue and expenses during the
reporting period. Actual results could differ from those estimates.
RENTAL REVENUES
Rental revenues are recognized upon the earliest occurrence of either the
return of the equipment or the end of one month's rental term. For rental
contracts greater than one month, rental revenues are recognized ratably over
the contract period.
RENTAL EQUIPMENT
Rental equipment is recorded at cost. Depreciation for rental equipment
acquired is computed using the straight-line method over an estimated useful
life with no salvage value. Estimated useful lives of rental equipment ranged
from three to ten years. Accumulated depreciation on rental equipment was
$3,209,000, $4,963,000 and $5,901,000 at December 31, 1995 and 1996 and June
30, 1997, respectively.
Ordinary repairs and maintenance costs are charged to operations as
incurred. When rental equipment is disposed of, the related cost and
accumulated depreciation are removed from the respective accounts. Proceeds
from the disposal and the related net book value of the equipment are
recognized in the period of disposal.
PROPERTY AND EQUIPMENT
Property and equipment is recorded at cost. Depreciation is computed using
the straight line method over the estimated useful lives of the assets.
The estimated useful lives for property and equipment range from five to
seven years for vehicles, delivery and shop equipment, and three to ten years
for office furniture and leasehold improvements.
Ordinary repairs and maintenance costs are charged to operations as
incurred. When property and equipment is disposed of, the related cost and
accumulated depreciation are removed from the respective accounts, and any
gains or losses are included in results of operations.
INVENTORY
Sprintank's inventories primarily consist of items such as tires for
replacement on delivery vehicles and are not for sale or rental. Inventories
are stated at the lower of average cost or market.
F-53
<PAGE>
SPRINTANK AND SPRINTANK MOBILE STORAGE
(DIVISIONS OF SPRINT INDUSTRIAL SERVICES, INC.)
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying amounts reported in the balance sheets for trade accounts
receivable, accounts payable and other liabilities approximate fair value due
to the immediate to short-term maturity of these financial instruments. The
fair value of notes payable and is determined using current interest rates for
similar instruments as of the years ended December 31, 1995 and 1996 and the
period ended June 30, 1997 and approximates the carrying value of these notes
due to the fact that the underlying instruments include provisions to adjust
note balances and interest rates to approximate fair market value.
ESTIMATES
The preparation of consolidated financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of certain assets and
liabilities, the disclosure of contingent assets and liabilities at the date
of the consolidated financial statements and the related reported amounts of
revenue and expenses during the reporting period. Such estimates and
assumptions include those made regarding the estimated useful lives of
depreciable assets. Actual results could differ from those estimates.
Management believes that its estimates are reasonable.
CONCENTRATION OF CREDIT RISK
Financial instruments that potentially subject Sprintank to significant
concentrations of credit risk consist primarily of trade accounts receivable
from industrial customers. Concentrations of credit risk with respect to trade
accounts receivable are limited due to the number of large customers with
recurring rentals. Sprintank performs credit evaluations of its customers'
financial condition and does not require collateral on accounts receivable.
Sprintank maintains an allowance for doubtful accounts on its receivables
based upon expected collectibility. Allowance for doubtful accounts was $0,
$20,000 and $0 at December 31, 1995 and 1996 and June 30, 1997, respectively.
RELATED PARTY TRANSACTIONS
As disclosed in these financial statements, Sprintank has participated in
certain transactions with related parties during the current and previous
years until acquisition of substantially all of the assets of Sprintank by a
wholly owned subsidiary of National Equipment Services, Inc. (see Note 8). In
the opinion of management, all transactions with related parties have been
conducted at arm's-length.
INCOME TAXES
Sprintank's parent is a subchapter S corporation. Taxes are the
responsibility of the individual shareholders of the parent. The pro forma
provision for divisional income taxes approximates Sprintank's tax provision
on a stand alone basis.
F-54
<PAGE>
SPRINTANK AND SPRINTANK MOBILE STORAGE
(DIVISIONS OF SPRINT INDUSTRIAL SERVICES, INC.)
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
2. RENTAL EQUIPMENT
Rental equipment consists of the following (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31, JUNE
---------------- 30,
1995 1996 1997
------- ------- -------
<S> <C> <C> <C>
Trailers....................................... $ 4,774 $ 5,921 $ 6,890
Frac tanks..................................... 4,420 5,669 6,068
Tanks.......................................... 1,097 1,332 1,373
Dewatering boxes............................... 261 448 452
Vacuum boxes................................... 210 442 550
Phase separator................................ 273 274 276
Rolloff boxes.................................. 208 201 253
Other.......................................... 84 417 516
------- ------- -------
11,327 14,704 16,378
Less: accumulated depreciation................. (3,209) (4,963) (5,901)
------- ------- -------
$ 8,118 $ 9,741 $10,477
======= ======= =======
</TABLE>
3. PROPERTY AND EQUIPMENT
Property and equipment, net, consist of the following (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
------------- JUNE 30,
1995 1996 1997
----- ------ --------
<S> <C> <C> <C>
Vehicles and delivery equipment................... $ 732 $ 881 $1,057
Shop equipment.................................... 55 135 156
Office equipment.................................. 175 46 47
----- ------ ------
962 1,062 1,260
Less: accumulated depreciation.................... (378) (455) (503)
----- ------ ------
$ 584 $ 607 $ 757
===== ====== ======
</TABLE>
4. PREPAID EXPENSES AND OTHER ASSETS
Prepaid expenses and other assets consist of the following (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
------------- JUNE 30,
1995 1996 1997
------ ------ --------
<S> <C> <C> <C>
Prepaid insurance.................................. $ 56 $ 118 $ 73
Other.............................................. 33 13 32
----- ------ ----
$ 89 $ 131 $105
===== ====== ====
</TABLE>
F-55
<PAGE>
SPRINTANK AND SPRINTANK MOBILE STORAGE
(DIVISIONS OF SPRINT INDUSTRIAL SERVICES, INC.)
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
5. ACCRUED EXPENSES AND OTHER LIABILITIES
Accrued expenses and other liabilities consist of the following (in
thousands):
<TABLE>
<CAPTION>
DECEMBER
31,
--------- JUNE 30,
1995 1996 1997
---- ---- --------
<S> <C> <C> <C>
Payroll accruals....................................... $ 10 $ 85 $ 79
Deferred franchise taxes............................... 52 75 187
Taxes payable.......................................... 43 47 59
Accrued interest....................................... 49 42 21
Other.................................................. 28 14 35
---- ---- ----
$182 $263 $381
==== ==== ====
</TABLE>
6. INTERCOMPANY
Interest on intercompany advances between Sprint Industrial Services, Inc.
and Sprintank were imputed at a rate of 12% and is included in interest
expense and treated as contributed capital.
7. DEBT
Debt consists of the following (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
------------- JUNE 30,
1995 1996 1997
------ ------ --------
<S> <C> <C> <C>
Intercompany note payable to a related party,
interest 12% for the year ended December 31,
1995............................................. $ 100 $ -- $ --
Notes payable to stockholders, interest at various
rates ranging from 9% to 12%..................... 462 3,230 3,250
Revolving line of credit of $700,000, $1,000,000
and $1,000,000 for December 31, 1995, December
31, 1996 and June 30, 1997, respectively. In
1995, interest is payable monthly at prime plus
2%. For the periods ending December 31, 1996 and
June 30, 1997, interest is payable quarterly at
the bank's prime rate............................ 520 -- 500
Notes payable to a bank, interest and principal
payable monthly or quarterly at rates ranging
from 5.7% to 12% for the periods ending December
31, 1995, December 31, 1996 and June 30, 1997.... 6,192 5,682 4,840
Notes payable--insurance, interest and principal
payable monthly at rates ranging from 7.43% to
8.50% for the periods ending December 31, 1995,
December 31, 1996 and June 30, 1997,
respectively..................................... 96 75 34
------ ------ -------
$7,370 $8,987 $ 8,624
====== ====== =======
</TABLE>
Sprintank's agreement with the bank provided for a secured line of credit of
$700 in 1995, maturing no later than April 30, 1996. At December 31, 1995,
$520 was borrowed against the line of credit. At December 31, 1996, Sprintank
had a secured line of credit for $1,000, maturing no later than April 30,
1997. At December 31, 1996, nothing was borrowed against the line. During
1997, the $1,000 line of credit was amended, extending the maturity date to no
later than April 30, 1998. At June 30, 1997, $500 was borrowed against the
line of credit.
F-56
<PAGE>
SPRINTANK AND SPRINTANK MOBILE STORAGE
(DIVISIONS OF SPRINT INDUSTRIAL SERVICES, INC.)
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
The bank note agreements include restrictions as to limitations upon certain
ratios of liabilities to net worth and upon the minimum net worth of
Sprintank. Sprintank is in compliance with covenants in all agreements.
Substantially all rental equipment, property and equipment, and accounts
receivable of Sprintank are pledged as collateral for the bank line of credit,
demand notes, and notes related to purchases of certain businesses.
Sprintank incurred interest expense of $64, $357 and $192 on borrowings from
related parties in the periods ended December 31, 1995, December 31, 1996 and
June 30, 1997, respectively.
On bank notes payable, Sprintank incurred interest expense of $643, $536 and
$247 for the periods ended December 31, 1995, December 31, 1996 and June 30,
1997, respectively.
8. COMMITMENTS AND CONTINGENCIES
OPERATING LEASES
Sprintank leases certain facilities under operating leases which contain
renewal options and provide for periodic cost of living adjustments. Rental
expense was $96, $87, and $53, for the years ended December 31, 1995 and 1996
and for the period ended June 30, 1997, respectively.
Future minimum rental commitments as of June 30, 1997 under noncancelable
operating leases are (in thousands):
<TABLE>
<S> <C>
1997................................................................. $ 29
1998................................................................. 96
1999................................................................. 82
2000................................................................. 77
2001................................................................. 74
Thereafter........................................................... 287
----
$645
====
</TABLE>
LEGAL MATTERS
Sprintank is not a party to any legal proceedings or claims as of June 30,
1997.
9. SUBSEQUENT EVENTS
On June 30, 1997, Sprintank's owner sold substantially all of Sprintank's
assets to NES Acquisition Corp., a wholly owned subsidiary of National
Equipment Services, Inc., for a $25,256,431 cash payment (subject to a
customary purchase price adjustment mechanism) and the assumption of certain
liabilities and obligations.
F-57
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Stockholders
of MST Enterprises, Inc. (d/b/a
Equipco Rentals & Sales) and the Board of Directors
of National Equipment Services, Inc.
In our opinion, the accompanying balance sheets and the related statements
of operations, of cash flows and of changes in stockholder's equity, present
fairly, in all material respects, the financial position of MST Enterprises,
Inc. (d/b/a Equipco Rentals & Sales) at October 31, 1995 and 1996, and at July
17, 1997 and the results of its operations and its cash flows for each of the
two years in the period ended October 31, 1996, and for the period from
November 1, 1996 through July 17, 1997, in conformity with generally accepted
accounting principles. These financial statements are the responsibility of
management; our responsibility is to express an opinion on these financial
statements based on our audits. We conducted our audits of these statements in
accordance with generally accepted auditing standards which require that we
plan and perform the audits to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements, assessing the accounting principles used and
significant estimates made by management, and evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for the opinion expressed above.
/s/ PRICE WATERHOUSE LLP
Chicago, Illinois
November 4, 1997
F-58
<PAGE>
MST ENTERPRISES, INC.
D/B/A EQUIPCO RENTALS & SALES
BALANCE SHEETS
(IN THOUSANDS)
<TABLE>
<CAPTION>
JULY
OCTOBER 31, OCTOBER 31, 17,
1995 1996 1997
----------- ----------- ------
<S> <C> <C> <C>
ASSETS:
Cash........................................... $ 95 $ 207 $ 84
Accounts receivable, net....................... 523 580 642
Inventory...................................... 186 206 352
Rental equipment net........................... 2,047 2,553 3,007
Property and equipment, net.................... 333 337 221
Prepaid and other assets....................... 153 219 276
------ ------ ------
Total assets................................. $3,337 $4,102 $4,582
====== ====== ======
LIABILITIES AND STOCKHOLDERS' EQUITY:
Accounts payable............................... $ 470 $ 513 $ 384
Accrued expenses and other liabilities......... 241 281 387
Debt........................................... 1,846 2,393 2,396
------ ------ ------
Total liabilities............................ 2,557 3,187 3,167
------ ------ ------
Commitments and contingencies (Note 9)
Common stock, $10 par, 2,500 shares authorized,
1,000 shares issued and outstanding........... 10 10 10
Retained earnings.............................. 770 905 1,405
------ ------ ------
Total stockholders' equity................... 780 915 1,415
------ ------ ------
Total liabilities and stockholders' equity... $3,337 $4,102 $4,582
====== ====== ======
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-59
<PAGE>
MST ENTERPRISES, INC.
D/B/A EQUIPCO RENTALS & SALES
STATEMENTS OF OPERATIONS
(IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDED
----------------------- PERIOD ENDED
OCTOBER 31, OCTOBER 31, JULY 17,
1995 1996 1997
----------- ----------- ------------
<S> <C> <C> <C>
REVENUES:
Rental revenues.......................... $3,213 $3,605 $2,835
Rental equipment sales................... 552 391 447
New equipment sales...................... 1,581 1,805 1,055
Other.................................... 44 31 32
------ ------ ------
Total revenues......................... 5,390 5,832 4,369
------ ------ ------
COST OF REVENUES:
Rental equipment expenses................ 264 355 141
Rental equipment depreciation............ 934 1,163 890
Cost of rental equipment sales........... 118 181 125
Cost of new equipment sales.............. 1,461 1,232 691
Other direct operating expenses.......... 885 852 712
------ ------ ------
Total cost of revenues................. 3,662 3,783 2,559
------ ------ ------
Gross profit.............................. 1,728 2,049 1,810
Selling, general and administrative
expenses................................. 1,339 1,519 823
Non-rental depreciation and amortization.. 84 123 76
------ ------ ------
Operating income.......................... 305 407 911
Other income (expense), net............... -- (37) 20
Interest income (expense), net............ (160) (143) (94)
------ ------ ------
Income before income taxes................ 145 227 837
Income tax expense........................ 63 92 337
------ ------ ------
Net income................................ $ 82 $ 135 $ 500
====== ====== ======
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-60
<PAGE>
MST ENTERPRISES, INC.
D/B/A EQUIPCO RENTALS & SALES
STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDED
----------------------- PERIOD ENDED
OCTOBER 31, OCTOBER 31, JULY 17,
1995 1996 1997
----------- ----------- ------------
<S> <C> <C> <C>
OPERATING ACTIVITIES:
Net income............................... $ 82 $ 135 $ 500
Adjustments to reconcile net income to
net cash provided by operating
activities:
Depreciation............................ 1,034 1,294 967
Gain on sale of equipment............... (434) (144) (325)
Changes in operating assets and
liabilities:
Accounts receivable.................... (84) (57) (62)
Inventory.............................. 7 (20) (146)
Prepaid and other assets............... 6 (66) (57)
Accounts payable....................... 13 43 (129)
Accrued expenses and other liabilities. 116 40 106
------ ------ ------
Net cash provided by operating
activities.............................. 740 1,225 854
------ ------ ------
INVESTING ACTIVITIES:
Purchases of rental equipment............ (1,568) (1,820) (1,443)
Proceeds from sale of rental equipment... 609 295 424
Purchases of property and equipment...... (203) (239) --
Proceeds from sale of property and
equipment............................... -- 105 39
------ ------ ------
Net cash used in investing activities.... (1,162) (1,659) (980)
------ ------ ------
FINANCING ACTIVITIES:
Proceeds from long-term debt............. 875 1,465 700
Payments on long-term debt............... (499) (919) (697)
------ ------ ------
Net cash provided by financing
activities.............................. 376 546 3
------ ------ ------
Net increase (decrease) in cash.......... (46) 112 (123)
Cash at beginning of period.............. 141 95 207
------ ------ ------
Cash at end of period.................... $ 95 $ 207 $ 84
====== ====== ======
SUPPLEMENTAL NON-CASH FLOW INFORMATION:
Cash paid for interest................... $ 172 $ 152 $ 108
====== ====== ======
Cash paid for income taxes............... $ 23 $ 215 $ 300
====== ====== ======
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-61
<PAGE>
MST ENTERPRISES, INC.
D/B/A EQUIPCO RENTALS & SALES
STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
(IN THOUSANDS EXCEPT SHARE AMOUNTS)
<TABLE>
<CAPTION>
COMMON STOCK
------------- TOTAL
STATED PAID-IN RETAINED STOCKHOLDERS'
SHARES VALUE CAPITAL EARNINGS EQUITY
------ ------ ------- -------- -------------
<S> <C> <C> <C> <C> <C>
Balance at October 31, 1994........ 1,000 $10 $-- $ 688 $ 698
Net income......................... -- -- -- 82 82
----- --- --- ------ ------
Balance at October 31, 1995........ 1,000 10 -- 770 780
Net income......................... -- -- -- 135 135
----- --- --- ------ ------
Balance at October 31, 1996........ 1,000 10 -- 905 915
Net income......................... -- -- -- 500 500
----- --- --- ------ ------
Balance at July 17, 1997........... 1,000 $10 $-- $1,405 $1,415
===== === === ====== ======
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-62
<PAGE>
MST ENTERPRISES, INC.
D/B/A EQUIPCO RENTALS & SALES
NOTES TO FINANCIAL STATEMENTS
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION
MST Enterprises, Inc. (d/b/a Equipco Rentals & Sales) ("Equipco") is a C
corporation primarily involved in the short-term rental and sales of general
purpose construction equipment to industrial and construction companies. The
Company operates from one facility in Harrisonburg, Virginia.
FINANCIAL STATEMENT PRESENTATION
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenue and expenses during the
reporting period. Actual results could differ from those estimates.
RENTAL REVENUES
Rental revenues are recognized as earned over the lease term. Sales revenues
are recognized at the point of delivery.
RENTAL EQUIPMENT
Rental equipment is recorded at cost. Depreciation for rental equipment
acquired is computed using accelerated methods over periods approximating five
years.
Ordinary repairs and maintenance costs are charged to operations as
incurred. When rental equipment is disposed of, the related cost and
accumulated depreciation are removed from the respective accounts. Proceeds
from the disposal and the related net book value of the equipment are
recognized in the period of disposal and reported as revenue from rental
equipment sales and cost of equipment sales in the statement of operations.
PROPERTY AND EQUIPMENT
Property and equipment is recorded at cost. Depreciation is computed using
accelerated methods ranging from three to five years.
Ordinary repairs and maintenance costs are charged to operations as
incurred. When property and equipment is disposed of, the related cost and
accumulated depreciation are removed from the respective accounts, and any
gains or losses are included in results of operations.
ADOPTION OF NEW ACCOUNTING PRONOUNCEMENT
On January 1, 1996, Equipco adopted Statement of Financial Accounting
Standards (SFAS) No. 121, Accounting for the Impairment of Long-Lived Assets
and Long-Lived Assets to be Disposed of, which requires impairment losses to
be recorded on long-lived assets used in operations when indicators of
impairment are present and the assets' carrying amounts exceed the
undiscounted cash flows estimated to be generated by those assets. SFAS No.
121 also requires impairment losses to be recorded when the carrying amount of
long-lived assets that are expected to be disposed of, exceed their fair
values, net of disposal costs. Adoption of SFAS No. 121 did not have a
material impact on Equipco's financial position at July 17, 1997 or results of
operations for the period then ended.
F-63
<PAGE>
MST ENTERPRISES, INC.
D/B/A EQUIPCO RENTALS & SALES
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
INVENTORY
Equipco's inventories are valued at average costs and consist primarily of
items such as hand tools and accessories held for resale.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying amounts reported in the balance sheets for trade accounts
receivable, accounts payable and other liabilities approximate fair value due
to the immediate to short-term maturity of these financial instruments. The
fair value of notes receivable and notes payable is determined using current
interest rates for similar instruments as of July 17, 1997 and approximates
the carrying value of these notes due to the fact that the underlying
instruments include provisions to adjust note balances and interest rates to
approximate fair market value.
CONCENTRATION OF CREDIT RISK
Financial instruments that potentially subject Equipco to significant
concentrations of credit risk consist primarily of trade accounts receivable
from construction and industrial customers. Concentrations of credit risk with
respect to trade accounts receivable are limited due to the large number of
customers and Equipco's geographic dispersion. Equipco performs credit
evaluations of its customers' financial condition and generally does not
require collateral on accounts receivable. Equipco maintains an allowance for
doubtful accounts on its receivables based upon expected collectibility.
Allowance for doubtful accounts was $40,000, $20,000 and $30,000 at October
31, 1995 and 1996 and July 17, 1997, respectively.
INCOME TAXES
Deferred income tax assets and liabilities are computed based on temporary
differences between the financial statement and income tax bases of assets and
liabilities using the enacted marginal income tax rate in effect for the year
in which the differences are expected to reverse. Deferred income tax expenses
or benefits are based on the changes in the deferred income tax assets or
liabilities from period to period.
RELATED PARTY TRANSACTIONS
As disclosed in these financial statements, Equipco has participated in
certain transactions with related parties.
2. INVENTORY
Inventory consists of the following (in thousands):
<TABLE>
<CAPTION>
OCTOBER
31,
---------- JULY 17,
1995 1996 1997
---- ---- --------
<S> <C> <C> <C>
Merchandise.......................................... $199 $224 $382
Less: reserve........................................ (13) (18) (30)
---- ---- ----
Total inventory, net............................... $186 $206 $352
==== ==== ====
</TABLE>
F-64
<PAGE>
MST ENTERPRISES, INC.
D/B/A EQUIPCO RENTALS & SALES
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
3. RENTAL EQUIPMENT
Rental equipment consists of the following (in thousands):
<TABLE>
<CAPTION>
OCTOBER 31, JULY
---------------- 17,
1995 1996 1997
------- ------- -------
<S> <C> <C> <C>
Gross rental equipment......................... $ 4,669 $ 6,098 $ 6,992
Less: accumulated depreciation................. (2,622) (3,545) (3,985)
------- ------- -------
$ 2,047 $ 2,553 $ 3,007
======= ======= =======
</TABLE>
4. PROPERTY AND EQUIPMENT
Property and equipment, net, consists of the following (in thousands):
<TABLE>
<CAPTION>
OCTOBER 31,
------------ JULY 17,
1995 1996 1997
----- ----- --------
<S> <C> <C> <C>
Vehicles........................................... $ 474 $ 625 $ 509
Computer hardware.................................. 80 52 53
Furniture and fixtures............................. 49 30 28
Leaseholds......................................... 35 34 27
Farm assets........................................ 241 13 --
----- ----- -----
879 754 617
Less: accumulated depreciation..................... (546) (417) (396)
----- ----- -----
$ 333 $ 337 $ 221
===== ===== =====
</TABLE>
5. PREPAID AND OTHER ASSETS
Prepaid and other assets consists of the following (in thousands):
<TABLE>
<CAPTION>
OCTOBER
31,
--------- JULY 17,
1995 1996 1997
---- ---- --------
<S> <C> <C> <C>
Notes receivable....................................... $ 71 $155 $246
Investments............................................ 44 44 --
Prepaid expenses....................................... 38 20 30
---- ---- ----
$153 $219 $276
==== ==== ====
</TABLE>
Notes receivable consists of $95,000 at July 17, 1997 due from a third party
for the sale of non-business assets. Interest on the note accrues at 8%
annually and payment of principal and interest is due quarterly through
September 2003.
Also included in notes receivable is a related party receivable of $55,700
at July 17, 1997. Interest on the note receivable accrues at the IRS blended
rate (5.85% at July 17, 1997). Annual principal installments of $1,899 plus
accrued interest are due through March 1999.
F-65
<PAGE>
MST ENTERPRISES, INC.
D/B/A EQUIPCO RENTALS & SALES
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
6. ACCRUED EXPENSES AND OTHER LIABILITIES
Accrued expenses and other liabilities consists of the following (in
thousands):
<TABLE>
<CAPTION>
OCTOBER
31,
--------- JULY 17,
1995 1996 1997
---- ---- --------
<S> <C> <C> <C>
Accrued salaries and wages............................. $168 $ 85 $ 55
Other accrued expenses and liabilities................. 73 196 332
---- ---- ----
$241 $281 $387
==== ==== ====
</TABLE>
7. DEBT
Debt consists of the following (in thousands):
<TABLE>
<CAPTION>
OCTOBER 31, JULY
------------- 17,
1995 1996 1997
------ ------ ------
<S> <C> <C> <C>
Notes payable to related parties, due 12/01/96,
interest payable monthly at the Crestar Bank rate
plus 2.0%........................................ $ 490 $ -- $ --
Revolving line of credit, interest payable monthly
at the lessor of prime or 30 day libor plus 1.5%. 1,356 2,393 2,396
------ ------ ------
$1,846 $2,393 $2,396
====== ====== ======
</TABLE>
Equipco's line of credit provides $2,500,000 of available credit at October
31, 1995, October 31, 1996 and July 17, 1997. The line of credit is secured by
substantially all of Equipco's assets.
Maturities of debt are as follows at July 17, 1997 (in thousands):
<TABLE>
<S> <C>
1997............................................................... $ 147
1998............................................................... 502
1999............................................................... 390
2000............................................................... 303
2001............................................................... 235
Thereafter......................................................... 819
------
$2,396
======
</TABLE>
8. INCOME TAXES
The components of the provision for income taxes are as follows (in
thousands):
<TABLE>
<CAPTION>
OCTOBER
31,
---------- JULY 17,
1995 1996 1997
---- ---- --------
<S> <C> <C> <C>
CURRENT:
Federal.............................................. $ 71 $73 $294
State................................................ 13 13 52
DEFERRED:
Federal.............................................. (18) 5 (7)
State................................................ (3) 1 (2)
---- --- ----
$ 63 $92 $337
==== === ====
</TABLE>
F-66
<PAGE>
MST ENTERPRISES, INC.
D/B/A EQUIPCO RENTALS & SALES
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
The provision for income taxes differs from the amount of income tax
determined by applying the U.S. statutory federal income tax rate of 34% to
income before income taxes as a result of the following (in thousands):
<TABLE>
<CAPTION>
OCTOBER
31,
--------- JULY 17,
1995 1996 1997
---- ---- --------
<S> <C> <C> <C>
(Loss) income at statutory rate........................ $49 $77 $285
Effect of state taxes, net............................. 9 14 51
Other.................................................. 5 1 1
--- --- ----
$63 $92 $337
=== === ====
</TABLE>
Deferred tax liabilities are as follows (in thousands):
<TABLE>
<CAPTION>
OCTOBER
31,
--------- JULY 17,
1995 1996 1997
---- ---- --------
<S> <C> <C> <C>
Inventory reserves..................................... $ 5 $ 7 $12
Allowance for doubtful accounts........................ 16 8 12
--- --- ---
Net deferred tax liability............................. $21 $15 $24
=== === ===
</TABLE>
9. COMMITMENTS AND CONTINGENCIES
OPERATING LEASES
Equipco leases certain facilities under operating leases on a month-to-month
basis. Rent expense totaled $189,600, $189,600 and $118,500 for the years
ended October 31, 1995 and 1996 and for the period ended July 17, 1997,
respectively.
LEGAL MATTERS
Equipco is party to legal proceedings and claims arising in the ordinary
course of its business. Management believes that the ultimate resolution of
these matters will have no material adverse effect on Equipco's financial
position, results of operations or cash flows.
10. EMPLOYEE BENEFIT PLANS
The Company sponsors a defined contribution pension plan (the "Plan").
Employees meeting eligibility requirements are automatically enrolled in the
Plan. The Plan does not permit employee contributions and Equipco's
contributions are discretionary as determined by the Board of Directors.
Equipco's contributions to the plan totaled $10,000, $20,000 and $0 for each
of the years ended October 31, 1995 and 1996 and for the period ended July 17,
1997, respectively.
11. SUBSEQUENT EVENTS
On July 18, 1997 Equipco's owner sold all of the outstanding common stock of
Equipco to National Equipment Services, Inc. in exchange for a $5,980,000 cash
payment (subject to a customary purchase price adjustment mechanism).
F-67
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholders of
Work Safe Supply Company, Inc. and the Board of Directors
of National Equipment Services, Inc.
In our opinion, the accompanying consolidated balance sheets and the related
consolidated statements of operations, of cash flows and of changes in
stockholders' equity, present fairly, in all material respects, the financial
position of Work Safe Supply Company, Inc. and subsidiaries at December 31,
1997 and 1996, and the results of their operations and their cash flows for
each of the three years in the period then ended, in conformity with generally
accepted accounting principles. These financial statements are the
responsibility of management; our responsibility is to express an opinion on
these financial statements based on our audits. We conducted our audits of
these statements in accordance with generally accepted auditing standards
which require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management,
and evaluating the overall financial statement presentation. We believe that
our audits provide a reasonable basis for the opinion expressed above.
/s/ PRICE WATERHOUSE LLP
Chicago, Illinois
March 4, 1998
F-68
<PAGE>
WORK SAFE SUPPLY COMPANY, INC.
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
<TABLE>
<CAPTION>
DECEMBER 31,
-------------
1996 1997
------ ------
<S> <C> <C>
ASSETS:
Cash and cash equivalents........................................ $ 666 $ 383
Accounts receivable, net......................................... 2,647 3,279
Inventory, net................................................... 107 345
Rental equipment, net............................................ 1,425 1,983
Property and equipment, net...................................... 324 269
Prepaid and other assets......................................... 27 191
------ ------
Total assets................................................. $5,196 $6,450
====== ======
LIABILITIES AND STOCKHOLDERS' EQUITY:
Accounts payable................................................. $ 288 $ 444
Accrued expenses and other liabilities........................... 157 207
Note payable--shareholder........................................ 798 579
------ ------
Total liabilities............................................ 1,243 1,230
------ ------
Commitments and contingencies (Note 8)
Common stock, $1 par, 50,000 shares authorized, 13,500 shares
issued and outstanding.......................................... 13 13
Retained earnings................................................ 3,940 5,207
------ ------
Total stockholders' equity................................... 3,953 5,220
------ ------
Total liabilities and stockholders' equity................... $5,196 $6,450
====== ======
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-69
<PAGE>
WORK SAFE SUPPLY COMPANY, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS)
<TABLE>
<CAPTION>
FOR THE YEARS ENDED
DECEMBER 31,
----------------------
1995 1996 1997
------ ------ ------
<S> <C> <C> <C>
REVENUES:
Rental revenues........................................ $5,068 $5,258 $6,385
Rental equipment sales................................. 627 774 891
Other.................................................. 521 538 88
------ ------ ------
Total revenues...................................... 6,216 6,570 7,364
------ ------ ------
COST OF REVENUES:
Rental equipment expenses.............................. 685 753 867
Rental equipment depreciation.......................... 601 683 835
Cost of rental equipment sales......................... 376 464 588
Direct operating expense............................... 1,921 1,915 1,650
------ ------ ------
Total cost of revenues.............................. 3,583 3,815 3,940
------ ------ ------
Gross profit............................................ 2,633 2,755 3,424
Selling, general and administrative expenses............ 2,485 1,084 1,237
Non-rental depreciation................................. 78 115 80
------ ------ ------
Operating income........................................ 70 1,556 2,107
Other income (expense), net............................. (47) (57) 8
Interest income (expense), net.......................... (28) (47) (22)
------ ------ ------
Net income (loss)....................................... $ (5) $1,452 $2,093
====== ====== ======
PRO FORMA TAX PROVISION (UNAUDITED):
Income (loss) before income taxes...................... $ (5) $1,452 $2,093
Pro forma provision (benefit) for income taxes......... (2) 494 712
------ ------ ------
Pro forma net income (loss)............................ $ (3) $ 958 $1,381
====== ====== ======
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-70
<PAGE>
WORK SAFE SUPPLY COMPANY, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
FOR THE YEARS
ENDED DECEMBER 31,
--------------------
1995 1996 1997
---- ------ ------
<S> <C> <C> <C>
OPERATING ACTIVITIES:
Net income (loss)....................................... $ (5) $1,452 $2,093
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation........................................... 679 798 915
Gain on sale of equipment.............................. -- -- (51)
Changes in operating assets and liabilities:
Accounts receivable................................... (2) (327) (632)
Inventories........................................... (15) (10) (238)
Prepaid and other assets.............................. (5) 8 (164)
Accounts payable...................................... 69 (21) 156
Accrued expenses and other liabilities................ 106 (763) 50
---- ------ ------
Net cash provided by operating activities................ 827 1,137 2,129
---- ------ ------
INVESTING ACTIVITIES:
Purchases of rental equipment........................... (783) (1,082) (1,277)
Purchases of property and equipment..................... (127) (116) (90)
---- ------ ------
Net cash (used) in investing activities.................. (910) (1,198) (1,367)
---- ------ ------
FINANCING ACTIVITIES:
Proceeds from shareholder loan.......................... 584 43 34
Payments on shareholder loan............................ (296) (98) (253)
Dividends paid.......................................... -- -- (826)
---- ------ ------
Net cash (used) provided in financing activities......... 288 (55) (1,045)
---- ------ ------
Net increase (decrease) in cash and cash equivalents..... 205 (116) (283)
Cash and cash equivalents at beginning of period......... 577 782 666
---- ------ ------
Cash and cash equivalents at end of period............... $782 $ 666 $ 383
==== ====== ======
DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid for interest.................................. $ 1 $ 10 $ 3
==== ====== ======
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-71
<PAGE>
WORK SAFE SUPPLY COMPANY, INC.
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
<TABLE>
<CAPTION>
COMMON STOCK
------------- TOTAL
STATED RETAINED STOCKHOLDERS'
SHARES VALUE EARNINGS EQUITY
------ ------ -------- -------------
<S> <C> <C> <C> <C>
Balance at December 31, 1994............... 13,500 $13 $2,493 $2,506
Net loss................................... -- -- (5) (5)
------ --- ------ ------
Balance at December 31, 1995............... 13,500 13 2,488 2,501
Net income................................. -- -- 1,452 1,452
------ --- ------ ------
Balance at December 31, 1996............... 13,500 13 3,940 3,953
Net income................................. -- -- 2,093 2,093
Dividends.................................. -- -- (826) (826)
------ --- ------ ------
Balance at December 31, 1997............... 13,500 $13 $5,207 $5,220
====== === ====== ======
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-72
<PAGE>
WORK SAFE SUPPLY COMPANY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION
Work Safe Supply Company, Inc. (the "Company") is an S corporation involved
in the rental and sale of traffic safety equipment primarily in the State of
Michigan. Operations of the Company are conducted from the corporate
headquarters in Grand Rapids, Michigan and three additional facilities also
located in Michigan.
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include accounts of the Company and
its subsidiaries. All intercompany transactions and balances have been
eliminated.
ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenue and expenses during the
reporting period. Actual results could differ from those estimates.
CASH AND CASH EQUIVALENTS
Cash and cash equivalents are highly liquid investments with original
maturities of three months or less.
INVENTORY
Inventory consist primarily of supplies used in the Company's operations.
Inventory are stated at the lower of cost, determined by the first-in, first-
out method, or market.
RENTAL EQUIPMENT
Rental equipment is recorded at invoice cost. Depreciation for rental
equipment acquired is computed using straight-line and accelerated methods
over 3 to 5 year useful lives with no salvage value.
Ordinary repairs and maintenance costs are charged to operations as
incurred. When rental equipment is disposed of, the related cost and
accumulated depreciation are removed from the respective accounts. Proceeds
from the disposal and the related net book value of the equipment are
recognized in the period of disposal and reported as revenue from rental
equipment sales and cost of equipment sales in the statement of operations.
PROPERTY AND EQUIPMENT
Property and equipment is recorded at invoice cost. Depreciation is computed
using straight-line and accelerated methods over the estimated useful lives of
the assets.
The estimated useful lives for property and equipment are 31.5 years for
buildings, 5 to 7 years for machinery and equipment, 5 to 7 years for
furniture and fixtures and 3 to 5 years for vehicles.
Ordinary repairs and maintenance costs are charged to operations as
incurred. When property and equipment is disposed of, the related cost and
accumulated depreciation are removed from the respective accounts, and any
gains or losses are included in results of operations.
F-73
<PAGE>
WORK SAFE SUPPLY COMPANY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying amounts reported in the balance sheets for cash, trade accounts
receivable, accounts payable and accrued expenses and other liabilities
approximate fair value due to the immediate to short-term maturity of these
financial instruments. The fair value of long-term debt is determined using
current interest rates for similar type instruments and approximates the
carrying value of the debt as of December 31, 1997.
CONCENTRATION OF CREDIT RISK
Financial instruments that potentially subject the Company to significant
concentrations of credit risk consist primarily of trade accounts receivable
from construction customers. Concentrations of credit risk with respect to
trade accounts receivable are limited due to the large number of customers and
the Company's geographic dispersion. The Company performs credit evaluations
of its customers' financial condition and generally does not require
collateral on accounts receivable. The Company maintains an allowance for
doubtful accounts on its receivables based upon expected collectibility. The
allowance for doubtful accounts was $174,000 and $198,000 at December 31, 1996
and 1997, respectively.
RENTAL REVENUES
Rental revenues are recognized ratably over the lease term. Sales revenues
are recognized at the point of delivery.
INCOME TAXES
The Company has elected S corporation status under the U.S. Internal Revenue
Code. Pursuant to this election, the Company's income, deductions and credits
are reported on the income tax returns of its stockholders for federal
purposes and, accordingly, no provision for federal income taxes has been
made. Pro forma income taxes reflected on the statement of operations have
been calculated at the federal statutory rate of 34%.
RELATED PARTY TRANSACTIONS
The Company has participated in certain transactions with related parties as
disclosed in the notes to these consolidated financial statements.
2. RENTAL EQUIPMENT
Rental equipment consists of the following at December 31, (in thousands):
<TABLE>
<CAPTION>
1996 1997
------ ------
<S> <C> <C>
Rental equipment.......................................... $3,415 $4,767
Less: accumulated depreciation............................ (1,990) (2,784)
------ ------
Rental equipment, net..................................... $1,425 $1,983
====== ======
</TABLE>
Depreciation expense on rental equipment totaled $601,000, $683,000 and
$835,000 for the years ended December 31, 1995, 1996 and 1997, respectively.
F-74
<PAGE>
WORK SAFE SUPPLY COMPANY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
3. PROPERTY AND EQUIPMENT
Property and equipment, net, consists of the following at December 31, (in
thousands):
<TABLE>
<CAPTION>
1996 1997
---- ----
<S> <C> <C>
Land.......................................................... $ 7 $ 7
Building...................................................... 110 110
Shop equipment................................................ 160 166
Office equipment.............................................. 77 91
Vehicles...................................................... 450 336
---- ----
Total property and equipment, at cost......................... 804 710
Less: accumulated depreciation................................ (480) (441)
---- ----
Property and equipment, net................................... $324 $269
==== ====
</TABLE>
Depreciation expense on property and equipment totaled $78,000, $115,000 and
$80,000 for the years ended December 31, 1995, 1996 and 1997, respectively.
4. PREPAID AND OTHER ASSETS
Prepaid and other assets consists of the following December 31, (in
thousands):
<TABLE>
<CAPTION>
1996 1997
---- ----
<S> <C> <C>
Notes receivable, related party................................ $-- $120
Other assets................................................... 27 71
--- ----
$27 $191
=== ====
</TABLE>
Notes receivable consists of a non-interest bearing related party receivable
with annual payments of $24,000 due on June 1 of each year, commencing on June
1, 1998.
5. ACCRUED EXPENSES AND OTHER LIABILITIES
Accrued expenses and other liabilities consist of the following at December
31, (in thousands):
<TABLE>
<CAPTION>
1996 1997
---- ----
<S> <C> <C>
Accrued expenses............................................... $ 26 $ 41
Accrued salaries and benefits.................................. 49 57
Accrued state taxes............................................ 61 96
Other liabilities.............................................. 21 13
---- ----
$157 $207
==== ====
</TABLE>
6. EMPLOYEE BENEFIT PLANS
The Company sponsors a profit sharing and 401(k) plan (the "Plan") in which
employees meeting eligibility requirements may elect to participate. Company
contributions to the Plan are discretionary and employee vesting in Company
contributions occur ratably over a six year period. Company contributions
totaled $34,000, $49,000 and $42,000 for the years ended December 31, 1995,
1996 and 1997, respectively.
F-75
<PAGE>
WORK SAFE SUPPLY COMPANY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
7. RELATED PARTY TRANSACTIONS
The Company has unsecured notes payable due to shareholders totaling
$798,000 and $579,000 at December 31, 1996 and 1997, respectively. The notes
payable are non-interest bearing and payable upon demand. Imputed interest on
the notes payable is calculated using published Applicable Federal Rates (AFR)
in effect during the periods. Imputed interest totaled $34,000, $43,000 and
$34,000 for the years ended December 31, 1995, 1996 and 1997, respectively.
Effective March 1997, the Company entered into a lease agreement for office
space with its shareholders on a month-to-month basis for $3,000 per month.
Rent expense under this obligation totaled $36,000 for the year ended December
31, 1997.
8. COMMITMENTS AND CONTINGENCIES
The Company has entered various vehicle and equipment operating leases with
third parties which expire at various dates through January 2001. The Company
has also entered into operating leases with related and third parties for
office space which expire at various dates through December 2000. Rental
expense incurred by the Company related to these leases totaled $69,000,
$97,000 and $111,000 for the years ended December 31, 1995, 1996 and 1997,
respectively.
Future minimum rental commitments as of December 31, 1997 under
noncancelable operating leases are (in thousands):
<TABLE>
<S> <C>
1998............................................................... $115
1999............................................................... 73
2000............................................................... 29
2001............................................................... 2
-----
$219
=====
</TABLE>
9. SUBSEQUENT EVENTS
On February 15, 1998, the Company's shareholders sold substantially all of
the assets of the Company to National Equipment Services, Inc., for
approximately $7.6 million.
F-76
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Stockholders of
Genpower Pump & Equipment, Inc. and the
Board of Directors of
National Equipment Services, Inc.
In our opinion, the accompanying balance sheet and the related statements of
operations, of cash flows and of changes in stockholders' equity present
fairly, in all material respects, the financial position of Genpower Pump &
Equipment, Inc. at December 31, 1997, and the results of its operations and
its cash flows for the year ended December 31, 1997, in conformity with
generally accepted accounting principles. These financial statements are the
responsibility of the Company's management; our responsibility is to express
an opinion on these financial statements based on our audit. We conducted our
audit of these statements in accordance with generally accepted auditing
standards which require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management,
and evaluating the overall financial statement presentation. We believe that
our audit provides a reasonable basis for the opinion expressed above.
/s/ PRICE WATERHOUSE LLP
Houston, Texas
March 3, 1998
F-77
<PAGE>
GENPOWER PUMP & EQUIPMENT, INC.
BALANCE SHEET
DECEMBER 31, 1997
(IN THOUSANDS)
<TABLE>
<S> <C>
ASSETS
Cash and cash equivalents............................................. $ 20
Accounts receivable, net.............................................. 2,073
Inventory............................................................. 561
Rental equipment, net................................................. 1,920
Property and equipment, net........................................... 192
Deferred tax asset.................................................... 44
------
Total assets........................................................ $4,810
======
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable...................................................... $ 699
Accrued expenses and other liabilities................................ 799
Debt.................................................................. 833
Notes payable--related parties........................................ 176
------
Total liabilities................................................... 2,507
------
Commitments and contingencies (Note 9)
Common stock, $1.00 par value; 1,000,000 shares authorized; 10,000
shares issued and outstanding......................................... 10
Retained earnings...................................................... 3,233
Treasury stock (Note 1)................................................ (940)
------
Total stockholders' equity.......................................... 2,303
------
Total liabilities and stockholders' equity.......................... $4,810
======
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-78
<PAGE>
GENPOWER PUMP & EQUIPMENT, INC.
STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1997
(IN THOUSANDS)
<TABLE>
<S> <C>
REVENUES:
Rental revenues....................................................... $ 7,110
Rental equipment sales................................................ 161
New equipment sales................................................... 4,393
Other................................................................. 437
-------
Total revenues...................................................... 12,101
-------
COST OF REVENUES:
Rental equipment expenses............................................. 1,344
Rental equipment depreciation......................................... 560
Cost of rental equipment sales........................................ 111
Cost of new equipment sales........................................... 3,108
Direct operating expenses............................................. 1,519
-------
Total cost of revenues.............................................. 6,642
-------
Gross profit........................................................... 5,459
Selling, general and administrative expenses........................... 2,797
Nonrental depreciation and amortization................................ 37
-------
Operating income....................................................... 2,625
Other income, net...................................................... 13
Interest expense, net.................................................. (103)
-------
Income before income taxes............................................. 2,535
Income tax expense..................................................... 859
-------
Net income............................................................. $ 1,676
=======
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-79
<PAGE>
GENPOWER PUMP & EQUIPMENT, INC.
STATEMENT OF CHANGES IN STOCKHOLDER'S EQUITY
(IN THOUSANDS)
<TABLE>
<CAPTION>
TREASURY
COMMON STOCK STOCK
------------- --------------
STATED STATED RETAINED
VALUE SHARES VALUE EARNINGS TOTAL
SHARES ------ ------ ------ -------- ------
<S> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1996........ 10 $ 10 (3) $(940) $1,557 $ 627
Net income.......................... 1,676 1,676
--- ---- ----- ----- ------ ------
Balance at December 31, 1997........ 10 $ 10 (3) $(940) $3,233 $2,303
=== ==== ===== ===== ====== ======
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-80
<PAGE>
GENPOWER PUMP & EQUIPMENT, INC.
STATEMENT OF CASH FLOWS
YEAR ENDED DECEMBER 31, 1997
(IN THOUSANDS)
<TABLE>
<S> <C>
OPERATING ACTIVITIES:
Net income............................................................ $1,676
Adjustments to reconcile net income to net cash provided by operating
activities:
Depreciation and amortization........................................ 597
Gain on sale of equipment............................................ (37)
Changes in operating assets and liabilities:
Accounts receivable................................................. (1,250)
Inventory........................................................... (329)
Prepaid and other assets............................................ (3)
Accounts payable.................................................... 237
Accrued expenses and other liabilities.............................. 389
------
Net cash provided by operating activities.............................. 1,280
------
INVESTING ACTIVITIES:
Purchases of rental equipment......................................... (1,317)
Proceeds from sale of rental equipment................................ 205
Purchases of property and equipment................................... (9)
Proceeds from sale of property and equipment.......................... 8
------
Net cash used in investing activities.................................. (1,113)
------
FINANCING ACTIVITIES:
Proceeds from debt.................................................... 845
Payments on debt...................................................... (1,532)
------
Net cash used in financing activities.................................. (687)
------
Net decrease in cash and cash equivalents.............................. (520)
Cash at beginning of period............................................ 540
------
Cash at end of period.................................................. $ 20
======
SUPPLEMENTAL NONCASH FLOW INFORMATION:
Cash paid for federal income taxes.................................... $ 139
======
Cash paid for interest................................................ $ 123
======
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-81
<PAGE>
GENPOWER PUMP & EQUIPMENT, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1997
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION
Genpower Pump & Equipment, Inc. ("Genpower") is a C Corporation primarily
involved in the short-term rental and sales of pumps, generators, hoses,
fittings and other related equipment to the petrochemical and construction
industries. Genpower operates from nine separate locations along the Texas
Gulf Coast. Genpower's executive offices are located in Deer Park, Texas.
RENTAL REVENUES
Rental revenues are recognized upon the return of the equipment for daily
rentals, after 3 days for weekly rentals or after 17 days for monthly rentals.
For rental contracts greater than one month, rental revenues are recognized
notably over the contract period.
CASH AND CASH EQUIVALENTS
Cash and cash equivalents are highly liquid investments with original
maturities of three months or less.
INVENTORY
Genpower's inventories primarily consist of items such as pumps and
generators held for resale and hoses, fittings and other maintenance parts.
Inventories are stated at the lower of cost, determined by the first-in,
first-out method and replacement value or market.
RENTAL EQUIPMENT
Rental equipment is recorded at cost. Depreciation for rental equipment
acquired is computed using the double-declining balance and straight-line
methods over an estimated average seven-year useful life.
Ordinary maintenance and repairs costs are charged to operations as
incurred. When rental equipment is disposed of, the related cost and
accumulated depreciation are removed from the respective accounts. Proceeds
from the disposal and the related net book value of the equipment are
recognized in the period of disposal and reported as revenue from rental
equipment sales and cost of equipment sales in the statement of operations.
PROPERTY AND EQUIPMENT
Property and equipment is recorded at cost. Depreciation is computed using
the double-declining balance and straight-line methods over the estimated
useful lives of the assets.
The estimated useful lives for property and equipment is seven years for
machinery, five years for vehicles and five to seven years for furniture and
fixtures.
Ordinary maintenance and repairs costs are charged to operations as
incurred. When property and equipment is disposed of, the related cost and
accumulated depreciation are removed from the respective accounts and any
gains or losses are included in results of operations.
F-82
<PAGE>
GENPOWER PUMP & EQUIPMENT, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying amounts reported in the combined balance sheets for trade
accounts receivable, accounts payable and other liabilities approximate fair
value due to the immediate to short-term maturity of these financial
instruments. The fair value of notes receivable and notes payable using
current interest rates for similar instruments at December 31, 1997
approximates their carrying value as the underlying instruments include
provisions to adjust interest rates to approximate fair market value.
CONCENTRATION OF CREDIT RISK
Financial instruments that potentially subject Genpower to significant
concentrations of credit risk consist primarily of trade accounts receivable
from construction and industrial customers. Concentrations of credit risk with
respect to trade accounts receivable are limited due to the large number of
customers and Genpower's geographic dispersion. Genpower performs credit
evaluations of its customers' financial condition and generally does not
require collateral on accounts receivable. The allowance for doubtful accounts
was $129,132 at December 31, 1997.
TREASURY STOCK
Genpower records its treasury stock using the cost method.
ESTIMATES
The preparation of consolidated financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of certain assets and
liabilities, and disclosure of contingent assets and liabilities at the date
of the consolidated financial statements and the related reported amounts of
revenue and expenses during the reporting period. Actual results could differ
from those estimates.
ADVERTISING COSTS
Genpower advertises primarily through trade journals. Advertising costs are
expensed as incurred.
INCOME TAXES
Deferred income tax assets and liabilities are computed based on temporary
differences between the financial statement and income tax bases of assets and
liabilities using the enacted marginal income tax rate in effect for the year
in which the differences are expected to reverse. Deferred income tax expenses
or benefits are based on the changes in the deferred income tax assets or
liabilities from period to period.
RELATED PARTY TRANSACTIONS
As disclosed in these financial statements, Genpower has participated in
certain transactions with related parties.
2. INVENTORY
Inventory consists of the following at December 31, 1997 (in thousands):
<TABLE>
<S> <C>
Equipment............................................................ $309
Parts and supplies................................................... 252
----
$561
====
</TABLE>
F-83
<PAGE>
GENPOWER PUMP & EQUIPMENT, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
3. RENTAL EQUIPMENT
Rental equipment consists of the following at December 31, 1997 (in
thousands):
<TABLE>
<S> <C>
Pumps............................................................ $ 2,053
Air compressors.................................................. 478
Generators....................................................... 259
Engines.......................................................... 159
Lite towers...................................................... 80
Hoses............................................................ 75
Compaction equipment............................................. 64
Pipe plugs....................................................... 34
Forklifts........................................................ 23
Trailers......................................................... 10
-------
3,235
Less--accumulated depreciation................................... (1,315)
-------
$ 1,920
=======
</TABLE>
Depreciation expense for the year ended December 31, 1997 is $560,000.
4. PROPERTY AND EQUIPMENT
Property and equipment consists of the following at December 31, 1997 (in
thousands):
<TABLE>
<S> <C>
Vehicles and delivery equipment.................................... $ 368
Furniture and equipment............................................ 33
-----
401
Less--accumulated depreciation..................................... (209)
-----
$ 192
=====
</TABLE>
Depreciation expense for the year ended December 31, 1997 is $6,000.
5. ACCRUED EXPENSES AND OTHER LIABILITIES
Accrued expenses and other liabilities consists of the following at December
31, 1997 (in thousands):
<TABLE>
<S> <C>
Sales tax payable................................................... $ 18
Payroll tax payable................................................. 27
Federal income tax payable.......................................... 754
----
$799
====
</TABLE>
F-84
<PAGE>
GENPOWER PUMP & EQUIPMENT, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
6. DEBT
<TABLE>
<S> <C>
Debt consists of the following at December 31, 1997 (in
thousands):
Floor plan payable to Honda, secured by rental equipment, finance
charges ranging from 12% to 18%................................. $ 62
Notes payable to Ingersol Rand, secured by rental equipment,
payable through various dates ending December 2000, interest
rate at prime plus 1% payable monthly........................... 176
Notes payable to Gorman-Rupp, secured by rental equipment,
payable through various dates ending March 2000, interest rates
ranging from 8.25% to 9.5% payable monthly...................... 335
Term note payable to a bank, principal payable monthly plus
interest at 9% payable monthly with the final payment due in
February 1999................................................... 208
Revolving line of credit of $500, interest payable monthly plus
interest at 8.5% payable monthly................................ 52
-----
Total debt..................................................... 833
Less--current maturities......................................... (611)
-----
Total long-term debt........................................... $ 222
=====
</TABLE>
The Company also has a revolving line of credit of $1,000,000 with no draws
outstanding at December 31, 1997.
On January 12, 1998, pursuant to the Purchase Agreement, all of the
outstanding debt of the Company was paid off by NES.
Maturities of long-term debt are as follows at December 31, 1997:
<TABLE>
<S> <C>
1998................................................................. $611
1999................................................................. 179
2000................................................................. 43
----
$833
====
</TABLE>
7. INCOME TAXES
The provision for income taxes is comprised of the following at December 31,
1997 (in thousands):
<TABLE>
<S> <C>
Current provision................................................... $892
Deferred credit..................................................... (33)
----
$859
====
</TABLE>
The provision for income taxes differs from the amount of income tax
determined by applying the U.S. statutory federal income tax return of 34% to
income before taxes as a result of nondeductible entertainment expenses.
The deferred income tax assets consists of the increase in allowance for
doubtful accounts, which is not deductible for tax purposes until the accounts
are written off the books.
F-85
<PAGE>
GENPOWER PUMP & EQUIPMENT, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
8. COMMITMENTS AND CONTINGENCIES
OPERATING LEASES
Genpower leases certain facilities and vehicles under operating leases which
contain renewal options and provide for periodic cost-of-living adjustments.
Rental expense was $65,083 for the year ended December 31, 1997.
Future minimum rental commitments at December 31, 1997 under noncancelable
operating leases are (in thousands):
<TABLE>
<S> <C>
1998................................................................. $198
1999................................................................. 32
----
$230
====
</TABLE>
LEGAL MATTERS
Genpower is party to legal proceedings and potential claims in the ordinary
course of its business. Management believes that the ultimate resolution of
these matters will have no material adverse effect on Genpower's financial
position, results of operations or cash flows.
9. RELATED PARTY TRANSACTIONS
Genpower entered into an agreement in February 1996 with two of its
stockholders for the acquisition of approximately one-third of its common
stock. Consideration for the stock and a covenant not to compete was $800,000
in cash and subordinated notes payable for $200,000 due and paid in February
1997.
Genpower's stockholders advanced the company $284,603 at June 1997. The
amount payable at December 31, 1997 was $175,996.
Genpower leases its Texas City location from a related party for $1,600 per
month. The Company also provides the services of two employees to the related
party at no charge. Salaries of the employees as of December 31, 1997 were
approximately $66,401.
10. SUBSEQUENT EVENT
On January 12, 1998, Genpower's owners sold all of the outstanding common
stock to NES Acquisition Corp., a wholly-owned subsidiary of National
Equipment Services, Inc. for a $7,614,500 cash payment (subject to a customary
purchase price adjustment mechanism), a promissory note in the principal
amount of $235,500 and the assumption of certain liabilities and obligations.
F-86
<PAGE>
INDEPENDENT AUDITORS' REPORT
Board of Directors
Cormier Equipment Corporation:
We have audited the accompanying balance sheets of Cormier Equipment
Corporation as of December 31, 1997 and 1996, and the related statements of
earnings and retained earnings and cash flows for the years ended December 31,
1997, 1996 and 1995. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
from material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Cormier Equipment
Corporation as of December 31, 1997 and 1996, and the results of its
operations and its cash flows for the years ended December 31, 1997, 1996 and
1995 in conformity with generally accepted accounting principles.
/s/ Albin, Randall & Bennett, Certified Public Accountants
Lewiston, Maine
February 3, 1998
(Except for Note 8, as to which the date is March 4, 1998)
F-87
<PAGE>
CORMIER EQUIPMENT CORPORATION
BALANCE SHEETS
DECEMBER 31, 1996 AND 1997
<TABLE>
<CAPTION>
1996 1997
----------- -----------
<S> <C> <C>
ASSETS
Current Assets:
Cash.................................................. $ 4,500 $ 4,703
Trade receivables, net of allowance for doubtful
accounts of $82,670 in 1997 and $151,368 in 1996..... 2,208,216 2,152,042
Notes receivable--current portion..................... -0- 39,453
Merchandise inventories............................... 723,366 1,838,379
Prepaid expenses and deposits......................... 32,813 29,814
----------- -----------
Total current assets................................ 2,968,895 4,064,391
----------- -----------
Small tools, net of amortization....................... 1,518 9,548
----------- -----------
Equipment held for rental:
Construction equipment................................ 14,664,968 14,971,691
Less accumulated depreciation......................... 9,519,326 10,106,937
----------- -----------
Net equipment held for rental....................... 5,145,642 4,864,754
----------- -----------
Property and equipment:
Land.................................................. 63,500 63,500
Buildings............................................. 244,818 244,818
Leasehold improvements................................ 321,337 414,641
Transportation equipment.............................. 920,154 958,197
Shop equipment........................................ 109,032 107,104
Office equipment and furniture........................ 306,301 318,118
----------- -----------
1,965,142 2,106,378
Less accumulated depreciation......................... 896,180 1,109,089
----------- -----------
Net property and equipment.......................... 1,068,962 997,289
----------- -----------
Other assets:
Notes receivable, less current portion................ -0- 164,072
Cash surrender value of life insurance................ 2,940 2,440
----------- -----------
Total other assets.................................. 2,940 166,512
----------- -----------
$ 9,187,957 $10,102,494
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Note payable--line of credit.......................... 1,510,616 $3,179,734
Current portion of long-term debt..................... 968,518 434,531
Current portion of capital lease obligations.......... 19,215 39,972
Accounts payable...................................... 606,982 397,809
State income taxes payable............................ 64,684 41,815
Accrued payroll and other expenses.................... 502,551 638,473
----------- -----------
Total current liabilities........................... 3,672,566 4,732,334
----------- -----------
Long-term liabilities:
Long-term debt, less current portion.................. 85,200 635,864
Capital lease obligations, less current portion....... 19,471 7,213
----------- -----------
Total long-term liabilities......................... 104,671 643,077
----------- -----------
STOCKHOLDERS' EQUITY:
Common stock $.10 par value, authorized 2,000,000
shares; 784,000 shares issued; 588,000 and 783,000
shares outstanding in 1997 and 1996.................. 78,400 78,400
Additional paid-in capital............................ 24,416 24,416
Retained earnings..................................... 5,310,414 6,111,355
----------- -----------
5,413,230 6,214,171
Less treasury stock at cost, 196,000 shares in 1997
and 1,000 shares in 1996............................. 2,510 1,487,088
----------- -----------
Total stockholders' equity.......................... 5,410,720 4,727,083
----------- -----------
$ 9,187,957 $10,102,494
=========== ===========
</TABLE>
F-88
<PAGE>
CORMIER EQUIPMENT CORPORATION
STATEMENTS OF EARNINGS AND RETAINED EARNINGS
YEARS ENDED DECEMBER 31, 1995, 1996 AND 1997
<TABLE>
<CAPTION>
1995 1996 1997
----------- ----------- -----------
<S> <C> <C> <C>
REVENUES:
Rental income........................... $11,816,864 $12,092,502 $12,107,635
Sales of equipment and supplies......... 3,822,109 3,915,875 3,519,304
----------- ----------- -----------
15,638,973 16,008,377 15,626,939
----------- ----------- -----------
COST OF REVENUES:
Equipment rental........................ 1,780,180 1,472,319 1,515,490
Depreciation and amortization........... 2,041,570 2,530,942 2,749,382
Equipment and supplies.................. 2,565,979 2,613,244 2,157,968
Other costs and expenses................ 3,852,981 3,968,434 4,066,539
----------- ----------- -----------
10,240,710 10,584,939 10,489,379
----------- ----------- -----------
Gross profit............................. 5,398,263 5,423,438 5,137,560
Operating expenses....................... 2,975,747 3,324,143 3,287,112
----------- ----------- -----------
Operating income......................... 2,422,516 2,099,295 1,850,448
----------- ----------- -----------
OTHER INCOME (EXPENSE):
Interest expense, net................... (165,623) (123,341) (302,271)
Gain on sale of fixed assets............ 25,615 20,560 13,404
----------- ----------- -----------
Total other income (expense).......... (140,008) (102,781) (288,867)
----------- ----------- -----------
Earnings before state income taxes....... 2,282,508 1,996,514 1,561,581
State income taxes....................... 41,100 37,620 8,000
----------- ----------- -----------
Net earnings............................. 2,241,408 1,958,894 1,553,581
Retained earnings at beginning of year... 3,568,732 4,549,510 5,310,414
Distributions paid....................... (1,260,630) (1,197,990) (752,640)
----------- ----------- -----------
Retained earnings at end of year......... $ 4,549,510 $ 5,310,414 $ 6,111,355
=========== =========== ===========
</TABLE>
See accompanying notes to financial statements.
F-89
<PAGE>
CORMIER EQUIPMENT CORPORATION
STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1997 AND 1996
<TABLE>
<CAPTION>
1995 1996 1997
---------- ----------- -----------
<S> <C> <C> <C>
OPERATING ACTIVITIES:
Net earnings............................ 2,241,408 1,958,894 $ 1,553,581
Adjustments to reconcile net earnings to
net cash
provided by operating activities:
Depreciation and amortization.......... 2,056,487 2,587,300 2,826,937
(Decrease) increase in allowance for
doubtful accounts..................... (380) 39,248 (68,699)
Gain on sale of fixed assets........... (251,805) (437,914) (620,941)
Decrease in cash surrender value of
life insurance........................ 1,334 -0- 500
Decrease (increase) in operating
assets:
Trade receivables..................... (300,242) (18,154) 124,873
Merchandise inventories............... 262,263 395,007 (1,115,013)
Small tools........................... -0- -0- (8,031)
Prepaid expenses and deposits......... (15,283) (18) 2,999
Increase (decrease) in operating
liabilities:
Accounts payable...................... 401,313 3,690 (209,173)
State income taxes payable............ 12,857 (37) (22,869)
Accrued payroll and other expenses.... 163,865 (143,603) 135,922
---------- ----------- -----------
Net cash provided by operating
activities........................ 4,571,817 4,384,413 2,600,086
---------- ----------- -----------
INVESTING ACTIVITIES:
Purchases of small tools................ (190,525) -0- -0-
Purchase of equipment held for rental... (1,775,301) (1,789,805) (1,450,912)
Purchase of property and equipment...... (323,996) (609,914) (212,440)
Proceeds from sale of fixed assets...... 353,272 539,651 851,632
Loans made.............................. -0- -0- (203,525)
---------- ----------- -----------
Net cash used for investing
activities........................ (1,936,550) (1,860,068) (1,015,245)
---------- ----------- -----------
FINANCING ACTIVITIES:
New borrowings (repayments) on line of
credit................................. (470,000) (189,384) 1,669,118
Principal payments on long-term
liabilities............................ (900,219) (1,148,302) (1,016,538)
Purchase of treasury stock.............. -0- -0- (1,484,578)
Distributions paid...................... (1,260,630) (1,197,990) (752,640)
---------- ----------- -----------
Net cash used for financing
activities........................ (2,630,849) (2,535,676) (1,584,638)
---------- ----------- -----------
Increase (decrease) in cash........ 4,418 (11,331) 203
Cash at beginning of year............... 11,413 15,831 4,500
---------- ----------- -----------
Cash at end of year...................... 15,831 4,500 $ 4,703
========== =========== ===========
SCHEDULE OF NONCASH INVESTING AND
FINANCING ACTIVITIES:
Purchase of equipment held for rental... 2,645,458 3,529,079 $2,492,626
Less proceeds from long-term debt....... (927,621) (1,739,274) (1,041,714)
---------- ----------- -----------
Net cash paid for purchase of
equipment held for rental......... 1,717,837 1,789,805 $ 1,450,912
========== =========== ===========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION:
Cash paid for interest.................. 168,767 127,121 $ 273,342
Cash paid for state income taxes........ 28,244 37,657 30,868
</TABLE>
See accompanying notes to financial statements.
F-90
<PAGE>
CORMIER EQUIPMENT CORPORATION
NOTES TO FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
OPERATIONS
Cormier Equipment Corporation (the Company) rents and sells equipment and
supplies to paper and construction industries located primarily in the eastern
United States.
ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect certain reported amounts and disclosures. Accordingly,
actual results could differ from those estimates.
MERCHANDISE INVENTORIES
Equipment and supplies held for sale are stated at the lower of cost (first-
in, first-out) or market (net realizable value). Certain equipment in
inventory which is rented on an interim basis is stated at cost reduced by a
percentage of rental receipts.
SMALL TOOLS
The Company expensed small tools as purchased in 1997 and 1996. Prior to
1996 small tools were recorded at cost and amortized on a straight-line basis
over twenty-four months. The effect of the new treatment of small tools was to
increase cost of revenues and decrease net earnings by approximately $115,000
in 1996.
EQUIPMENT HELD FOR RENTAL
Construction equipment is stated at cost. Depreciation is computed using
accelerated methods over the estimated lives of the assets.
PROPERTY AND EQUIPMENT
Property and equipment are stated at cost. Depreciation is computed using
estimated service lives of the respective assets using both straight-line and
accelerated methods.
INCOME TAXES
The Company has elected to be taxed under the provisions of Subchapter S of
the Internal Revenue Code. Under those provisions, the Company does not pay
federal corporate income taxes on its taxable income. Instead, the
stockholders are liable for individual income taxes on their respective share
of the Company's taxable income.
ADVERTISING COSTS
Advertising costs are generally charged to operations in the year incurred
and totaled approximately $29,500, $34,000 and $35,000 for the years ended
December 31, 1995, 1996 and 1997, respectively.
2. NOTES RECEIVABLE
Notes receivable are due from partnerships whose partners are also company
shareholders. The notes, totaling $203,525 at December 31, 1997, provide for
monthly payments, including interest at 8.75%, over a period of five years.
3. INDEBTEDNESS
The Company has a $6,000,000 revolving equipment line of credit of which
$2,820,266 was unused at December 31, 1997. Advances on the credit line are
payable on demand and bear interest at the Wall Street Journal base rate, 8.5%
at December 31, 1997. The credit line is secured by inventory, trade
receivables, machinery and equipment, and furniture and fixtures.
F-91
<PAGE>
CORMIER EQUIPMENT CORPORATION
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
Long-term debt consists of the following:
<TABLE>
<CAPTION>
1996 1997
--------- ----------
<S> <C> <C>
Installment notes payable with monthly installments
of varying amounts, including interest, secured by
specific equipment and vehicles, certain notes are
with 0% interest, others are with interest ranging
from 6.0% to 8.25%................................. 1,053,718 $1,070,395
Less current portion of long-term debt.............. 968,518 434,531
--------- ----------
85,200 $ 635,864
========= ==========
</TABLE>
Future maturities of long-term debt are as follows:
<TABLE>
<S> <C>
1998............................................................. $434,531
1999............................................................. 356,712
2000............................................................. 279,152
</TABLE>
4. CAPITAL LEASE OBLIGATIONS
Included in property and equipment are office equipment at a cost of $57,464
and construction equipment at a cost of $43,610 which were acquired under
capital lease agreements. Future minimum lease payments under the capital
leases are as follow:
<TABLE>
<S> <C>
1998............................................................. $39,972
1999............................................................. 7,213
-------
Total minimum lease payments................................... $47,185
=======
</TABLE>
5. LEASE COMMITMENTS
The Company presently leases four of its operating locations under operating
lease agreements with partnerships whose partners are also company
shareholders. These four operating leases and other real estate rental
obligations currently require monthly rental payments of $25,000 with various
provisions for increases and renewals. Rent expense was $274,000, $298,500,
and $318,175, for the years ended December 31, 1995, 1996, and 1997,
respectively.
Minimum future lease obligations are as follows:
<TABLE>
<S> <C>
1998............................................................ $300,015
1999............................................................ 25,885
2000............................................................ 8,325
--------
Total minimum future lease obligations........................ $334,225
========
</TABLE>
6. BENEFIT PLAN
The Company sponsors a 401(k) savings and profit-sharing plan covering
substantially all employees as eligibility requirements are met. The Company
makes payments to the plan, in proportion to voluntary employee contributions.
Employer contributions were $14,442 for 1995, $18,103 for 1996 and $21,215 for
1997.
7. RELATED PARTY TRANSACTIONS
During the normal course of business, the Company rents equipment from the
Walton Company, which has certain common shareholders. Equipment rentals from
Walton Company totaled approximately $356,000 in 1995, $355,000 in 1996 and
$373,000 in 1997.
8. SUBSEQUENT EVENTS
On March 4, 1998, the Company's stockholders sold substantially all of the
assets of the Company for an amount in excess of book value.
F-92
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors
The Modern Group, Inc.
Beaumont, Texas
We have audited the accompanying balance sheets of Dragon Rentals (a wholly
owned division of The Modern Group, Inc.--a Texas Corporation) as of December
31, 1996 and 1997, and the related statements of income and expenses, and cash
flows for the years then ended. These financial statements are the
responsibility of the Division's management. Our responsibility is to express
an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Dragon Rentals as of
December 31, 1996 and 1997, and the results of its operations and its cash
flows for the years then ended in conformity with generally accepted
accounting principles.
/s/ LAWRENCE, BLACKBURN MEEK MAXEY & CO. P.C.
March 3, 1998
F-93
<PAGE>
DRAGON RENTALS
BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------
1996 1997
---------- -----------
<S> <C> <C>
ASSETS:
Cash and cash equivalents.............................. $ 38,477 $ 46,065
Accounts receivable, net of allowance for doubtful
accounts of $268,000 and $152,000, respectively....... 1,534,297 3,105,747
Accounts receivable-related party...................... 19,000 144,651
Inventory.............................................. 86,150
Merchandise for resale................................. 691,203
Rental equipment, net.................................. 2,286,286 11,718,619
Property and equipment, net............................ 418,221 853,151
Prepaid and other assets............................... 52,709 66,851
---------- -----------
Total assets......................................... $5,040,193 $16,021,234
========== ===========
LIABILITIES:
Accounts payable....................................... $ 219,340 $ 268,489
Revolving line of credit............................... 1,793,774
Accrued interest....................................... 5,215 118,432
Accrued expenses and other liabilities................. 989,693 716,788
Accrued expense-related party.......................... 308,969 25,107
Capital leases payable................................. 86,185
Income tax payable..................................... 36,759
Deferred income taxes.................................. 423,400 635,000
Debt................................................... 1,509,368 9,898,312
---------- -----------
Total liabilities.................................... 3,492,744 13,542,087
---------- -----------
Divisional Equity...................................... 1,547,449 2,479,147
---------- -----------
Total liabilities and divisional equity.............. $5,040,193 $16,021,234
========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-94
<PAGE>
DRAGON RENTALS
STATEMENTS OF INCOME AND EXPENSES
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER
31,
-----------------------
1996 1997
---------- -----------
<S> <C> <C>
REVENUES:
Rental revenues....................................... $4,978,701 $ 8,907,284
Other................................................. 1,199,807 1,656,880
---------- -----------
Total revenues...................................... 6,178,508 10,564,164
---------- -----------
COST OF REVENUES:
Rental equipment expenses............................. 3,674,471 4,061,952
Rental equipment depreciation......................... 353,224 844,581
Direct operating expenses............................. 708,751 1,159,865
---------- -----------
Total cost of revenues.............................. 4,736,446 6,066,398
---------- -----------
Gross profit........................................... 1,442,062 4,497,766
Selling, general and administrative expenses........... 869,878 2,165,785
Non-rental depreciation and amortization............... 46,526 59,000
---------- -----------
Operating income....................................... 525,658 2,272,981
Other income (expense), net............................ (102,501) (669,922)
Interest income (expense), net......................... (161,537) (674,811)
---------- -----------
Income before income taxes............................. 261,620 928,248
Income tax expense..................................... 90,641 211,600
---------- -----------
Net income............................................. $ 170,979 $ 716,648
========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-95
<PAGE>
DRAGON RENTALS
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-------------------------
1996 1997
----------- ------------
<S> <C> <C>
OPERATING ACTIVITIES:
Net income......................................... $ 170,979 $ 716,648
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization..................... 399,920 903,578
Gain on sale of equipment......................... (46,986) (10,878)
Provision for doubtful accounts................... (19,912) 257,562
Changes in operating assets and liabilities:
Accounts receivable............................... (572,619) (1,829,012)
Accounts receivable--related party................ 0 (125,651)
Inventory......................................... (232,490) (86,150)
Merchandise for resale............................ 0 691,203
Prepaid and other assets.......................... (13,181) (14,142)
Accounts payable.................................. 492,074 49,149
Accrued interest.................................. 0 113,217
Accrued expenses and other liabilities............ 289,407 (259,092)
Accrued expenses--related party................... 0 (283,862)
Income tax payable................................ 0 (36,759)
Deferred income taxes............................. (71,337) 211,600
----------- ------------
Net cash provided by operating activities........... 395,855 297,411
----------- ------------
INVESTING ACTIVITIES:
Purchases of rental equipment...................... (749,748) (10,140,812)
Purchases of property and equipment................ (49,000) (689,280)
Proceeds from sale of property and equipment....... 65,221 70,129
----------- ------------
Net cash used in investing activities............... (733,527) (10,759,963)
----------- ------------
FINANCING ACTIVITIES:
Net advances on line of credit..................... 0 1,793,774
Capital contributions.............................. 5,768 0
Proceeds from long-term debt....................... 1,894,367 11,550,621
Payments on long-term debt......................... (1,529,650) (2,960,440)
Proceeds from capital leases....................... 0 120,947
Payments of capital lease obligations.............. 0 (34,762)
----------- ------------
Net cash provided by financing activities........... 370,485 10,470,140
----------- ------------
Net increase in cash and cash equivalents........... 32,813 7,588
Cash and cash equivalents at beginning of period.... 5,664 38,477
----------- ------------
Cash and cash equivalents at end of period.......... $ 38,477 $ 46,065
=========== ============
SUPPLEMENTAL NON-CASH FLOW INFORMATION:
Cash paid for interest............................. $ 166,034 $ 675,057
=========== ============
Cash paid for income taxes......................... $ 161,978 $ 36,759
=========== ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-96
<PAGE>
DRAGON RENTALS
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1997 AND 1996
NOTE 1--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
NATURE OF BUSINESS
Dragon Rentals (a wholly owned division of The Modern Group, Inc.) engages
primarily in the rental of storage containers to the waste disposal industry
in southeast Texas and southern Louisiana.
ACCOUNTING BASIS
The Division utilizes the accrual method of accounting for financial
statement reporting and the cash method for federal income tax purposes. Under
the accrual method, revenue is recognized when earned instead of when received
and expenses are recognized when incurred instead of when actually paid.
PROPERTY AND DEPRECIATION
Property and equipment are carried at cost. Depreciation is computed on the
straight-line method for financial reporting purposes and accelerated methods
for income tax purposes. Financial statement depreciation expense was $399,920
and $903,578 for the periods ended December 31, 1996 and 1997, respectively.
INCOME TAX
Deferred income taxes are provided in accordance with Statement of Financial
Accounting Standards No. 109, "Accounting for Income Taxes." Deferred taxes
provided for accumulated temporary differences due to basis differences for
assets and liabilities for financial reporting and income tax purposes. The
Division's temporary differences are due to accelerated depreciation for tax
purposes over financial reporting purposes and the use of the cash method for
federal income tax reporting.
ALLOWANCE FOR DOUBTFUL ACCOUNTS
The Division establishes an allowance for uncollectible trade accounts
receivable based on historical collection experience and management's
evaluation of collectibility of outstanding accounts receivable. The allowance
for doubtful accounts was $152,600 and $268,000 as of December 31, 1996 and
1997, respectively.
CASH
For purpose of the cash flow statements, cash includes operating funds on
deposit at the bank.
CONCENTRATION OF RISK
The division has deposits in financial institutions that may, from time to
time, exceed the $100,000 federally insured limits.
CONCENTRATIONS OF CREDIT
The Division's services are primarily provided to customers throughout the
Southeast Texas region; mainly within the petro-chemical industry and are
subject to the economic sensitive industry cycles as such.
RECLASSIFICATIONS
Certain reclassifications have been made to the 1996 financial statements to
conform with the 1997 financial statement presentation. Such reclassifications
have had no effect on net earnings as previously reported.
F-97
<PAGE>
DRAGON RENTALS
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
ADVERTISING
The Division has elected to expense advertising costs as incurred.
Advertising expense was $90,944 and $81,264 for the periods ended December 31,
1996 and 1997, respectively.
ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect certain reported amounts and disclosures. Accordingly,
actual results could differ from those estimates.
INVENTORIES
Inventories are stated at the lower of cost or market with costs charged to
jobs determined by the weighted average cost method.
NOTE 2--LONG-TERM DEBT
<TABLE>
<CAPTION>
1996 1997
---------- ----------
<S> <C> <C>
Initial term loan with Wells Fargo Bank, secured
by accounts receivable, general intangibles,
inventory, and equipment and fixtures. The note
is payable in monthly installments of $141,047,
including interest of 1.00% above bank prime,
with a due date of July 19, 2000. $ $9,872,572
Equipment acquisition note with Wells Fargo Bank,
secured by accounts receivable, general
intangibles, inventory, and equipment and
fixtures. The note is payable in monthly
installments of $15,285, including interest of
1.00% above bank prime, with a due date of July
19, 2000. 1,710,852
Note payable for general insurance, secured by
contractor equipment. The note is payable in
monthly installments of $1,063, including
interest, maturing in January, 1999. 13,812
Notes payable to individuals, collateralized by
equipment. The notes are payable in various
installments, including interest from 11.25% to
14.68%, maturing in of before December, 1999. 358,670 97,267
Note payable to Community Bank, collateralized by
equipment. The note is payable in monthly
installments of $38,812, including interest at
10.75%, maturing in April, 1997. 1,125,548
Notes payable to Ford Motor Credit, secured by a
vehicle, payable in monthly installments of
$1,104, including interest at 9.00%, maturing in
November, 1997. 23,222
Note payable to GMAC, secured by a vehicle,
payable in monthly installments of $668,
including interest at 11.75%, maturing in March,
1997............................................ 1,928
---------- ----------
1,509,368 11,694,503
Less amount allocated to manufacturing division.. 1,796,191
---------- ----------
$1,509,368 $9,898,312
========== ==========
</TABLE>
F-98
<PAGE>
DRAGON RENTALS
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
A schedule of maturities of long-term debt is as follows for the year ended
December 31, 1997:
<TABLE>
<S> <C>
1998.......................................................... $ 1,957,936
1999.......................................................... 1,904,866
2000.......................................................... 7,831,701
2001 and thereafter........................................... 0
-----------
$11,694,503
===========
</TABLE>
NOTE 3--NOTE PAYABLE--ACCOUNTS RECEIVABLE FINANCING:
In accordance with the asset-based financing arrangement, Wells Fargo
(lender) advances funds to the Division upon receipt of the customer account
and reduces the accumulated advances upon collection of the account. Interest
is payable monthly at the prime rate plus 1/2%. The agreement expires on July
19, 2000. The note payable is secured by a general business security agreement
on all assets of the Division. The amount outstanding on this note was
$1,793,774 at December 31, 1997.
NOTE 4--RELATED PARTY TRANSACTIONS:
The Division has identified the following related party transactions with
management and companies in which management has full ownership:
(1) The Division provides personnel and administrative services and
shares certain building expenses with a related company, Modern, Inc. Prior
to August 1, 1997 all personnel and management services cost were borne by
Modern, Inc.
As of December 31, 1997, Modern, Inc. owned Dragon Rentals $125,651.
As of December 31, 1996, Dragon Rentals owed Modern, Inc. $308,969.
(2) At December, 31, 1997 and 1996, Dragon Rentals had a $19,000 note
receivable from Will Crenshaw, the sole shareholder of Modern, Inc., a
related party.
(3) The Division has a lease agreement with Will Crenshaw, sole
shareholder of Modern, Inc., for the rental of yard space to hold
containers when they are not out on rent. At December 31, 1997 the Division
owed accrued rent of $25,000 to Mr. Crenshaw.
NOTE 5--ECONOMIC DEPENDENCE:
Historically, the Division purchased 100% of the waste containers used in
its business from Modern, Inc., a related party. For the years ended December
31, 1996 and 1997, the Division had purchases of $657,500 and $1,864,486,
respectively. However, on July 19, 1997, the Division purchased the
manufacturing facility from Modern, Inc., and from that point forward began
manufacturing the container boxes. This restructuring enabled the Division to
become more efficient by building container boxes at a lessor cost.
NOTE 6--INCOME TAXES:
In accordance with the provisions of Statement of Financial Accounting
Standards No. 109, " Accounting for Income Taxes", the Division has reflected
the tax consequences on future years differences between the tax basis of
assets and liabilities and their financial reporting amounts.
The sources of deferred income taxes and the tax effect of each follows:
<TABLE>
<CAPTION>
1996 1997
-------- -----------
<S> <C> <C>
Accumulated depreciation temporary differences..... $407,287 $ 998,157
Effect of cash method of accounting................ 16,113 699,273
Net operating loss carryforward.................... (1,062,430)
-------- -----------
$423,400 $ 635,000
======== ===========
</TABLE>
F-99
<PAGE>
DRAGON RENTALS
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
The components of corporate income tax expense are as follows for the year
ended December 31:
<TABLE>
<CAPTION>
1996 1997
------- --------
<S> <C> <C>
Current tax expense...................................... $36,759 $
Deferred tax expense..................................... 53,882 211,600
------- --------
$90,641 $211,600
======= ========
</TABLE>
NOTE 7--PROPERTY AND EQUIPMENT:
<TABLE>
<CAPTION>
1996 1997
--------- ----------
<S> <C> <C>
Land improvements.................................. $ 21,668 $ 21,668
Building........................................... 13,458
Machinery and equipment............................ 64,851 155,998
Furniture and fixtures............................. 18,842 31,388
Autos and trucks................................... 587,922 1,053,315
Capital jobs in progress........................... 41,031
--------- ----------
693,283 1,316,858
Accumulated depreciation........................... (275,062) (463,707)
--------- ----------
$ 418,221 $ 853,151
========= ==========
</TABLE>
NOTE 8--RENTAL EQUIPMENT:
<TABLE>
<CAPTION>
1996 1997
---------- -----------
<S> <C> <C>
Rental Equipment................................. $2,875,021 $12,977,642
Accumulated depreciation......................... (588,735) (1,259,023)
---------- -----------
$2,286,286 $11,718,619
========== ===========
</TABLE>
NOTE 9--OPERATING LEASE OBLIGATIONS:
The Division conducts its operations in southeast Texas and southern
Louisiana from leased facilities with varying terms ranging from one year to
five years. The leases provide for renewal options ranging from four years to
nine years. The Division also has incurred a certain operating lease for
equipment used in its operations. The lease has a term of five years. Future
minimum obligations at December 31, 1997 are as follows:
<TABLE>
<S> <C>
1998.......................................................... $ 231,900
1999.......................................................... 229,600
2000.......................................................... 181,500
2001.......................................................... 660,000
2002 and thereafter........................................... 30,000
----------
Total minimum lease payments required....................... $1,333,000
==========
</TABLE>
NOTE 10--CAPITAL LEASE OBLIGATIONS:
During 1997, the Division acquired equipment under the provisions of long-
term leases. For financial reporting purposes, minimum lease payments relating
to the equipment have been capitalized. The leases expire in or before
February, 2000. The leased property under the capital leases as of December
31, 1997 has a cost of $120,947 accumulated amortization of $9,664 and a net
book value of $111,283. Amortization of the leased property is included in
depreciation expense.
F-100
<PAGE>
DRAGON RENTALS
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
The future minimum lease payments under the capital leases and the net
present value of the future lease payments at December 31, 1997 are as
follows:
<TABLE>
<S> <C>
Total minimum lease payments..................................... $95,952
Less amount representing interest................................ 9,767
-------
Present value of net minimum lease payments...................... $86,185
=======
</TABLE>
NOTE 11--PREPAID AND OTHER ASSETS:
Prepaid and other assets consists of the following at December 31,
<TABLE>
<CAPTION>
1996 1997
------- -------
<S> <C> <C>
Prepaid insurance........................................ $ 4,699 $21,353
Prepaid real estate taxes................................ 8,482
Deferred charges......................................... 15,970
Other receivable......................................... 9,528 9,528
Rental lease deposits.................................... 30,000 20,000
------- -------
$52,709 $66,851
======= =======
</TABLE>
NOTE 12--ACCRUED EXPENSES AND OTHER LIABILITIES:
Accrued expenses and other liabilities consists of the following at December
31,
<TABLE>
<CAPTION>
1996 1997
-------- --------
<S> <C> <C>
Payable to investors.................................... $721,052 $
Customer deposits....................................... 76,136
Accrued expenses........................................ 77,859 346,814
Accrued franchise tax................................... 8,721
Accrued payroll......................................... 102,458
Accrued sales tax....................................... 105,925 267,517
-------- --------
$989,693 $716,789
======== ========
</TABLE>
NOTE 13--INVENTORY:
Inventory consist of the following at December 31, 1997:
<TABLE>
<S> <C>
Steel............................................................. $18,916
Purchased parts................................................... 56,794
Work in process................................................... 10,440
-------
$86,150
=======
</TABLE>
NOTE 14--SUBSEQUENT EVENTS:
On March 2, 1998 Dragon Rentals was sold to National Equipment Services,
Inc. National Equipment Services Inc. is primarily involved in the rental of
equipment to construction and industrial users from locations in Alabama,
Georgia, Louisiana, Nevada, Texas and Virginia.
F-101
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Stockholders of
Albany Ladder Company, Inc. and the Board of Directors
of National Equipment Services, Inc.
In our opinion, the accompanying balance sheet and the related statement of
operations, of cash flows and of changes in stockholder's equity, present
fairly, in all material respects, the financial position of Albany Ladder
Company, Inc. at December 31, 1997, and the results of its operations and its
cash flows in the period then ended, in conformity with generally accepted
accounting principles. These financial statements are the responsibility of
management; our responsibility is to express an opinion on these financial
statements based on our audit. We conducted our audit of these statements in
accordance with generally accepted auditing standards which require that we
plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements, assessing the accounting principles used and
significant estimates made by management, and evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable basis
for the opinion expressed above.
/s/ PRICE WATERHOUSE LLP
Chicago, Illinois
March 31, 1998
F-102
<PAGE>
ALBANY LADDER COMPANY, INC.
BALANCE SHEET
DECEMBER 31, 1997
(IN THOUSANDS)
<TABLE>
<S> <C>
ASSETS:
Cash and cash equivalents............................................. $ 87
Marketable securities................................................. 104
Accounts receivable, net.............................................. 5,951
Inventory............................................................. 2,878
Rental equipment, net................................................. 15,116
Property and equipment, net........................................... 2,139
Prepaid and other assets.............................................. 927
-------
Total assets....................................................... $27,202
=======
LIABILITIES AND STOCKHOLDERS' EQUITY:
Accounts payable...................................................... $ 980
Accrued expenses and other liabilities................................ 1,020
Notes payable--shareholder............................................ 370
Notes payable......................................................... 11,900
-------
Total liabilities.................................................. 14,270
Commitments and contingencies (Note 9)
Common stock:
Class A shares, $100 par, 1,200 shares authorized, 246 shares issued
and outstanding ..................................................... 25
Class B shares, $100 par, 2,000 shares authorized, 941 shares issued
and outstanding ..................................................... 94
Additional paid-in capital............................................. 333
Retained earnings...................................................... 12,391
Unrealized gain on marketable securities available for sale............ 89
-------
Total stockholders' equity......................................... 12,932
-------
Total liabilities and stockholders' equity......................... $27,202
=======
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-103
<PAGE>
ALBANY LADDER COMPANY, INC.
STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1997
(IN THOUSANDS)
<TABLE>
<S> <C>
REVENUES:
Rental revenues....................................................... $18,410
Rental equipment sales................................................ 1,885
New equipment sales................................................... 8,931
Other................................................................. 4,978
-------
Total revenues..................................................... 34,204
-------
COST OF REVENUES:
Rental equipment expenses............................................. 4,800
Rental equipment depreciation......................................... 3,445
Cost of rental equipment sales........................................ 721
Cost of new equipment sales........................................... 7,725
Direct operating expense.............................................. 5,938
-------
Total cost of revenues............................................. 22,629
-------
Gross profit........................................................... 11,575
Selling, general and administrative expenses........................... 7,796
Non-rental depreciation................................................ 640
-------
Operating income....................................................... 3,139
Other income, net...................................................... 117
Interest expense, net.................................................. (846)
-------
Net income............................................................. $ 2,410
=======
PRO FORMA TAX PROVISION (UNAUDITED):
Income before income taxes............................................ $ 2,410
Pro forma provision for income taxes.................................. (964)
Pro forma net income.................................................. $ 1,446
=======
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-104
<PAGE>
ALBANY LADDER COMPANY, INC.
STATEMENTS OF CASH FLOWS
FOR THE YEAR ENDED DECEMBER 31, 1997
(IN THOUSANDS)
<TABLE>
<S> <C>
OPERATING ACTIVITIES:
Net income.......................................................... $ 2,410
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation....................................................... 4,085
Gain on sale of equipment.......................................... (987)
Changes in operating assets and liabilities:
Accounts receivable............................................... (1,172)
Inventories....................................................... (92)
Prepaid and other assets.......................................... (483)
Accounts payable.................................................. 262
Accrued expenses and other liabilities............................ 239
--------
Net cash provided by operating activities............................ 4,262
--------
INVESTING ACTIVITIES:
Purchases of rental equipment....................................... (6,516)
Proceeds from sale of rental equipment.............................. 1,885
Purchases of property and equipment................................. (284)
Proceeds from sale of property and equipment........................ 13
--------
Net cash used in investing activities................................ (4,902)
--------
FINANCING ACTIVITIES:
Proceeds from long-term debt........................................ 12,104
Payments on long-term debt.......................................... (10,630)
Dividends paid...................................................... (859)
--------
Net cash provided by financing activities........................... 615
--------
Net increase (decrease) in cash..................................... (25)
Cash at beginning of period......................................... 112
--------
Cash at end of period............................................... $ 87
========
SUPPLEMENTAL NON-CASH FLOW INFORMATION:
Cash paid for interest.............................................. $ 811
========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-105
<PAGE>
ALBANY LADDER COMPANY, INC.
STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
<TABLE>
<CAPTION>
COMMON STOCK
---------------------- TOTAL
CLASS A CLASS B STATED PAID-IN UNREALIZED RETAINED STOCKHOLDERS'
SHARES SHARES VALUE CAPITAL GAIN EARNINGS EQUITY
------- ------- ------ ------- ---------- -------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at December 31,
1996................... 246 941 $119 $333 $59 $10,840 $11,351
Net income.............. -- -- -- -- -- 2,410 2,410
Increase in unrealized
gain................... -- -- -- -- 30 -- 30
Dividends............... -- -- -- -- -- (859) (859)
--- --- ---- ---- --- ------- -------
Balance at December 31,
1997................... 246 941 $119 $333 $89 $12,391 $12,932
=== === ==== ==== === ======= =======
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-106
<PAGE>
ALBANY LADDER COMPANY, INC.
NOTES TO FINANCIAL STATEMENTS
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION
Albany Ladder Company, Inc. (the Company) is primarily engaged in the sale
and rental of lifts, scaffolding, and contractor equipment and operates from
seven locations located in New York, Pennsylvania, and Vermont.
ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and the
disclosures of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
REVENUE RECOGNITION
Rental revenues are recognized ratably over the lease term. Sales revenues
are recognized at the point of delivery.
CASH AND CASH EQUIVALENTS
Cash and cash equivalents are short-term highly liquid investments with
original maturities of three months or less.
INVENTORY
The Company's inventories primarily consist of parts and new equipment held
for sale. Inventories are stated at the lower of cost, determined by the
average cost or specific identification method, or market.
RENTAL EQUIPMENT
Rental equipment is recorded at cost. Depreciation for rental equipment
acquired is computed using the straight-line and accelerated methods over an
estimated 5 to 8 year useful life.
Ordinary repairs and maintenance costs are charged to operations as
incurred. When rental equipment is disposed of, the related cost and
accumulated depreciation are removed from the respective accounts. Proceeds
from the disposal and the related net book value of the equipment are
recognized in the period of disposal and reported as revenue from rental
equipment sales and cost of equipment sales in the statement of operations.
PROPERTY AND EQUIPMENT
Property and equipment is recorded at cost. Depreciation is computed using
the straight-line method over the estimated useful lives of the assets.
The estimated useful lives for property and equipment range from 5 years for
machinery, equipment and automobiles, to 10 years for leasehold improvements.
Ordinary repairs and maintenance costs are charged to operations as
incurred. When property and equipment is disposed of, the related cost and
accumulated depreciation are removed from the respective accounts, and any
gains or losses are included in results of operations.
F-107
<PAGE>
ALBANY LADDER COMPANY, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying amounts reported in the balance sheets for marketable
securities, trade accounts receivable, accounts payable and accrued expenses
and other liabilities approximate fair value due to the immediate to short-
term maturity of these financial instruments. The fair value of long-term debt
is determined using current interest rates for similar instruments and
approximates the carrying value of the debt as of December 31, 1997.
CONCENTRATION OF CREDIT RISK
Financial instruments that potentially subject the Company to significant
concentrations of credit risk consist primarily of trade accounts receivable
from construction and industrial customers. Concentrations of credit risk with
respect to trade accounts receivable are limited due to the large number of
customers and the Company's geographic dispersion. The Company performs credit
evaluations of its customers' financial condition and generally does not
require collateral on accounts receivable. The Company maintains an allowance
for doubtful accounts on its receivables based upon expected collectibility.
Allowance for doubtful accounts was $372 at December 31, 1997.
INCOME TAXES
The Company has elected S corporation status under the U.S. Internal Revenue
Code. Pursuant to this election, the Company's income, deductions and credits
are reported on the income tax returns of the Company's stockholders for
federal purposes and, accordingly, no provision for federal income taxes has
been made. Pro forma income taxes are calculated at a statutory tax rate of
40%.
2. INVENTORY
Inventory consists of the following at December 31, 1997 (in thousands):
<TABLE>
<S> <C>
New equipment..................................................... $ 693
Parts and supplies................................................ 1,541
Scaffolding and ladders........................................... 525
Other............................................................. 119
------
Total inventory................................................... $2,878
======
</TABLE>
3. RENTAL EQUIPMENT
Rental equipment consists of the following at December 31, 1997 (in
thousands):
<TABLE>
<S> <C>
Rental equipment................................................. $30,990
Less: accumulated depreciation................................... (15,874)
-------
Rental equipment, net............................................ $15,116
=======
</TABLE>
4. PROPERTY AND EQUIPMENT
Property and equipment consists of the following at December 31, 1997 (in
thousands):
<TABLE>
<S> <C>
Leasehold improvements............................................ $ 617
Vehicles.......................................................... 3,370
Machinery and shop equipment...................................... 471
Computer equipment................................................ 847
------
Total property and equipment, at cost............................. 5,305
Less: accumulated depreciation.................................... (3,166)
------
Property and equipment, net....................................... $2,139
======
</TABLE>
F-108
<PAGE>
ALBANY LADDER COMPANY, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
5. PREPAID AND OTHER ASSETS
Prepaid and other assets consist of the following at December 31, 1997 (in
thousands):
<TABLE>
<S> <C>
Prepaid expenses.................................................... $225
Employee and other receivables...................................... 702
----
$927
====
</TABLE>
6. ACCRUED EXPENSES AND OTHER LIABILITIES
Accrued expenses and other liabilities consist of the following at December
31, 1997 (in thousands):
<TABLE>
<S> <C>
Accrued salaries and benefits.................................... $ 388
Sales tax payable................................................ 163
Accrued insurance................................................ 232
Accrued professional fees........................................ 107
Other............................................................ 130
------
$1,020
======
</TABLE>
7. NOTES PAYABLE
Notes payable consist of a secured revolving line of credit of $13,350,000
maturing no later than August 31, 1999. The Company has the right to elect
various interest rate options under the agreement. These options include
floating rates fluctuating with the bank's prime rate and fixed rates for
varying periods fluctuating with published LIBOR or treasury rates. Interest
payments are due monthly. Interest rates in effect at December 31, 1997 were
as follows (dollar amounts in thousands):
<TABLE>
<S> <C>
Interest at 7.31%................................................. $10,025
Interest at 8.25%................................................. 1,875
-------
Total notes payable............................................... $11,900
=======
</TABLE>
The bank agreement includes restrictions as to limitations upon certain
ratios of liabilities to net worth and upon the minimum net worth of the
Company. The Company is in compliance with these covenants. Substantially all
of the Company's assets are pledged as collateral for the long-term debt.
Maturities of debt are as follows at December 31, 1997 (in thousands):
<TABLE>
<S> <C>
1998.............................................................. $ --
1999.............................................................. 11,900
Thereafter........................................................ --
-------
$11,900
=======
</TABLE>
Interest expense on long-term debt for the year ended December 31, 1997 was
$795.
F-109
<PAGE>
ALBANY LADDER COMPANY, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
8. NOTES PAYABLE--SHAREHOLDER
Notes payable--shareholder consists of the following at December 31, 1997
(in thousands):
<TABLE>
<S> <C>
Note payable, shareholder, unsecured, due on demand with interest
payable monthly at prime plus 3%.................................. $170
Note payable, shareholder, unsecured, due on demand with interest
payable monthly at prime plus 1%.................................. 200
----
Total notes payable--shareholder............................... $370
====
</TABLE>
Interest expense on shareholder debt for the year ended December 31, 1997
was $39.
9. COMMITMENTS AND CONTINGENCIES
The Company leases office and warehouse space at eight locations. The leases
have varying expiration dates through April 2001, with certain leases
containing extension options. In addition to the monthly rental payments,
these leases also require payment of the related utilities, maintenance, and
real estate taxes for the respective properties.
The Company also leases various vehicles and equipment. The leases have
varying expiration dates through October 2002.
Rental expense totaled $570 for the year ended December 31, 1997.
Future minimum lease obligations are as follows at December 31, 1997 (in
thousands):
<TABLE>
<S> <C>
1998................................................................ $ 404
1999................................................................ 312
2000................................................................ 181
2001................................................................ 67
2002................................................................ 12
-----
$976
=====
</TABLE>
10. EMPLOYEE BENEFIT PLANS
The Company sponsors a 401(k) profit sharing plan (the "Plan"). Employees
meeting certain age and length of service requirements are eligible to
participate in the Plan. The Company makes contributions varying with the
level of employee participation, up to certain limits. The Company contributed
$157,000 to the plan during the year ended December 31, 1997.
11. SUBSEQUENT EVENTS
On March 30, 1998, the Company's owners sold all of the outstanding Class A
and B shares of common stock to National Equipment Services, Inc. in exchange
for a $28,811,000 cash payment (less a $2,000,000 million reserve).
F-110
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Directors
Falconite, Inc.:
We have audited the accompanying consolidated balance sheet of Falconite,
Inc. and subsidiaries (the Company) as of December 31, 1996, and the related
consolidated statements of operations, shareholders' equity, and cash flows
for the years ended December 31, 1995 and 1996. These consolidated financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position
of Falconite, Inc. and subsidiaries as of December 31, 1996 and the results of
their operations and their cash flows for the years ended December 31, 1995
and 1996, in conformity with generally accepted accounting principles.
/s/ KPMG Peat Marwick L.L.P.
St. Louis, Missouri
February 20, 1997
F-111
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors
and Shareholders of Falconite, Inc.
We have audited the accompanying consolidated balance sheet of Falconite,
Inc. and Subsidiaries as of December 31, 1997, and the related consolidated
statements of operations, shareholders' equity, and cash flows for the year
then ended. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of Falconite,
Inc. and Subsidiaries as of December 31, 1997, and the consolidated results of
their operations and their cash flows for the year then ended, in conformity
with generally accepted accounting principles.
/s/ Coopers & Lybrand L.L.P.
Louisville, Kentucky
February 6, 1998, except for the information in Note 6
as to which the date is March 23, 1998 and the information in
Note 12 as to which the date is April 1, 1998
F-112
<PAGE>
FALCONITE, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------------
1996 1997
------------ ------------
<S> <C> <C>
ASSETS
Cash and cash equivalents.......................... $ 416,000 $ 820,000
Trade accounts receivable, less allowance for
doubtful accounts of $522,000 and $431,000 as of
December 31, 1996 and 1997, respectively.......... 7,294,000 9,281,000
Due from affiliated companies and related parties.. 453,000 --
Income taxes receivable............................ 136,000 382,000
Inventories........................................ 1,615,000 1,596,000
Rental equipment, principally machinery, at cost
less accumulated depreciation of $12,989,000 and
$21,489,000 as of December 31, 1996 and 1997,
respectively...................................... 81,583,000 107,721,000
Operating property and equipment, net.............. 7,018,000 10,542,000
Excess of cost over net assets of purchased
businesses, less accumulated amortization......... 17,059,000 16,279,000
Prepaid and other assets, at cost less accumulated
amortization...................................... 1,884,000 1,447,000
------------ ------------
$117,458,000 $148,068,000
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
Trade accounts payable............................. $ 13,587,000 $ 2,184,000
Accrued expenses................................... 657,000 2,196,000
Accrued interest payable........................... 140,000 666,000
Revolving lines of credit.......................... 27,152,000 91,416,000
Obligations under capital lease.................... 1,600,000 4,093,000
Term debt.......................................... 31,867,000 4,691,000
Deferred income taxes.............................. 7,801,000 9,645,000
Due to affiliated companies and related parties.... 121,000 39,000
Other liabilities.................................. 377,000 742,000
------------ ------------
Total liabilities................................ 83,302,000 115,672,000
------------ ------------
Commitments and contingencies
Shareholders' equity:
Preferred stock, Falconite, Inc., $0.01 par value;
authorized, 1,000,000 shares; issued and
outstanding, zero shares.......................... -- --
Common stock, $0.01 par value; authorized,
50,000,000 shares; issued and outstanding,
8,330,000 shares.................................. 83,000 83,000
Additional paid-in capital......................... 20,250,000 20,250,000
Due from affiliated companies and related parties.. -- (2,144,000)
Retained earnings.................................. 13,823,000 14,207,000
------------ ------------
Total shareholders' equity....................... 34,156,000 32,396,000
------------ ------------
$117,458,000 $148,068,000
============ ============
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
F-113
<PAGE>
FALCONITE, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
FOR THE YEARS ENDED
DECEMBER 31,
-------------------------------------
1995 1996 1997
----------- ----------- -----------
<S> <C> <C> <C>
Revenues:
Equipment rentals...................... $23,395,000 $32,883,000 $44,911,000
New equipment sales.................... 4,393,000 4,058,000 4,659,000
Rental equipment sales................. 5,448,000 7,674,000 9,222,000
Sales of parts, supplies, and
equipment............................. 979,000 1,391,000 1,680,000
Service revenues and other income...... 1,446,000 2,080,000 3,174,000
----------- ----------- -----------
Total revenues....................... 35,661,000 48,086,000 63,646,000
----------- ----------- -----------
Cost of revenues:
Cost of equipment rentals, excluding
equipment rental depreciation......... 4,651,000 7,332,000 10,284,000
Equipment rental depreciation.......... 4,437,000 6,823,000 11,114,000
Cost of new equipment sales............ 3,651,000 3,104,000 4,103,000
Cost of rental equipment sales......... 4,332,000 6,697,000 7,582,000
Cost of sales of parts, supplies,
equipment, and other services......... 1,014,000 1,306,000 1,111,000
----------- ----------- -----------
Total cost of revenues............... 18,085,000 25,262,000 34,194,000
----------- ----------- -----------
Gross profit........................ 17,576,000 22,824,000 29,452,000
Selling, general, and administrative
expenses............................... 5,858,000 9,985,000 15,065,000
Depreciation and amortization, excluding
equipment rental depreciation.......... 412,000 764,000 2,428,000
----------- ----------- -----------
Operating income..................... 11,306,000 12,075,000 11,959,000
----------- ----------- -----------
Other income (expense):
Interest income........................ 41,000 32,000 55,000
Interest expense....................... (3,213,000) (4,330,000) (7,382,000)
Non-capitalized offering costs......... -- -- (1,000,000)
Other, net............................. (40,000) 182,000 185,000
----------- ----------- -----------
(3,212,000) (4,116,000) (8,142,000)
----------- ----------- -----------
Income before income taxes and
minority interests.................. 8,094,000 7,959,000 3,817,000
Income taxes............................ 2,893,000 2,328,000 1,859,000
Minority interests...................... 1,429,000 1,714,000 --
----------- ----------- -----------
Net income........................... $ 3,772,000 $ 3,917,000 $ 1,958,000
=========== =========== ===========
Pro forma net income data:
Net income as reported................. $ 3,772,000 $ 3,917,000 --
Pro forma adjustment to provision for
income taxes.......................... 124,000 666,000 --
----------- ----------- -----------
Pro forma net income................... $ 3,648,000 $ 3,251,000 --
=========== =========== ===========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
F-114
<PAGE>
FALCONITE, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1995, 1996 AND 1997
<TABLE>
<CAPTION>
DUE FROM
FALCONITE, INC. COMBINED COMPANIES' AFFILIATED
COMMON STOCK COMMON STOCK ADDITIONAL COMPANIES TOTAL
----------------- -------------------- PAID-IN AND RELATED RETAINED SHAREHOLDERS'
SHARES AMOUNT SHARES AMOUNT CAPITAL PARTIES EARNINGS EQUITY
--------- ------- --------- ---------- ----------- ----------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at January 1,
1995................... -- -- 14,000 $ 131,000 $ 87,000 -- $ 6,509,000 $ 6,727,000
Common stock issued by
McCurry and Falconite,
Inc.................... -- -- 1,000 1,000 -- -- -- 1,000
Net income.............. -- -- -- -- -- -- 3,772,000 3,772,000
Capital distribution to
shareholder of McCurry
& Falconite Equipment
Company, Inc........... -- -- -- -- -- -- (160,000) (160,000)
--------- ------- -------- ---------- ----------- ----------- ----------- -----------
Balance at January 1,
1996................... -- -- 15,000 $ 132,000 $ 87,000 -- $10,121,000 $10,340,000
Net income.............. -- -- -- -- -- -- 3,917,000 3,917,000
Capital distribution to
shareholder of McCurry
& Falconite Equipment
Company, Inc........... -- -- -- -- -- -- (215,000) (215,000)
Formation of Falconite,
Inc. and
Recapitalization
Agreement transactions. 8,330,000 $83,000 (15,000) (132,000) 20,163,000 -- -- 20,114,000
--------- ------- -------- ---------- ----------- ----------- ----------- -----------
Balance at December 31,
1996................... 8,330,000 83,000 -- -- 20,250,000 -- 13,823,000 34,156,000
Net income.............. -- -- -- -- -- -- 1,958,000 1,958,000
Capital distribution to
shareholder of McCurry
& Falconite Equipment
Company, Inc........... -- -- -- -- -- -- (1,574,000) (1,574,000)
Due from affiliated
companies and related
parties................ -- -- -- -- -- $(2,144,000) -- (2,144,000)
--------- ------- -------- ---------- ----------- ----------- ----------- -----------
Balances at December 31,
1997................... 8,330,000 $83,000 -- -- $20,250,000 $(2,144,000) $14,207,000 $32,396,000
========= ======= ======== ========== =========== =========== =========== ===========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
F-115
<PAGE>
FALCONITE, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31,
----------------------------------------
1995 1996 1997
------------ ------------ ------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income.......................... $ 3,772,000 $ 3,917,000 $ 1,958,000
Adjustments to reconcile net income
to net cash provided by operating
activities:
Depreciation and amortization....... 4,849,000 7,587,000 13,542,000
Minority interests.................. 1,429,000 1,714,000 --
Provision for losses on trade
accounts receivable................ 323,000 891,000 297,000
Provision for deferred income
taxes.............................. 2,308,000 2,208,000 1,844,000
Net gain on sale of rental
equipment and operating property
and equipment...................... (987,000) (978,000) (1,788,000)
Change in operating assets and
liabilities, net of effect of
business acquisitions:
Trade accounts receivable.......... (2,302,000) (2,139,000) (2,284,000)
Due from affiliated companies and
related parties................... (173,000) (140,000) (1,691,000)
Income taxes receivable............ -- (136,000) (246,000)
Inventories........................ 226,000 (989,000) 19,000
Prepaid and other assets........... (89,000) (752,000) 420,000
Trade accounts payable, accrued
expenses, and accrued interest
payable........................... 245,000 12,052,000 (9,338,000)
Income taxes payable............... (274,000) (33,000) --
Due to affiliated companies and
related parties................... (97,000) (240,000) (82,000)
Other liabilities.................. 64,000 299,000 365,000
------------ ------------ ------------
Net cash provided by operating
activities....................... 9,294,000 23,261,000 3,016,000
------------ ------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisitions of rental operations,
net of cash acquired............... (451,000) (3,094,000) --
Proceeds from sales of rental
equipment and operating assets..... 5,622,000 7,936,000 11,419,000
Capital expenditures for rental
equipment.......................... (29,100,000) (41,092,000) (42,552,000)
Capital expenditures for operating
property and equipment............. (1,829,000) (3,229,000) (5,726,000)
------------ ------------ ------------
Net cash used in investing
activities....................... (25,758,000) (39,479,000) (36,859,000)
------------ ------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net borrowings under revolving lines
of credit.......................... 7,899,000 12,746,000 64,264,000
Proceeds form issuance of term debt. 33,261,000 22,100,000 15,559,000
Principal payments on term debt and
obligations under capital lease.... (25,190,000) (18,039,000) (44,002,000)
Proceeds from issuance of common
stock.............................. 1,000 -- --
Capital distributions to
shareholders....................... (160,000) (215,000) (1,574,000)
Capital distributions to minority
shareholder........................ (160,000) (216,000) --
------------ ------------ ------------
Net cash provided by financing
activities....................... 15,651,000 16,376,000 34,247,000
------------ ------------ ------------
Net increase in cash and cash
equivalents......................... (813,000) 158,000 404,000
Cash and cash equivalents at
beginning of year................... 1,071,000 258,000 416,000
------------ ------------ ------------
Cash and cash equivalents at end
year................................ $ 258,000 $ 416,000 $ 820,000
============ ============ ============
SUPPLEMENTAL CASH FLOW DISCLOSURES:
Cash paid for:
Interest............................ $ 3,227,000 $ 4,319,000 $ 6,857,000
Income taxes........................ 912,000 505,000 382,000
NONCASH FINANCING ACTIVITIES:
Refinancings of term debt........... -- 8,346,000 --
Purchase of equipment with capital
leases............................. 1,119,000 296,000 3,376,000
Reduction in term debt due to sale
of property........................ 1,123,000 -- --
Term debt entered into for purchases
of businesses and covenants not to
compete............................ 150,000 450,000 --
Loan costs funded by debt........... -- -- 384,000
Noncash consideration for
acquisitions of minority interest.. -- 20,287,000 --
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
F-116
<PAGE>
FALCONITE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
A) PRINCIPLES OF CONSOLIDATION:
Falconite, Inc. (Falconite or the Company) was formed on December 31, 1996
when the shareholders of Falconite Equipment, Inc. (Falconite Equipment),
formerly known as Falconite, Inc., M&M Properties, Inc., d/b/a M&M Equipment
Company (M&M Equipment), and McCurry and Falconite Equipment Company, Inc.
(M&F Equipment) entered into a Recapitalization Agreement. Pursuant to the
terms of the Recapitalization Agreement, the shareholders of Falconite
Equipment, M&M Equipment, and M&F Equipment exchanged their common shares for
common shares of Falconite (the Recapitalization). The exchange of shares was
accounted for at historical basis for the controlling shareholders of
Falconite and at fair market value for the minority interests in M&M Equipment
and M&F Equipment.
The accompanying consolidated financial statements include the accounts of
the Company and its subsidiaries. Prior to formation of the Company, the
historical financial statements of Falconite Equipment, M&M Equipment, and M&F
Equipment were combined for financial reporting purposes. For purposes of
these financial statements, the 1996 and 1997 consolidated financial
statements and the 1995 combined financial statements will be referred to as
consolidated financial statements. All significant intercompany balances and
transactions have been eliminated in the consolidated financial statements.
The consolidated statements of income reflect the 49% minority interest
through December 31, 1996 for M&M Equipment and M&F Equipment when the
remaining interests were purchased by Falconite.
In January 1990, M&M Equipment was formed by two shareholders of Falconite
Equipment and a third party. Subsequent to its formation, M&M Equipment was
considered an entity under common control as the controlling shareholders of
Falconite Equipment owned 51% of M&M Equipment. The combined financial
statements for the year ended December 31, 1995 reflect the 49% minority
interest.
In October 1993, Falconite Equipment acquired a 70% ownership of Erzinger
Equipment Co. (Erzinger). Subsequently, on September 10, 1996, Falconite
Equipment acquired the remaining 30% of Erzinger. The minority interest is
reflected through September 10, 1996. For the period September 10, 1996
through December 31, 1996, Erzinger is accounted for as a wholly owned
subsidiary of Falconite Equipment.
In March 1995, a shareholder of Falconite Equipment and the minority
shareholder of M&M Equipment created a Subchapter S corporation, M&F
Equipment. M&F Equipment has been operated as a branch of M&M Equipment since
its inception. The consolidated financial statements reflect the operations of
M&F Equipment since inception and reflect the minority shareholder's interest
in M&F Equipment through December 31, 1996. On December 31, 1996, as part of
the Recapitalization, the Subchapter S Corporation election was terminated.
The consolidated balance sheets are presented in an unclassified format, as
management believes it more accurately reflects its operations and presents
its financial position on a basis comparable to other companies in its
industry.
B) DESCRIPTION OF BUSINESS:
Falconite, an Illinois corporation, through its wholly owned subsidiaries,
is engaged primarily in a single-industry segment--the rental, sales, and
service of cranes, other lift equipment, and smaller equipment ranging from
pumps and generators to larger equipment such as backhoes and forklifts.
Falconite's operations are based in certain southern and midwestern states.
C) CASH EQUIVALENTS:
For purposes of the consolidated statements of cash flows, the Company
considers all highly liquid debt instruments with original maturities of three
months or less to be cash equivalents.
F-117
<PAGE>
FALCONITE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
D) INVENTORIES:
Inventories consist of parts, supplies and small tools. Inventories are
stated at cost. Cost is determined using the first-in, first-out method.
E) RENTAL EQUIPMENT AND OPERATING PROPERTY AND EQUIPMENT:
Rental equipment and operating property and equipment are stated at cost.
Rental equipment and operating property and equipment under capital leases are
stated at the present value of future minimum lease payments at the inception
of the lease.
Depreciation is calculated on the straight-line method over the estimated
useful lives of the assets. Prior to January 1, 1997, M&M Equipment assigned a
salvage value of 25% to its rental equipment purchases, whereas Falconite
Equipment did not provide for a salvage value on its rental equipment.
Equipment held under capital leases and leasehold improvements are amortized
on the straight-line basis over the shorter of the lease term or estimated
useful life of the asset.
Amortization of assets under capital leases is included in depreciation
expense. Prior to January 1, 1997, depreciation expense was computed over the
following useful lives in years:
<TABLE>
<CAPTION>
FALCONITE M&M
EQUIPMENT EQUIPMENT
--------- ---------
<S> <C> <C>
Rental equipment:
Cranes.............................................. 10-15 10
Lift equipment...................................... 10 10
Other heavy equipment............................... 7 7
Miscellaneous....................................... 2-5 5-7
Operating equipment:
Buildings........................................... 45 --
Other buildings and leasehold improvements.......... 20-40 39
Vehicles............................................ 5 5
Furniture and fixtures.............................. 5 5-7
Computer equipment.................................. 3 5-7
</TABLE>
Rental equipment acquired subsequently to January 1, 1997 is being
depreciated using the straight-line method, after giving effect to an
estimated salvage value as follows:
<TABLE>
<CAPTION>
USEFUL LIFE SALVAGE
TYPE OF EQUIPMENT IN YEARS VALUE
----------------- ----------- -------
<S> <C> <C>
Large (28 tons and greater) cranes.................... 15 25%
Small (less than 28 tons) cranes...................... 10 10
Large lifts........................................... 10 10
Small lifts........................................... 7 10
Forklifts............................................. 7 10
Dirt moving........................................... 7 10
Other small equipment................................. 5 10
Vehicles and trailers................................. 5 --
</TABLE>
The change in depreciation policy did not have a material effect on the
consolidated financial statements.
Equipment reported under the classification of "rental equipment," although
primarily utilized within the rental aspect of the business, is available for
sale in the ordinary course of business and is recorded at the lower of cost,
net of accumulated depreciation, or market. Rental equipment sold by the
Company is sold "as is."
F-118
<PAGE>
FALCONITE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
F) EXCESS OF COST OVER NET ASSETS OF PURCHASED BUSINESSES:
Excess of cost over net assets of purchased businesses (goodwill) is
amortized on a straight-line basis over the expected periods to be benefited,
generally 5 to 30 years. The Company assesses the recoverability of this
intangible asset by determining whether the amortization of the goodwill
balance over its remaining life can be recovered through the undiscounted
future operating cash flows of the acquired operation. The amount of goodwill
impairment, if any, is measured based on projected future operating cash flows
on a discounted basis.
G) INCOME TAXES:
Income taxes are accounted for under the asset and liability method.
Deferred tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax
bases and operating losses and tax credit carryforwards. Deferred tax assets
and liabilities are measured using enacted tax rates expected to apply to
taxable income in the years in which those temporary differences are expected
to be recovered or settled. The effect on deferred tax assets and liabilities
of a change in tax rates is recognized in income in the period that includes
the enactment date.
Prior to January 1, 1997, M&F Equipment had elected S corporation status in
accordance with the provisions of Subchapter S of the Internal Revenue Code.
Pursuant to this election, the taxable income of M&F Equipment was reported in
the federal and state income tax returns of the shareholders. Accordingly, a
provision for federal and state income taxes that is payable by an S
corporation has not been reflected in the accompanying consolidated financial
statements. The pro forma income tax adjustment included on the consolidated
statements of income represents federal income tax expense that would have
been incurred had M&F Equipment been a C corporation.
H) ALLOWANCE FOR DOUBTFUL ACCOUNTS:
The Company determines the allowance for doubtful accounts by reserving
specific trade accounts receivable and providing an estimate based on the
aging of the trade receivables. The Company recognized bad debt expense of
$323,000, $891,000 and $297,000 for the years ended December 31, 1995, 1996
and 1997, respectively. The Company writes off trade receivables when
considered uncollectible.
I) USE OF ESTIMATES:
The preparation of the consolidated financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions relating to the reporting of assets and liabilities and the
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
J) CONCENTRATIONS OF RISKS:
Financial instruments which potentially subject the Company to significant
concentrations of credit risk consist principally of cash and cash equivalents
and trade accounts receivable. The Company places its cash with high quality
financial institutions in amounts that from time to time exceed federally
insured limits. No losses have been incurred on such deposits.
Falconite's customers are primarily concentrated in the construction and
manufacturing industries and are dependent on those industries. Management
believes it has addressed this concentration by expanding its operations
throughout certain southern and midwestern states. Falconite performs ongoing
credit evaluations of
F-119
<PAGE>
FALCONITE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
its customers' financial condition but does not require collateral to support
customer receivables. In certain instances, Falconite may file a mechanic's
lien to protect its interest.
K) REVENUE RECOGNITION:
Equipment rental and delivery charge revenue is recognized when earned.
New and used equipment sales and revenues from the sale of parts and
supplies are recognized when title passes to the purchaser usually at the time
of delivery or pickup. When equipment is sold, the cost consists of actual
costs in the case of new equipment and the net book value in the case of used
equipment.
Revenue associated with repairs and maintenance of equipment owned or rented
by customers is recognized when earned. Fees for repairs and maintenance on
equipment owned by customers of the Company are either paid by the customer or
reimbursed to the Company under the original manufacturer's warranty
agreement. Revenue associated with the warranty work is recognized when
earned.
L) DEFERRED COSTS:
Debt issuance costs are amortized to interest expense over the term of the
related debt, utilizing the interest method. Debt issuance costs are included
in prepaid and other assets.
Falconite had deferred costs of approximately $427,000 as of December 31,
1996, in connection with a planned initial public offering that was in
process. These costs as well as $573,000 of costs incurred during 1997 have
been written off during the current year.
2. ACQUISITIONS:
In December 1995, Falconite Equipment acquired the assets of a rental
company located in Calvert City, Kentucky. This acquisition was accounted for
under the purchase method, with the operating results being included within
the consolidated financial statements since the date of the acquisition. The
total purchase price was approximately $585,000, for which Falconite
recognized total goodwill of approximately $100,000 which is being amortized
on a straight-line basis over a five-year period.
In September 1996, Falconite purchased the 30% minority interest of Erzinger
for approximately $875,000 in cash, a note payable, certain assets of
Erzinger, and entered into covenants not to compete for $450,000. The
covenants not to compete are being amortized on a straight-line basis over the
life of the agreements, two years. The acquisition was accounted for using the
purchase method, with the operating results of Erzinger included in the
consolidated operating results since the date of the original acquisition. The
operating results have been adjusted to reflect the minority shareholder's
interest in the operating results for the respective periods disclosed. Total
goodwill of $543,000 is being amortized on a straight-line basis over a five-
year period.
In November 1996, M&M Equipment acquired various pieces of rental equipment
from a rental company in Tallahassee, Florida for $653,000. The total purchase
price was $1,053,000 which included $400,000 in covenants not to compete.
Covenants not to compete are being amortized over three years.
In December 1996, Falconite Equipment acquired the assets of another rental
company in Calvert City, Kentucky. This acquisition was accounted for under
the purchase method, with the operating results being included in the
consolidated financial statements since the date of acquisition. The total
purchase price was $300,000, for which Falconite Equipment recognized total
goodwill of approximately $86,000. Goodwill for this acquisition is being
amortized on a straight-line basis over a five-year period.
F-120
<PAGE>
FALCONITE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
In December 1996, Falconite Equipment acquired 100% of the outstanding
common stock of a rental company with locations in Fort Campbell, Kentucky and
Clarksville, Tennessee. This acquisition was accounted for under the purchase
method, with the operating results being included in the consolidated
financial statements since the date of acquisition. The total purchase price
was $985,000, for which Falconite Equipment recognized total goodwill of
approximately $286,000, which is being amortized on a straight-line basis over
a five-year period.
As part of the Recapitalization, on December 31, 1996, Falconite purchased
the 49% minority interest in M&M Equipment by exchanging 1,225,000 shares of
its common stock. The 49% minority interest in M&M Equipment's net assets
acquired were recorded at their estimated fair market value of $20,080,000
whereas the remaining 51% was recorded at the historical cost of such assets.
The excess of the purchase price over the fair market value of the net assets
acquired of $16,178,000 was recorded as goodwill, and is being amortized on a
straight-line basis over its expected useful life of 30 years.
3. FAIR VALUE OF FINANCIAL INSTRUMENTS:
The Company estimates the fair value of financial instruments using quoted
market prices when available, or fair values which are based on estimates
using present value or other valuation techniques. Those techniques are
significantly affected by the assumption used, including the discount rate and
estimates of future cash flows. In that regard the derived fair value
estimates cannot be substantiated by comparison to independent markets and, in
many cases, could not be realized in immediate settlement of the instrument.
The use of different market assumptions and estimation methodologies may have
a material effect on the estimated fair value amounts. The aggregate fair
value amounts referred to do not represent the underlying value of Falconite.
Because of their relatively short maturities, generally the estimated fair
values of the Company's financial instruments approximate their carrying
amounts on the consolidated balance sheets. The estimated fair value of term
debt with adjustable rates approximate their carrying amounts. For fixed rate
instruments, the estimated fair values are calculated using a discounted cash
flow calculation that applies current incremental borrowing rates for similar
types of arrangements. At December 31, 1996 and 1997, there were no material
differences between the carrying amount and the fair value of term debt.
4. OPERATING PROPERTY AND EQUIPMENT, NET:
Operating property and equipment, net at December 31, 1996 and 1997 consist
of the following:
<TABLE>
<CAPTION>
1996 1997
---------- -----------
<S> <C> <C>
Land, buildings and leasehold improvements......... $1,608,000 $ 5,002,000
Transportation equipment........................... 6,044,000 5,820,000
Furniture, fixtures and equipment.................. 871,000 2,120,000
---------- -----------
8,523,000 12,942,000
Less accumulated depreciation and amortization..... 1,505,000 2,400,000
---------- -----------
$7,018,000 $10,542,000
========== ===========
</TABLE>
5. LEASES:
Falconite is party to several operating leases for transportation equipment
and certain office and warehouse facilities that expire at various times
through the year 2003. These leases require Falconite to pay all executory
costs such as maintenance and insurance. Rental expense for operating leases
for the years ended December 31, 1995, 1996 and 1997 was $303,000, $396,000
and $571,000, respectively.
F-121
<PAGE>
FALCONITE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
In addition to the above, Falconite leases various facilities and equipment
from its shareholders. The facility leases are on varying terms ranging from
one year to ten years. Management believes these lease arrangements reflect
those that could be obtained from a third party. Total rent expense associated
with these leases for the years ended December 31, 1995, 1996 and 1997 was
$278,000, $689,000 and $629,000, respectively.
Future minimum lease payments under operating leases (with initial or
remaining lease terms in excess of one year) as of December 31, 1997 were as
follows:
<TABLE>
<CAPTION>
YEAR
ENDING OPERATING
DECEMBER 31, LEASES
------------ ----------
<S> <C>
1998......................................................... $1,396,000
1999......................................................... 1,065,000
2000......................................................... 818,000
2001......................................................... 681,000
2002......................................................... 466,000
Thereafter................................................... 1,260,000
----------
Total minimum lease payments.................................. $5,686,000
==========
</TABLE>
Falconite has capitalized certain rental and transportation equipment under
various lease agreements. The book value of these leased assets is included in
the recorded amounts for rental equipment and operating property and
equipment.
A schedule of future minimum lease payments under capital leases at December
31, 1997 consisted of the following:
<TABLE>
<CAPTION>
YEAR
ENDING
DECEMBER 31, AMOUNT
------------ ----------
<S> <C>
1998......................................................... $2,957,000
1999......................................................... 648,000
2000......................................................... 375,000
2001......................................................... 252,000
2002......................................................... 136,000
----------
Total minimum lease payments.................................. 4,368,000
Less amount representing imputed interest..................... 275,000
----------
Present value of minimum payments............................. $4,093,000
==========
</TABLE>
F-122
<PAGE>
FALCONITE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
6. REVOLVING LINES OF CREDIT AND TERM DEBT:
Term debt at December 31, 1997 and 1996 consisted of the following:
<TABLE>
<CAPTION>
1996 1997
----------- ----------
<S> <C> <C>
Notes payable with Nations Bank of Tennessee,
N.A., with monthly principal and interest
payments of $30,368 maturing in 2002; interest
stated at LIBOR (8.47% at December 31, 1997)
plus 2.5%...................................... -- $3,362,000
Various notes payable, with varying monthly
principal and interest payments; interest rates
ranging from 7.0% to 9.75% at December 31,
1997, with maturities ranging from January 1,
1998 to September 30, 2002..................... $15,472,000 1,329,000
Various notes payable with Southwest Bank of St.
Louis, with monthly payments of principal and
interest; interest rates ranging from prime
(8.25% at December 31, 1996) plus .75% to 10%.. 8,346,000 --
Notes payable with Citizens Bank & Trust, with
monthly payments of principal and interest at
prime (8.25% at December 31, 1996),
collateralized by a guarantee of the majority
shareholder.................................... 6,850,000 --
Notes payable with GE Capital, with monthly
principal and interest payments of $11,217;
interest at the 30 days' commercial paper rate
(5.41% at December 31, 1996) plus 2.08%........ 1,088,000 --
Note payable with the Kentucky Development
Finance Authority, with monthly principal and
interest payments of $2,660 maturing in 2000;
interest stated at a fixed rate of 5.06%,
collateralized by real estate.................. 111,000 --
----------- ----------
$31,867,000 $4,691,000
=========== ==========
</TABLE>
Annual maturities of term debt at December 31, 1997 are as follows:
<TABLE>
<S> <C>
1998........................................................... $1,238,000
1999........................................................... 389,000
2000........................................................... 348,000
2001........................................................... 185,000
2002........................................................... 109,000
Thereafter..................................................... 2,422,000
----------
Total........................................................ $4,691,000
==========
</TABLE>
The Citicorp Facility is comprised of a revolving line of credit extended to
Falconite Equipment and M&M Equipment. The total amount of credit available
under the Citicorp Facility is limited to a borrowing base equal to the lesser
of (i) $100 million, of which $2 million is available as a swingline
subfacility; or (ii) a formula based on accounts receivable, parts inventory,
transportation equipment owned by the Company and rental and resale equipment
inventory. The obligations of Falconite Equipment and M&M Equipment under the
Citicorp Facility are collateralized by substantially all of the assets of
Falconite Equipment and M&M Equipment. The Citicorp Facility has financial
covenants regarding tangible net worth, debt ratios and debt coverage. The
Company was not in compliance with certain loan provisions at December 31,
1997, but received waivers from the lender for these violations on March 23,
1998. The Citicorp Facility also contains covenants and provisions
F-123
<PAGE>
FALCONITE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
that restrict, among other things, Falconite Equipment's and M&M Equipment's
ability to: (i) incur liens on its property; (ii) engage in certain sales of
assets; (iii) merge or consolidate with or acquire another person or engage in
other fundamental changes; (iv) engage in certain transactions with
affiliates; and (v) commit to make capital expenditures in excess of certain
preset limits. The Citicorp Facility provides for certain events of default.
At December 31, 1997, the principal amount outstanding under the Citicorp
Facility was $81,900,000, and the interest rate on such borrowings was 8.1875%
(30 day LIBOR plus 2.5%). At December 31, 1997, $9.6 million of additional
borrowings were available to Falconite Equipment and M&M Equipment under the
Citicorp Facility. The obligations of Falconite Equipment and M&M Equipment
under the Citicorp Facility are guaranteed by the Company, certain
subsidiaries of the Company, Ralph W. McCurry and Michael A. Falconite.
The Deutsche Facility is comprised of a line of credit, which amount is
determined at Deutsche's sole discretion, extended to M&M Equipment for the
purchase of equipment from certain designated manufacturers. The obligations
of M&M Equipment under the Deutsche Facility are collateralized by all of M&M
Equipment's inventory and equipment manufactured by such designated
manufacturers, including all accounts, rights, instruments and proceeds
arising from such inventory and equipment. The Deutsche Facility has financial
covenants and provisions regarding tangible net worth and debt ratios. The
Company was not in compliance with certain loan provisions at December 31,
1997, but received waivers from the lender for these violations on March 23,
1998. The obligations of M&M Equipment under the Deutsche Facility are
guaranteed by Falconite Equipment, Ralph W. McCurry and Wanda R. McCurry. At
December 31, 1997, the principal amount outstanding under the Deutsche
Facility was $9,516,000, and the interest rate on such borrowings was 9.5%.
7. INCOME TAXES:
Income tax expense consists of:
<TABLE>
<CAPTION>
CURRENT DEFERRED TOTAL
-------- ---------- ----------
<S> <C> <C> <C>
Year ended December 31, 1995:
Federal................................ $565,000 $2,011,000 $2,576,000
State and local........................ 20,000 297,000 317,000
-------- ---------- ----------
$585,000 $2,308,000 $2,893,000
======== ========== ==========
Year ended December 31, 1996:
Federal................................ $196,000 $2,006,000 $2,202,000
State and local........................ (76,000) 202,000 126,000
-------- ---------- ----------
$120,000 $2,208,000 $2,328,000
======== ========== ==========
Year ended December 31, 1997:
Federal................................ $ 13,000 $1,598,000 $1,611,000
State and local........................ 2,000 246,000 248,000
-------- ---------- ----------
$ 15,000 $1,844,000 $1,859,000
======== ========== ==========
</TABLE>
Income tax expense for the years ended December 31, 1996 and 1997 differed
from the amounts computed by applying the federal income tax rate of 34% to
income before income taxes as a result of the following:
<TABLE>
<CAPTION>
1995 1996 1997
---------- ---------- ----------
<S> <C> <C> <C>
Computed "expected" tax expense....... $2,752,000 $2,706,000 $1,298,000
Increased (reduction) in income taxes
resulting from:
Nontaxable M&F Equipment income..... (124,000) (666,000) --
State and local income taxes, net of
federal income tax benefit......... 209,000 84,000 164,000
Amortization........................ -- -- 349,000
Other, net.......................... 56,000 204,000 48,000
---------- ---------- ----------
$2,893,000 $2,328,000 $1,859,000
========== ========== ==========
</TABLE>
F-124
<PAGE>
FALCONITE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
From the time of its inception, March 20, 1995, through December 31, 1996,
M&F Equipment was taxed as an S corporation under Subchapter S of the Internal
Revenue Code. The pro forma income tax adjustments included on the
consolidated statements of income represent federal income tax expense that
would have been required had M&F Equipment been a C corporation. M&F
Equipment's undisturbed earnings of $1,574,000 were distributed in September
1997.
The tax effects of temporary differences that give rise to significant
portions of the deferred tax assets and deferred tax liabilities at December
31, 1996 and 1997 are presented below:
<TABLE>
<CAPTION>
1996 1997
------------ ------------
<S> <C> <C>
Deferred tax assets:
Trade accounts receivable, principally due
to allowance for doubtful accounts........ $ 195,000 $ 161,000
Alternative minimum tax credit
carryforwards............................. 1,713,000 1,713,000
Net operating loss carryforwards........... 1,402,000 4,168,000
Sales tax accruals......................... -- 223,000
Inventory obsolescence reserves............ 175,000 56,000
Other...................................... 175,000 205,000
------------ ------------
Net deferred tax assets.................. 3,660,000 6,526,000
Deferred tax liability:
Rental and operating property and
equipment, principally due to difference
in depreciation........................... (11,461,000) (16,171,000)
------------ ------------
Net deferred tax liability............... $ (7,801,000) $ (9,645,000)
============ ============
</TABLE>
At December 31, 1997, the Company has net operating loss carryforwards for
federal income tax purposes of approximately $11.1 million which are available
to offset future federal taxable income through the year 2011. The net
operating loss carryforwards are primarily attributable to M&M Equipment and
may be subject to certain limitations. The Company expects to pursue certain
tax planning strategies that management believes make it more likely than not
that the Company will recover the tax benefit of the net operating loss
carryforwards.
In addition, as of December 31, 1997, the Company had alternative minimum
tax credit carryforwards of approximately $1,713,000 which are available to
reduce future federal regular income taxes, if any, over an indefinite period.
8. EMPLOYEE BENEFIT PLANS:
Prior to August 1, 1997, Falconite Equipment had a discretionary profit-
sharing plan covering substantially all of its employees. Profit-sharing
expense was funded through annual contributions to the plan. There were no
contributions to the plan during 1996 and 1997. Falconite Equipment also
contributes to a union-administered pension plan as required. Falconite
Equipment's contributions to these plans for the years ended December 31,
1995, 1996 and 1997 totaled $71,000, $45,000 and $105,000, respectively.
Falconite Equipment could, under certain circumstances, be liable for unfunded
vested benefits or other expenses of jointly administered union plans. At this
time, Falconite has not established any liabilities because withdrawal from
these plans is not probable.
M&M Equipment has a discretionary 401(k) plan covering substantially all of
its employees. Plan expense is funded through annual contributions. For the
years ended December 31, 1995, 1996 and 1997, M&M Equipment contributions
totaled $38,000, $60,000 and $86,000, respectively. As of July 1, 1997,
Falconite has a discretionary 401(k) plan covering substantially all of its
employees. For the year ended December 31, 1997, Falconite contributions
totaled $70,000.
F-125
<PAGE>
FALCONITE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
9. RELATED PARTY TRANSACTIONS:
The individual companies included in the consolidated financial statements
enter into various related party transactions with affiliated companies and
shareholders of the individual companies.
A summary of receivables/payables included in the consolidated balance sheet
as of December 31, 1996 and 1997 is as follows:
<TABLE>
<CAPTION>
1996 1997
-------- ----------
<S> <C> <C>
Due from affiliated companies and related parties:
Note receivable--officer.......................... $ 77,000 $ 101,000
Note receivable--majority shareholder............. 332,000 483,000
Due from F&F Leasing.............................. 44,000 16,000
Due from E&F Leasing.............................. -- 200,000
Due from M&F Investments.......................... -- 1,344,000
-------- ----------
$453,000 $2,144,000
======== ==========
Due to affiliated companies and related parties:
Due to F&F Leasing................................ $ 42,000 --
Notes payable--majority shareholder............... 79,000 $ 39,000
-------- ----------
$121,000 $ 39,000
======== ==========
</TABLE>
A summary of expenses included in the consolidated statements of income for
the years ended December 31, 1995, 1996 and 1997 is as follows:
<TABLE>
<CAPTION>
1995 1996 1997
-------- -------- --------
<S> <C> <C> <C>
Building rent expense paid to affiliates and
related parties:
Rent paid to F&F Leasing.................. $ 63,000 $200,000 $137,000
Rent paid to an officer................... 30,000 30,000 --
Rent paid to M&F Investments.............. 13,000 122,000 247,000
Rent paid to the minority shareholder of
M&M...................................... 22,000 -- --
Rent paid to E&F Leasing.................. 27,000 188,000 246,000
-------- -------- --------
$155,000 $540,000 $630,000
======== ======== ========
Equipment rent expense paid to F&F Leasing.. $123,000 $149,000 --
======== ======== ========
Interest expense paid to director........... $ 19,000 $ 11,000 $ 5,000
======== ======== ========
Management fee paid to officers:
From M&M Equipment........................ $ 28,000 $ 28,000 --
From Erzinger............................. 31,000 36,000 --
-------- -------- --------
$ 59,000 $ 64,000 --
======== ======== ========
</TABLE>
Falconite Equipment and M&M Equipment lease buildings from affiliated
companies for which the companies pay monthly rental to the affiliated
companies pursuant to various lease agreements. Falconite Equipment leased its
Erzinger facility from E&F Leasing, a related party, through July 31, 1996 for
approximately $24,000 a month. Effective August 1, 1996, the monthly rental
was reduced to $15,000 retroactive to January 1, 1996, such that no rent
expense was incurred in August or September 1996. The ongoing agreed-upon
monthly rent will be $17,500 per month.
F-126
<PAGE>
FALCONITE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
10. COMMITMENTS AND CONTINGENCIES:
Department of Revenue Notifications
During 1995, Falconite Equipment received a notification from the Illinois
Department of Revenue asserting deficiencies in Illinois' use taxes for the
period from July 1989 to May 1995. The asserted deficiencies, which totaled
approximately $520,000 plus interest and penalties, result from Falconite
Equipment's rental of equipment to customers within the State of Illinois and
complexities of how use taxes should be calculated. Falconite Equipment is in
the process of challenging the asserted deficiencies.
During 1996, Falconite Equipment received a notification from the Tennessee
Department of Revenue asserting certain deficiencies in Tennessee sales tax
for the period from 1991 to 1996. The sales tax liability was settled during
1997 for $307,000
Management, after consultation with counsel, believes the ultimate outcome
of the alleged deficiencies will not result in a material impact on Falconite
Equipment's consolidated financial position, results of operations or cash
flows although resolution in any year or quarter could be material to the
results of operations or cash flows for that period. Accrued expenses have
been recorded within the range of management's best estimate of the probable
loss.
Government and Environmental Regulations
Falconite and its operations are subject to various federal, state, and
local laws and regulations governing, among other things, worker safety, air
emissions, water discharge, and the generation, handling, storage,
transportation, treatment, and disposal of hazardous substances and wastes.
Under such laws, an owner or lessee of real estate may be liable for the costs
of removal or remediation of certain hazardous or toxic substances located on,
in or emanating from, such property, as well as related costs of investigation
and property damage. Such laws often impose such liability without regard to
whether the owner or lessee knew of, or was responsible for, the presence of
such hazardous or toxic substances. In addition, Falconite dispenses petroleum
products from above-ground storage tanks located at certain rental locations
that it owns or leases. Falconite maintains an environmental compliance
program that includes the implementation of required technical and operational
activities designed to minimize the potential for leaks and spills, the
maintenance of records, and the regular testing and monitoring of tank
systems. Falconite also uses hazardous materials such as solvents to clean and
maintain its rental equipment fleet. In addition, Falconite generates and
disposes waste such as used motor oil, radiator fluid, and solvents, and may
be liable under various federal, state, and local laws for an environmental
contamination at facilities where its waste is or has been disposed. While
there can be no assurance that the Company's operations have been operated in
compliance with governmental regulations, in the opinion of management, the
ultimate disposition of any matters, that may arise, will not have a material
adverse effect on Falconite's consolidated financial position, results of
operations or cash flows although resolution in any year or quarter could be
material to the results of operations or cash flows for that period.
Legal Proceedings
Falconite is involved in various other claims and legal actions arising in
the ordinary course of business. In the opinion of management, the ultimate
disposition of these matters will not have a material adverse effect on
Falconite's consolidated financial position, results of operations or cash
flows although resolution in any year or quarter could be material to the
results of operations or cash flows for that period.
Commitments for Capital Expenditures
Falconite has outstanding firm commitments for capital expenditures of
approximately $549,000 at December 31, 1997. The commitments relate to the
purchasing of additional rental equipment and the replacement of older lease
fleet assets.
F-127
<PAGE>
FALCONITE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Workers' Compensation
Falconite is fully insured, subject to varying deductibles, for workers'
compensation claims in substantially all states in which it operates. In the
remaining states, Falconite provides for workers' compensation claims through
incurred loss retrospective policies. Management believes any potential
liability for estimated claims, including the effect of any retroactive
premium adjustments, is immaterial.
11. BUSINESS AND CREDIT CONCENTRATIONS:
Falconite engages in the rental of equipment to a variety of industrial and
construction customers which are significantly impacted by the U.S. economy as
well as the regional and local economies. Management believes diversifying
into other states reduces the impact of events or conditions in a particular
region, such as regional slowdowns, adverse weather and other factors. In
addition, Falconite's operating results may be adversely affected by increases
in interest rates that may lead to a decline in economic activity while
simultaneously resulting in higher interest payments by Falconite under its
variable rate credit facilities.
Most of Falconite's customers are located in a four-state area: Kentucky,
Tennessee, Alabama and Missouri. No single customers accounted for more than
1% of Falconite's consolidated sales in 1996 and 1997, and no trade account
receivable from any customer exceeded $289,000 at December 31, 1997. Falconite
estimates an allowance for doubtful accounts based on the creditworthiness of
its customers as well as general economic conditions. Consequently, an adverse
change in those factors could affect management's estimate of its bad debts.
12. SUBSEQUENT EVENTS:
In January 1998, the Company purchased the assets of Genequip, Inc., an
equipment rental company with locations in Louisville and Lexington, Kentucky
and Indianapolis, Indiana. The total purchase price was $10,037,000 and was
accounted for using the purchase method.
On April 1, 1998, the Company's owners entered into a definitive and binding
agreement to sell all of the outstanding shares of common stock to National
Equipment Services, Inc. in exchange for $62,000,000 in cash and $3,750,000 of
subordinated promissory notes.
F-128
<PAGE>
NATIONAL EQUIPMENT SERVICES, INC.
INTRODUCTION TO UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS
National Equipment Services, Inc. ("the Company") was founded in June 1996
to acquire and integrate equipment rental companies. In 1997, the Company
acquired six businesses in separate transactions. In 1998, the Company
acquired seven businesses in separate transactions and has a definitive
agreement to acquire Falconite concurrent with the closing of the Company's
initial public offerings (the "Offerings"). While the Acquired Businesses
(Acquired Businesses herein defined to mean (i) all of the 13 acquired
businesses and (ii) Falconite, Inc., which the Company has a definitive
agreement to acquire) were or will be acquired at various dates during 1997
and 1998, the following unaudited pro forma combined statement of operations
is presented as if all such acquisitions and the Offerings had occurred on
January 1, 1997. The following unaudited pro forma combined balance sheet
gives effect to the aforementioned acquisitions and the Offerings as if they
had occurred on December 31, 1997.
The unaudited pro forma combined financial statements have been derived from
Company (the Company herein defined to include the Acquired Businesses)
prepared financial information (and, when applicable, includes adjustments to
conform fiscal periods to calendar periods), the audited Financial Statements
and notes thereto of certain of the Acquired Businesses for certain periods
and the audited Financial Statements and notes thereto of the Company since
inception, which Financial Statements appear elsewhere in this Prospectus.
The unaudited pro forma combined financial statements have been prepared for
comparative purposes only and do not purport to be indicative of the results
which would have been achieved had the Acquired Businesses been purchased and
the Offerings been consummated as of the assumed dates, nor are the results
indicative of the Company's future results.
F-129
<PAGE>
PRO FORMA COMBINED STATEMENT OF OPERATIONS(A)
(IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1997
---------------------------------------------------------------------
EQUIPCO
THE AERIAL BAT RENTALS & LONE STAR
COMPANY PLATFORMS RENTALS SALES RENTALS SPRINTANK SUBTOTAL
------- --------- ------- --------- --------- --------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Revenues:
Rental revenues........ $26,398 $ 406 $1,457 $2,180 $1,455 $5,715 $37,611
Rental equipment sales. 4,186 51 995 332 188 -- 5,752
New equipment sales and
other.................. 10,704 237 1,350 877 -- 327 13,495
------- ----- ------ ------ ------ ------ -------
Total revenues.......... 41,288 694 3,802 3,389 1,643 6,042 56,858
------- ----- ------ ------ ------ ------ -------
Cost of Revenues:
Rental equipment
depreciation........... 5,009 47 707 710 242 1,109 7,824
Cost of rental
equipment sales........ 2,935 34 352 97 119 -- 3,537
Cost of new equipment
sales.................. 4,872 180 1,010 570 -- -- 6,632
Other operating
expenses............... 12,899 277 462 641 1,010 643 15,932
------- ----- ------ ------ ------ ------ -------
Total cost of revenues.. 25,715 538 2,531 2,018 1,371 1,752 33,925
------- ----- ------ ------ ------ ------ -------
Gross profit (loss)..... 15,573 156 1,271 1,371 272 4,290 22,933
------- ----- ------ ------ ------ ------ -------
Selling, general and
administrative expenses. 7,910 249 489 684 475 2,028 11,835
Non-rental depreciation
and amortization........ 1,476 8 25 33 26 83 1,651
------- ----- ------ ------ ------ ------ -------
Operating income (loss). 6,187 (101) 757 654 (229) 2,179 9,447
------- ----- ------ ------ ------ ------ -------
Other income (expense),
net..................... 72 -- (1) 20 139 (10) 220
Interest expense, net... 4,336 16 46 73 164 553 5,188
------- ----- ------ ------ ------ ------ -------
Income (loss) before
income taxes............ 1,923 (117) 710 601 (254) 1,616 4,479
Income tax expense
(benefit)............... 818 (6) -- 240 -- -- 1,052
------- ----- ------ ------ ------ ------ -------
Net income (loss)....... $ 1,105 $(111) $ 710 $ 361 $ (254) $1,616 $ 3,427
======= ===== ====== ====== ====== ====== =======
</TABLE>
(See Notes to Unaudited Pro Forma Combined Financial Statements)
F-130
<PAGE>
PRO FORMA COMBINED STATEMENT OF OPERATIONS(A)
(IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1997
---------------------------------------------------------------------------------------------------------
WORK GRAND PRO
SAFE EAGLE CORMIER DRAGON HI- ALBANY PRO FORMA FORMA
SUBTOTAL SUPPLY GENPOWER SCAFFOLDING EQUIPMENT RENTALS REACH LADDER FALCONITE ADJUSTMENTS(B) COMBINED
-------- ------ -------- ----------- --------- ------- ------ ------- --------- -------------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Revenues:
Rental revenues. $37,611 $6,385 $7,110 $1,067 $12,107 $8,907 $5,568 $18,410 $44,911 $ 4,227 $146,303
Rental equipment
sales........... 5,752 891 161 -- 960 -- 953 1,885 9,222 2,910 22,734
New equipment
sales and other. 13,495 88 4,830 612 2,685 1,657 1,108 13,909 9,513 1,694 49,591
------- ------ ------ ------ ------- ------ ------ ------- ------- ------- --------
Total revenues... 56,858 7,364 12,101 1,679 15,752 10,564 7,629 34,204 63,646 8,831 218,628
------- ------ ------ ------ ------- ------ ------ ------- ------- ------- --------
Cost of Revenues:
Rental equipment
depreciation.... 7,824 835 560 80 2,742 844 885 3,445 11,114 1,157 (c) 29,486
Cost of rental
equipment sales. 3,537 588 111 -- 339 -- 636 721 7,582 2,561 16,075
Cost of new
equipment sales. 6,632 -- 3,108 23 391 -- 334 7,725 4,103 1,579 23,895
Other operating
expenses........ 15,932 2,517 2,863 776 6,925 5,222 3,125 10,738 11,395 (187)(d) 59,306
------- ------ ------ ------ ------- ------ ------ ------- ------- ------- --------
Total cost of
revenues......... 33,925 3,940 6,642 879 10,397 6,066 4,980 22,629 34,194 5,110 128,762
------- ------ ------ ------ ------- ------ ------ ------- ------- ------- --------
Gross profit..... 22,933 3,424 5,459 800 5,355 4,498 2,649 11,575 29,452 3,721 89,866
------- ------ ------ ------ ------- ------ ------ ------- ------- ------- --------
Selling, general
and
administrative
expenses......... 11,835 1,237 2,797 327 3,241 2,166 1,534 7,796 15,065 (3,692)(e) 42,306
Non-rental
depreciation and
amortization..... 1,651 80 37 -- 250 59 107 640 2,428 4,836 (f) 10,088
------- ------ ------ ------ ------- ------ ------ ------- ------- ------- --------
Operating income. 9,447 2,107 2,625 473 1,864 2,273 1,008 3,139 11,959 2,577 37,472
------- ------ ------ ------ ------- ------ ------ ------- ------- ------- --------
Other income
(expense), net... 220 8 13 8 -- (670) 14 117 (815) 1,422 (g) 317
Interest expense,
net.............. 5,188 22 103 33 302 675 462 846 7,327 583 (h) 15,541
------- ------ ------ ------ ------- ------ ------ ------- ------- ------- --------
Income (loss)
before income
taxes............ 4,479 2,093 2,535 448 1,562 928 560 2,410 3,817 3,416 22,248
Income tax
expense
(benefit)........ 1,052 -- 859 -- 8 212 -- -- 1,859 5,346 (i) 9,336
------- ------ ------ ------ ------- ------ ------ ------- ------- ------- --------
Net income
(loss)........... $ 3,427 $2,093 $1,676 $ 448 $ 1,554 $ 716 $ 560 $ 2,410 $ 1,958 $(1,930) $ 12,912
======= ====== ====== ====== ======= ====== ====== ======= ======= ======= ========
</TABLE>
(See Notes to Unaudited Pro Forma Combined Financial Statements)
F-131
<PAGE>
PRO FORMA COMBINED BALANCE SHEET(J)
(IN THOUSANDS)
AT DECEMBER 31, 1997
<TABLE>
<CAPTION>
THE WORK SAFE EAGLE CORMIER DRAGON GRAND ALBANY
COMPANY SUPPLY GENPOWER SCAFFOLDING EQUIPMENT RENTALS HI-REACH LADDER FALCONITE ADJUSTMENTS(K)
-------- --------- -------- ----------- --------- ------- -------- ------- --------- --------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
ASSETS
Cash and cash
equivalents...... $ 35,682 $ 383 $ 20 $ 25 $ 5 $ 46 $ 4 $ 87 $ 820 $(37,072)(i)
Accounts
receivable, net.. 8,356 3,279 2,073 336 2,152 3,106 1,272 5,951 9,281 (2,665)(ii)
Inventory, net... 2,239 345 561 15 1,838 86 54 2,878 1,596 --
Rental equipment,
net.............. 46,801 1,983 1,920 962 4,865 11,719 3,868 15,116 107,721 15,896 (iii)
Property and
equipment, net... 3,012 269 192 -- 1,006 853 391 2,139 10,542 3,054 (iv)
Intangible
assets, net...... 27,937 -- -- -- -- -- -- -- 16,279 103,166 (v)
Loan origination
costs, net....... 6,270 -- -- -- -- -- -- -- -- --
Prepaid and other
assets, net...... 840 191 44 2 236 211 23 1,031 1,829 (1,171)(vi)
-------- ------ ------ ------ ------- ------- ------ ------- -------- --------
Total assets.... $131,137 $6,450 $4,810 $1,340 $10,102 $16,021 $5,612 $27,202 $148,068 $ 81,208
======== ====== ====== ====== ======= ======= ====== ======= ======== ========
LIABILITIES
Accounts payable. $ 2,489 $ 444 $ 699 $ 52 $ 398 $ 268 $ 255 $ 980 $ 2,184 --
Accrued interest. 1,066 -- -- 2 -- 118 17 -- 666 (137)(vii)
Accrued expenses
and other
liabilities...... 2,327 207 799 42 680 1,377 160 1,020 12,622 16,331 (viii)
Debt............. 98,782 579 1,009 596 4,298 11,779 3,887 12,270 100,200 (79,870)(ix)
-------- ------ ------ ------ ------- ------- ------ ------- -------- --------
Total
liabilities..... 104,664 1,230 2,507 692 5,376 13,542 4,319 14,270 115,672 (63,676)
Stockholders'
equity........... 26,473 5,220 2,303 648 4,726 2,479 1,293 12,932 32,396 144,884 (x)
-------- ------ ------ ------ ------- ------- ------ ------- -------- --------
Total
liabilities and
stockholders'
equity.......... $131,137 $6,450 $4,810 $1,340 $10,102 $16,021 $5,612 $27,202 $148,068 $ 81,208
======== ====== ====== ====== ======= ======= ====== ======= ======== ========
<CAPTION>
PRO
FORMA
--------
<S> <C>
ASSETS
Cash and cash
equivalents...... $ --
Accounts
receivable, net.. 33,141
Inventory, net... 9,612
Rental equipment,
net.............. 210,851
Property and
equipment, net... 21,458
Intangible
assets, net...... 147,382
Loan origination
costs, net....... 6,270
Prepaid and other
assets, net...... 3,236
--------
Total assets.... $431,950
========
LIABILITIES
Accounts payable. $ 7,769
Accrued interest. 1,732
Accrued expenses
and other
liabilities...... 35,565
Debt............. 153,530
--------
Total
liabilities..... 198,596
Stockholders'
equity........... 233,354
--------
Total
liabilities and
stockholders'
equity.......... $431,950
========
</TABLE>
(See Notes to Unaudited Pro Forma Combined Financial Statements)
F-132
<PAGE>
NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS)
(a) For the Company, represents actual historical 1997 results, including
results for the Acquired Businesses purchased in 1997 from the date of
acquisition. For the Acquired Businesses represents historical 1997
results for (i) the Acquired Businesses purchased in 1997 prior to the
date of acquisition and (ii) the Acquired Businesses purchased or to be
purchased in 1998.
(b) In each of the following items, reflects the elimination of a location
not purchased from Cormier Equipment as follows:
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
1997
------------
<S> <C>
Rental revenues............................................ $ 130
New equipment sales and other.............................. 21
-----
Total revenues............................................. 151
Rental equipment depreciation.............................. 81
Other operating expenses................................... 102
-----
Total cost of revenues..................................... 183
-----
Gross profit (loss)........................................ (32)
Selling, general and administrative expenses............... 72
Non-rental depreciation and amortization................... 1
-----
Operating loss............................................. $(105)
=====
</TABLE>
In addition, reflects the acquisition of GenEquip, Inc., a business acquired
by Falconite, Inc. in January 1998 as follows:
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
1997
------------
<S> <C>
Rental revenues.............................................. $4,357
Rental equipment sales....................................... 2,910
New equipment sales and other................................ 1,715
------
Total revenues............................................... 8,982
Rental equipment depreciation................................ 1,583
Cost of rental equipment sales............................... 2,561
Cost of new equipment sales.................................. 1,578
Other operating costs........................................ 1,664
------
Total cost of revenues....................................... 7,386
------
Gross profit................................................. 1,596
Selling, general and administrative expenses................. 1,221
Non-rental depreciation and amortization..................... 107
------
Operating income............................................. 268
Other income, net............................................ 59
Interest income, net......................................... 23
------
Income before income taxes................................... $ 350
======
</TABLE>
(c) Pursuant to SEC reporting requirements, rental equipment depreciation has
been derived utilizing the rental equipment asset values of each of the
Acquired Businesses at the time of their acquisition rather than utilizing
values of rental equipment assets actually held by each of the Acquired
Businesses the period presented. Reflects the impact on rental equipment
depreciation resulting from the application of the Company's depreciation
policy rather than those of the former owners of the Acquired Businesses.
In addition, reflects the increase in rental equipment depreciation
resulting from the write-up of rental equipment assets to fair value
arising from purchase accounting. In addition, reflects the increase in
rental equipment depreciation resulting from the purchase of equipment
referred to in note (e) below.
F-133
<PAGE>
(d) Reflects the elimination of lease expense resulting from the termination
of certain rental equipment leases which occurred with the purchase of
the underlying equipment. Also reflects the rent expense resulting from
the Company's current lease terms as compared to lease terms entered into
by former owners. In addition, reflects the increase in rent expense and
corresponding decrease in depreciation expense and real estate tax
expense resulting from the Company leasing rather than owning certain
related facilities and, conversely, the decrease in rent expense and
corresponding increase in depreciation expense and real estate tax
expense resulting from the termination of certain facility leases which
occurred with the purchase of the underlying facility by the Company.
Also, reflects the decrease in rent expense resulting from the
termination of certain facility leases.
(e) Reflects the decrease resulting from differentials between the
compensation levels of former owners of the Acquired Businesses and the
terms of the employment agreements entered into between certain of the
former owners and the Company.
(f) Pursuant to SEC reporting requirements, non-rental depreciation has been
derived utilizing the property, plant and equipment values of each of the
Acquired Businesses at the time of their acquisition, rather than
utilizing values of property, plant and equipment actually held by each of
the Acquired Businesses in the period presented. Reflects the decrease in
non-rental depreciation resulting from the application of the Company's
depreciation policy rather than those of the former owners of the Acquired
Businesses. In addition, reflects the increase in non-rental depreciation
resulting from the write-up of property, plant and equipment to fair value
arising from purchase accounting. Also reflects amortization of goodwill
calculated on a goodwill life of 40 years and amortization of non-compete
agreements calculated on their contract terms of two to five years, in
each case specifically related to the purchases of the Acquired
Businesses.
(g) Reflects discontinuation and elimination of unrelated businesses
previously operated and related charges incurred by the former owners of
certain of the Acquired Businesses.
(h) Reflects additional interest expense at the Company's incremental
borrowing rate on the net indebtedness resulting from the purchase of the
Acquired Businesses after giving effect to the Offerings.
(i) Reflects the income tax rate that would have been in effect if the
Acquired Businesses had been combined and subject to a federal statutory
rate of 34% and the applicable state statutory rate for each of the
Acquired Businesses throughout the periods presented.
(j) Represents actual historical balance sheets of the Company and the
Acquired Businesses purchased in 1998 or to be purchased in 1998.
(k) The following are adjustments to the aforementioned balance sheets:
(i) Reflects the use of the Company's and the Acquired Businesses' cash at
December 31, 1997 to pay a portion of the consideration due to selling
shareholders.
(ii) Reflects the exclusion of contract receivables which will be retained
by a selling shareholder.
(iii) Reflects the write-up of rental equipment to fair value as part of
purchase accounting. Reflects the purchase of rental equipment
previously leased. In addition, reflects the purchase of rental
equipment resulting from the acquisition of GenEquip, Inc. by
Falconite, Inc. in January 1998.
(iv) Reflects the write-up of property and equipment to fair value as part
of purchase accounting. Reflects the purchase of facilities previously
leased. In addition, reflects the purchase of equipment resulting from
the acquisition of GenEquip, Inc. by Falconite, Inc. in January 1998.
(v) Reflects $101,666 of goodwill representing the excess of the purchase
price over the fair value of net assets acquired. In addition, reflects
$1,500 of noncompete agreements entered into by the Company and certain
sellers.
(vi) Reflects the exclusion of certain related party receivables which will
be retained by the selling shareholders.
(vii) Reflects the exclusion of certain accrued interest not assumed by the
Company.
(viii) Reflects certain additional accrued expenses and other liabilities
assumed by the Company.
(ix) Reflects the reduction of indebtedness resulting from the use of the
Company's and the Acquired Businesses' cash on hand and application of
net proceeds from the Offerings.
(x) Reflects the cash proceeds from the Offerings, net of estimated
Offerings cost and Mandatory Redemption, less the elimination of equity
of the Acquired Businesses purchased or to be purchased in 1998.
F-134
<PAGE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS IN CONNECTION WITH THE OFFER CONTAINED HEREIN OTHER THAN THOSE
CONTAINED IN THE PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE
COMPANY. THE PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION
OF AN OFFER TO BUY ANY SECURITIES OTHER THAN THE SECURITIES TO WHICH IT
RELATES, NOR DOES IT CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN
OFFER TO BUY SUCH SECURITIES IN ANY CIRCUMSTANCE IN WHICH SUCH OFFER OR
SOLICITATION IS UNLAWFUL. NEITHER THE DELIVERY OF THE PROSPECTUS NOR ANY SALE
MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT
THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF
OR THAT THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT
TO ITS DATE.
------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Available Information..................................................... iii
Prospectus Summary........................................................ 1
Risk Factors.............................................................. 9
Use of Proceeds........................................................... 15
Capitalization............................................................ 16
Selected Pro Forma Combined Financial Data................................ 17
Selected Historical Financial Data........................................ 22
Management's Discussion and Analysis of Financial Condition and Results of
Operations............................................................... 24
Business.................................................................. 30
Management................................................................ 37
Security Ownership of Certain Beneficial Owners and Management............ 43
Certain Relationships and Related Transactions............................ 44
Description of Credit Facility............................................ 45
Description of Exchange Notes............................................. 47
The Exchange Offer........................................................ 72
Certain Federal Income Tax Consequences................................... 79
Plan of Distribution...................................................... 80
Experts................................................................... 80
Legal Matters............................................................. 81
Index to Financial Statements............................................. F-1
</TABLE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
$100,000,000
LOGO
NATIONAL EQUIPMENT
SERVICES, INC.
OFFER TO EXCHANGE ITS
10% SENIOR SUBORDINATED
NOTES DUE 2004,
SERIES B FOR ANY AND ALL
OF ITS OUTSTANDING
10% SENIOR SUBORDINATED NOTES
DUE 2004
------------
PROSPECTUS
, 1998
------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The Company, NES Acquisition, BAT, NES Michigan and NES East. The Company
and each of NES Acquisition, BAT, NES Michigan and NES East are incorporated
under the laws of the State of Delaware. Section 145 of the General
Corporation Law of the State of Delaware ("Section 145") provides that a
Delaware corporation may indemnify any persons who are, or are threatened to
be made, parties to any threatened, pending or completed action, suit or
proceeding, whether civil, criminal, administrative or investigative (other
than an action by or in the right of such corporation), by reason of the fact
that such person is or was an officer, director, employee or agent of such
corporation, or is or was serving at the request of such corporation as a
director, officer, employee or agent of another corporation or enterprise. The
indemnity may include expenses (including attorneys' fees), judgments, fines
and amounts paid in settlement actually and reasonably incurred by such person
in connection with such action, suit or proceeding, provided such person acted
in good faith and in a manner he reasonably believed to be in or not opposed
to the corporation's best interests and, with respect to any criminal action
or proceeding, had no reasonable cause to believe that his conduct was
illegal. A Delaware corporation may indemnify any persons who are, or are
threatened to be made, a party to any threatened, pending or completed action
or suit by or in the right of the corporation by reason of the fact that such
person was a director, officer, employee or agent of such corporation, or is
or was serving at the request of such corporation as a director, officer,
employee or agent of another corporation or enterprise. The indemnity may
include expenses (including attorney's fees) actually and reasonably incurred
by such person in connection with the defense or settlement of such action or
suit, provided such person acted in good faith and in a manner he reasonably
believed to be in or not opposed to the corporation's best interests except
that no indemnification is permitted without judicial approval if the officer
or director is adjudged to be liable to the corporation. Where an officer or
director is successful on the merits or otherwise in the defense of any action
referred to above, the corporation must indemnify him against the expenses
which such officer or director has actually and reasonably incurred.
Section 145 further provides that the indemnification provisions of Section
145 shall not be deemed exclusive of any other rights to which those seeking
indemnification may be entitled under any bylaw, agreement, vote of
stockholders or disinterested directors or otherwise, both as to action in
such person's official capacity and as to action in another capacity while
holding such office. The certificates of incorporation, as amended (if
applicable), of each of the Company, NES Acquisition, BAT, NES Michigan and
NES East provide that, to the fullest extent permitted by the General
Corporation Law of the State of Delaware, no director of the corporation shall
be liable to the corporation or its stockholders for monetary damages arising
from a breach of fiduciary duty owed to the corporation of its stockholders.
Article V of the by-laws of each of the Company, NES Acquisition, BAT, NES
Michigan and NES East provides that any person who was or is a party or is
threatened to be made a party to or is involved in any action, suit or
proceeding, whether civil, criminal, administrative or investigative by reason
of the fact that he, or a person of whom he is the legal representative, is or
was a director or officer of such corporation, or is or was serving at the
request of such corporation as a director, officer, employee, fiduciary or
agent of another corporation or of a partnership, joint venture, trust or
other enterprise, shall be indemnified and held harmless by the corporation to
the fullest extent to which it is empowered to do so unless prohibited from
doing so by the General Corporation Law of the State of Delaware, as may be
amended (but only to the extent such amendment permits the corporation to
provide broader indemnification rights than were permitted prior to such
amendment) against expense, liability and loss (including attorneys' fees
actually and reasonably incurred by such person in connection with such
proceeding) and such indemnification shall continue as to an indemnitee who
has ceased to a be a director, officer, employee or agent and shall inure to
the benefit of the indemnitee's heirs, executors and administrators, provided
that, such person shall be indemnified only (subject to certain limited
exceptions) in connection with a proceeding initiated by such person only if
such proceeding was authorized by the board of directors of the corporation.
The right to indemnification of such person shall be a contract right and
shall include the right to be paid expenses incurred in defending any
proceeding in advance of its final disposition.
II-1
<PAGE>
Section 145 further authorizes a corporation to purchase and maintain
insurance on behalf of any person who is or was a director, officer, employee
or agent of the corporation, or is or was serving at the request of the
corporation as a director, officer, employee or agent of another corporation
or enterprise, against any liability asserted against him and incurred by him
in any such capacity, arising out of his status as such, whether or not the
corporation would otherwise have the power to indemnify him under Section 145.
Article V of the by-laws of each of the Company, NES Acquisition, BAT, NES
Michigan and NES East further provides that such corporation may purchase and
maintain insurance on its own behalf and on behalf of any person who is or was
a director, officer, employee, fiduciary, or agent of such corporation or was
serving at the request of such corporation as a director, officer, employee or
agent of another corporation, partnership, joint venture, trust or other
enterprise against any liability asserted against him or her and incurred by
him or her in any such capacity, whether or not the corporation would have the
power to indemnify such person against such liability under Article V of its
by-laws. All of the directors and officers of each of the Company and NES
Acquisition, BAT, NES Michigan and NES East are covered by insurance policies
maintained and held in effect by such corporation against certain liabilities
for actions taken in such capacities, including liabilities under the
Securities Act of 1933.
Albany. Albany is incorporated under the laws of the State of New York.
Pursuant to the statutes of the State of New York, a director or officer of a
corporation is entitled, under specified circumstances, to indemnification by
the corporation against reasonable expenses, including attorneys' fees,
incurred by him in connection with the defense of a civil or criminal
proceeding to which he has been made, or threatened to be made, a party by
reason of the fact that he was such director or officer. In certain
circumstances, indemnity is provided against judgments, fines and amounts paid
in settlement. In general, indemnification is available where the director or
officer acted in good faith, for a purpose such director or officer reasonably
believed to be in the best interests of the corporation. Specific court
approval is required in some cases. The foregoing statement is qualified in
its entirety by reference to Sections 715, 717 and 721 through 725 of the New
York Business Corporation Law ("NYBCL").
Section 10 of the certificate of incorporation of Albany provides that, to
the maximum extent now or thereafter permitted by the laws of the State of New
York, including but not limited to Article 7 of the NYBCL or its successor
statutes, and without further action by the stockholders or directors of
Albany, or any court, Albany will indemnify its officers, directors and
stockholders who are made or threatened to be made a party to any action or
proceeding whatsoever whether administrative, civil or criminal, in any court,
agency or forum whatsoever, brought by or on behalf of any party whomsoever by
reason of the fact that such person was an officer, director or stockholder of
Albany, or of a corporation in which the stockholders of Albany were also
stockholders and which is thereafter merged into Albany, against judgments,
fines, amounts paid in settlements and reasonable expenses, including
attorneys' fees actually and necessarily incurred as a result of such actual
or threatened action or proceeding, or any appeal therein and so far as
permitted by law, stockholders, officers and directors of Albany shall not be
personally liable to Albany or its stockholders for monetary damages for
breach of fiduciary duty, except for liability fixed by judgment or other
final adjudication which establishes that such acts were acts committed in bad
faith or were the result of actual and deliberate dishonesty and were material
to the cause of action so adjudicated, or for any transaction from which the
stockholder, officer or director derived a financial profit or other advantage
to which he was not legally entitled. In addition, the certificate of
incorporation of Albany provides that if the laws of the State of New York are
later amended to permit corporate action further eliminating or limiting the
personal liability of stockholders, officers and directors, then the liability
of a stockholder, officer or director of Albany shall be eliminated or limited
to the fullest extent permitted by the New York State Law, as so amended.
All of the directors and officers of Albany are covered by insurance
policies against certain liabilities for actions taken in such capacities,
including liabilities maintained and held in effect by Albany under the
Securities Act of 1933.
II-2
<PAGE>
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(A) EXHIBITS.
<TABLE>
<C> <S> <C>
3.1(i) Certificate of Incorporation of the Company*
3.1(ii) Certificate of Amendment dated January 3, 1997 to Certificate
of Incorporation of the Company*
3.1(iii) Certificate of Amendment dated October 28, 1997 to Certificate
of Incorporation of the Company*
3.2 By-laws of the Company*
3.3 Certificate of Incorporation of NES Michigan Acquisition Corp.
3.4 By-laws of NES Michigan Acquisition Corp.
3.5 Certificate of Incorporation of NES Acquisition Corp.*
3.6 By-laws of NES Acquisition Corp.*
3.7 Certificate of Incorporation of BAT Acquisition Corp.*
3.8 By-laws of BAT Acquisition Corp.*
3.9 Certificate of Incorporation of NES East Acquisition Corp.
3.10 By-laws of NES East Acquisition Corp.
3.11 Certificate of Incorporation of Albany Ladder Company, Inc.
3.12 By-laws of Albany Ladder Company, Inc.
4.1(i) Indenture dated November 25, 1997 by and among the Company, the
Subsidiary Guarantors and Harris Savings and Trust Company, as
trustee.*
4.1(ii) Supplemental Indenture dated April 1, 1998 by and among NES
East Acquisition Corp., NES Michigan Acquisition Corp., Albany
Ladder Company, Inc. and Harris Savings and Trust Company, as
trustee.
4.2 Forms of Series A and Series B 10% Senior Subordinated Notes
(contained in Exhibit 4.1(i) as Exhibit A thereto)*
4.3 Form of Subsidiary Guarantee (contained in Exhibit 4.1(i) as
Exhibit D thereto).*
4.4 Registration Rights Agreement dated as of November 25, 1997
among the Company, Aerial Platforms, Inc., NES Acquisition
Corp., BAT Acquisition Corp., MST Enterprises, Inc. and the
Initial Purchasers.*
4.5 Purchase Agreement dated as of November 20, 1997 among the
Company, Aerial Platforms, Inc., NES Acquisition Corp., BAT
Acquisition Corp., MST Enterprises, Inc. and the Initial
Purchasers.*
4.6(i) Credit Agreement dated July 1, 1997 by and among the Company,
Aerial Platforms, Inc., NES Acquisition Corp., BAT Acquisition
Corp., certain financial institutions and First Union
Commercial Corporation, as Agent.*
4.6(ii) First Amendment to Credit Agreement dated as of July 18, 1997
by and among the Company, Aerial Platforms, Inc., NES
Acquisition Corp., BAT Acquisition Corp., MST Enterprises,
Inc., certain financial institutions and First Union Commercial
Corporation, as Agent.*
4.6(iii) Second Amendment to Credit Agreement and Consent dated as of
October 29, 1997 by and among the Company, Aerial Platforms,
Inc., NES Acquisition Corp., BAT Acquisition Corp., MST
Enterprises, Inc., certain financial institutions and First
Union Commercial Corporation, as Agent.*
4.6(iv) Borrower Joinder Agreement dated as of July 18, 1997 by and
among the Company, MST Enterprises, Inc. and First Union
Commercial Corporation, as Agent.*
4.6(v) Third Amendment to Credit Agreement and Consent dated as of
April 7, 1998 by and among the Company, NES Acquisition Corp.,
BAT Acquisition Corp., NES Michigan Acquisition Corp., NES East
Acquisition Corp., Albany Ladder Company, Inc., certain
financial institutions and First Union Commercial Corporation,
as Agent.
</TABLE>
II-3
<PAGE>
<TABLE>
<C> <S> <C>
4.7 Pledge Agreement dated as of July 18, 1997 by and among the
Company, Aerial Platforms, Inc., NES Acquisition Corp., BAT
Acquisition Corp., MST Enterprises, Inc. and First Union
Commercial Corporation, as Agent for certain Lenders referred
to therein.*
4.8 Security Agreement dated as of July 18, 1997 by and among the
Company, Aerial Platforms, Inc., NES Acquisition Corp., BAT
Acquisition Corp., MST Enterprises, Inc. and First Union
Commercial Corporation, as Agent for certain Lenders referred
to therein.*
5.1 Opinion and consent of Kirkland & Ellis.
10.1(i) Professional Services Agreement dated as of June 4, 1996 by and
between the Company and Golder, Thoma, Cressey, Rauner Fund IV,
L.P.*
10.1(ii) Amendment No. 1 to Professional Services Agreement dated as of
December 31, 1996 between the Company and Golder, Thoma,
Cressey, Rauner Fund IV, L.P.*
10.2 Purchase Agreement dated as of June 4, 1996 between the Company
and Golder, Thoma, Cressey, Rauner Fund IV, L.P.*
10.3(i) Stockholders Agreement dated as of June 4, 1996 by and between
the Company, Golder, Thoma, Cressey, Rauner Fund IV, L.P. and
certain Executives named therein.*
10.3(ii) Amendment No. 1 to Stockholders Agreement dated December 31,
1996 by and among the Company, Golder, Thoma, Cressey, Rauner
Fund IV, L.P. and certain Executives named therein.*
10.4(i) Registration Agreement dated as of June 4, 1996 between dated
as of June 4, 1996 between the Company and Golder, Thoma,
Cressey, Rauner Fund IV, L.P. and certain Executives named
therein.*
10.4(ii) Amendment No. 1 to Registration Agreement dated as of December
31, 1996 by and among the Company, Golder, Thoma, Cressey,
Rauner Fund IV, L.P. and certain Executives named therein.*
10.5(i) Senior Management Agreement dated as of June 4, 1996 between
the Company and Kevin Rodgers.*, **
10.5(ii) Amendment No. 1 to Senior Management Agreement dated December
31, 1996 between the Company and Kevin Rodgers.*, **
10.6(i) Senior Management Agreement dated as of June 4, 1996 between
the Company and Paul Ingersoll.*, **
10.6(ii) Amendment No. 1 to Senior Management Agreement dated December
31, 1996 between the Company and Paul Ingersoll.*, **
10.7 Senior Management Agreement dated as of December 31, 1996
between the Company and Dennis O'Connor.*, **
10.8 Executive Stock Pledge Agreement dated as of June 4, 1996
between the Company and Kevin Rodgers.*
10.9 Executive Stock Pledge Agreement dated as of June 4, 1996
between the Company and Paul Ingersoll.*
10.10 Executive Stock Pledge Agreement dated as of December 31, 1996
between the Company and Dennis O'Connor.*
10.11 Promissory Note dated as of January 6, 1997 by Kevin Rodgers in
favor of the Company in the principal amount of $63,232.*
10.12 Promissory Note dated as of January 6, 1997 by Paul Ingersoll
in favor of the Company in the principal amount of $9,880.*
10.13 Promissory Note dated as of January 6, 1997 by Dennis O'Connor
in favor of the Company in the principal amount of $19,760.*
</TABLE>
II-4
<PAGE>
<TABLE>
<C> <S> <C>
10.14 Securities Transfer Agreement dated as of December 31, 1996 by and
among the Company, Golder, Thoma, Cressey, Rauner Fund IV, L.P.,
Golder, Thoma, Cressey, Rauner Fund V, L.P., Kevin Rodgers, Paul
Ingersoll and Dennis O'Connor.*
10.15 Asset Purchase Agreement dated as of January 6, 1997 by and among
NES Acquisition Corp., Industrial Crane Maintenance Systems, Inc.,
Brazos Rental & Tool, Inc., Safe Work Load Products, Inc. and
certain stockholders of the Sellers referred to therein.
10.16 Stock Purchase Agreement dated as of February 18, 1997 by and
among Aerial Platforms, Inc., Carter B. Wilson and the Company.
10.17 Asset Purchase Agreement dated as March 17, 1997 by among NES
Acquisition Corp., Lone Star Rentals, Inc. and James Horsley.
10.18 Asset Purchase Agreement dated as of April 1, 1997 by and among,
BAT Acquisition Corp., BAT Rentals, Inc. and Paul B. Bronken.
10.19 Asset Purchase Agreement dated as of July 1, 1997 by and among NES
Acquisition Corp., Sprint Industrial Services, Inc., Joseph B.
Swinbank and Donald Poarch.
10.20 Stock Purchase Agreement dated as of July 18, 1997 by and among
MST Enterprises, Inc., the stockholders of MST Enterprises, Inc.
and National Equipment Services, Inc.
10.21 Asset Purchase Agreement dated as of January 16, 1998 by and among
McNabb Enterprises, Inc., the stockholders of McNabb Enterprises,
Inc. and BAT Acquisition Corp.
10.22 Asset Purchase Agreement dated as of January 23, 1998 by and among
NES Michigan Acquisition Corp., Grand Hi-Reach, Inc. and Allen
Baker.
10.23 Stock Purchase Agreement dated as of January 12, 1998 by and among
Genpower Pump & Equipment Co., Inc., the stockholders of Genpower
Pump & Equipment Co., Inc. and the Company.
10.24 Asset Purchase Agreement dated as of February 4, 1998 by and among
NES Michigan Acquisition Corp., Work Safe Supply Co., Inc., Dan J.
Babcock and Kathy Babcock.
10.25 Asset Purchase Agreement dated as of March 2, 1998 by and among
The Modern Group, Inc., the Stockholders of The Modern Group,
Inc., Southeast Texas Intermediary, Inc. and NES Acquisition Corp.
10.26 Asset Purchase Agreement dated as of February 9, 1998 by and
between Cormier Equipment Corporation and NES Acquisition Corp.
10.27 Assignment and Assumption Agreement dated as of March 4, 1998
among NES Acquisition Corp. and NES East Acquisition Corp.
10.28 Lease dated January 6, 1997 by and between ES&L Service and NES
Acquisition Corp.*
10.29 Lease Agreement dated as of May 30, 1990 by and between Weeks
Super Partnership, LTD and Aerial Platforms, Inc.*
10.30 Lease Agreement dated as of March 17, 1997 by and between James
Horsley and NES Acquisition Corp. relating to 3440 Red Bluff Road,
Pasadena, Texas.*
10.31 Lease dated as of April 1, 1997 by and between BAT Rentals, Inc.
and BAT Acquisition Corp.*
10.32 Lease Agreement dated as of July 18, 1997 by and between March S.
Trubitz, Suellen Trubitz and MST Enterprises, Inc.*
10.33 Stock Purchase Agreement dated as of March 9, 1998 by and among
the Company, Albany Ladder Company, Inc. and the stockholders of
Albany Ladder Company, Inc.
</TABLE>
II-5
<PAGE>
<TABLE>
<C> <S> <C>
10.34 Stock Purchase Agreement dated as of April 1, 1998 by and among
the Company, Falconite, Inc. and the stockholders of Falconite,
Inc.
10.35 Form of U.S. Underwriting Agreement among the Company, the
Selling Stockholders referred to therein, Smith Barney Inc.,
William Blair & Company, L.L.C., Credit Suisse First Boston
Corporation, Donaldson, Lufkin & Jenrette Securities
Corporation and NationsBanc Montgomery Securities LLC.***
10.36 Form of International Underwriting Agreement among the Company,
the Selling Stockholders referred to therein, Smith Barney
Inc., William Blair & Company, L.L.C., Credit Suisse First
Boston (Europe) Limited, Donaldson, Lufkin & Jenrette
International and NationsBanc Montgomery Securities LLC.***
12.1 Statement Regarding Computation of Ratios of Earnings to Fixed
Charges.
21.1 Subsidiaries of the Company.
23.1 Consent of Price Waterhouse LLP.
23.2 Consent of Albin, Randall & Bennett.
23.3 Consent of Coopers & Lybrand L.L.P.
23.4 Consent of KPMG Peat Marwick L.L.P.
23.5 Consent of Lawrence, Blackburn Meek Maxey & Co. P.C.
23.6 Consent of Kirkland & Ellis (included in Exhibit 5.1).
24.1(i) Powers of Attorney of Directors and Officers of the Company,
NES Acquisition Corp. and BAT Acquisition Corp.*
24.1(ii) Powers of Attorney of Directors and Officers of NES Michigan
Acquisition Corp., NES East Acquisition Corp. and Albany Ladder
Company, Inc.
25.1 Statement of Eligibility of Trustee on Form T-1.*
27.1 Financial Data Schedule.
99.1 Form of Letter of Transmittal.*
99.2 Form of Notice of Guaranteed Delivery.*
99.3 Form of Tender Instructions.*
</TABLE>
- --------
*Filed previously.
**Management contract or compensatory plan or arrangement.
***To be filed by amendment.
(B) FINANCIAL STATEMENT SCHEDULES.
Schedule I--National Equipment Services, Inc. (Parent Company Only)--
Condensed Financial Information of Registrant.
Schedule II--National Equipment Services, Inc. and Subsidiaries--Valuation
and Qualifying Accounts and Reserves.
II-6
<PAGE>
ITEM 22. UNDERTAKINGS.
(a) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the registrant pursuant to the foregoing provisions, or otherwise, the
registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the
Securities Act of 1933 and is, therefore, unenforceable. In the event that a
claim for indemnification against such liabilities (other than the payment by
the registrant of expenses incurred or paid by a director, officer or
controlling person of the registrant in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or controlling
person in connection with the securities being registered, the registrant
will, unless in the opinion of its counsel the matter has been settled by
controlling precedent, submit to a court of appropriate jurisdiction the
question whether such indemnification by it is against public policy as
expressed in the Securities Act of 1933 and will be governed by the final
adjudication of such issue.
(b) The undersigned registrant hereby undertakes to respond to requests for
information that is incorporated by reference into the prospectus pursuant to
Item 4, 10(b), 11, or 13 of this Form, within one business day of receipt of
such request, and to send the incorporated documents by first class mail or
other equally prompt means. This includes information contained in documents
filed subsequent to the effective date of the registration statement through
the date of responding to the request.
(c) The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933.
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most recent
post-effective amendment thereof) which individually or in the
aggregate, represent a fundamental change in the information set forth
in the registration statement. Notwithstanding the foregoing, any
increase or decrease in volume of securities offered (if the total
dollar value of securities offered would not exceed that which was
registered) and deviation from the low or high end of the estimated
maximum offering range may be reflected in the form of prospectus filed
with the Commission pursuant to Rule 424(b) if, in the aggregate, the
changes in volume and price represent no more than a 20% change in the
maximum aggregate offering price set forth in the "Calculation of
Registration Fee" table in the effective registration statement.
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the registration statement or
any material change to such information in the registration statement.
(2) That, for the purpose of determining any liability under the Securities
Act of 1933, each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therin, and the
offering of such securities at the time shall be deemed to be the initial bona
fide offering thereof; and
(3) To remove from registration by means of a post-effective amendment any
of the securities being registered which remain unsold at the termination of
the offering.
II-7
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, National
Equipment Services, Inc. has duly caused this Amendment No.1 to Registration
Statement on Form S-4 to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of Evanston, State of Illinois, on April 20,
1998.
NATIONAL EQUIPMENT SERVICES, INC.
/s/ PAUL R. INGERSOLL
BY: _________________________________
Paul R. Ingersoll
Vice President and Secretary
Pursuant to the requirements of the Securities Act of 1933, this Amendment
No.1 to Registration Statement on Form S-4 has been signed on April 20, 1998
by the following persons in the capacities indicated:
<TABLE>
<CAPTION>
SIGNATURE CAPACITY
--------- --------
<S> <C>
* President, Chief Executive Officer and
___________________________________________ Director (Principal Executive Officer)
Kevin P. Rodgers
* Chief Financial Officer (Principal
___________________________________________ Financial Officer and Principal
Dennis J. O'Connor Accounting Officer)
* Chairman of the Board
___________________________________________
Carl D. Thoma
* Director
___________________________________________
William C. Kessinger
* Director
___________________________________________
Ronald St. Clair
</TABLE>
- --------
* The undersigned, by signing his name hereto, does sign and execute this
Amendment No.1 to Registration Statement on Form S-4 on behalf of the above
named officers and directors of National Equipment Services, Inc. pursuant
to the Power of Attorney executed by such officers and directors and filed
with the Securities and Exchange Commission.
<TABLE>
<S> <C>
/s/ PAUL R. INGERSOLL
___________________________________________
Paul R. Ingersoll
Attorney-in-fact
</TABLE>
II-8
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, NES Acquisition
Corp. has duly caused this Amendment No. 1 to Registration Statement on Form
S-4 to be signed on its behalf by the undersigned, thereunto duly authorized,
in the City of Evanston, State of Illinois, on April 20, 1998.
NES ACQUISITION CORP.
/s/ PAUL R. INGERSOLL
BY: _________________________________
Paul R. Ingersoll
Vice President, Treasurer and
Secretary
Pursuant to the requirements of the Securities Act of 1933, this Amendment
No.1 to Registration Statement on Form S-4 has been signed on April 20, 1998
by the following persons in the capacities indicated:
<TABLE>
<CAPTION>
SIGNATURE CAPACITY
--------- --------
<S> <C>
* Chief Executive Officer and Director
___________________________________________ (Principal Executive Officer)
Kevin P. Rodgers
* Chief Financial Officer (Principal
___________________________________________ Financial Officer and Principal
Dennis J. O'Connor Accounting Officer)
* Director
___________________________________________
Carl D. Thoma
* Director
___________________________________________
</TABLE> William C. Kessinger
- --------
*The undersigned, by signing his name hereto, does sign and execute this
Amendment No. 1 to Registration Statement on Form S-4 on behalf of the
above named officers and directors of NES Acquisition Corp. pursuant to the
Power of Attorney executed by such officers and directors and filed with
the Securities and Exchange Commission.
/s/ PAUL R. INGERSOLL
- -------------------------------
Paul R. Ingersoll
Attorney-in-fact
II-9
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, NES Michigan
Acquisition Corp. has duly caused this Amendment No. 1 to Registration
Statement on Form S-4 to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of Evanston, State of Illinois, on April 20,
1998.
NES MICHIGAN ACQUISITION CORP.
/s/ PAUL R. INGERSOLL
BY: _________________________________
Paul R. Ingersoll
Vice President, Treasurer and
Secretary
Pursuant to the requirements of the Securities Act of 1933, this Amendment
No.1 to Registration Statement on Form S-4 has been signed on April 20, 1998
by the following persons in the capacities indicated:
<TABLE>
<CAPTION>
SIGNATURE CAPACITY
--------- --------
<S> <C>
* President, Chief Executive Officer and
___________________________________________ Director (Principal Executive Officer)
Kevin P. Rodgers
* Chief Financial Officer (Principal
___________________________________________ Financial Officer and Principal
Dennis J. O'Connor Accounting Officer)
* Director
___________________________________________
Carl D. Thoma
* Director
___________________________________________
</TABLE> William C. Kessinger
- --------
*The undersigned, by signing his name hereto, does sign and execute this
Amendment No. 1 to Registration Statement on Form S-4 on behalf of the
above named officers and directors of NES Michigan Acquisition Corp.
pursuant to the Power of Attorney executed by such officers and directors
and filed with the Securities and Exchange Commission.
/s/ PAUL R. INGERSOLL
- -------------------------------
Paul R. Ingersoll
Attorney-in-fact
II-10
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, NES East
Acquisition Corp. has duly caused this Amendment No. 1 to Registration
Statement on Form S-4 to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of Evanston, State of Illinois, on April 20,
1998.
NES EAST ACQUISITION CORP.
/s/ PAUL R. INGERSOLL
By:__________________________________
Paul R. Ingersoll
Vice President, Treasurer and
Secretary
Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 1 to Registration Statement on Form S-4 has been signed on April 20, 1998
by the following persons in the capacities indicated:
<TABLE>
<CAPTION>
SIGNATURE CAPACITY
--------- --------
<S> <C>
* President, Chief Executive Officer and
___________________________________________ Director (Principal Executive Officer)
Kevin P. Rodgers
* Chief Financial Officer (Principal
___________________________________________ Financial Officer and Principal
Dennis J. O'Connor Accounting Officer)
* Director
___________________________________________
Carl D. Thoma
* Director
___________________________________________
William C. Kessinger
</TABLE>
- --------
*The undersigned, by signing his name hereto, does sign and execute this
Amendment No. 1 to Registration Statement on Form S-4 on behalf of the
above named officers and directors of NES East Acquisition Corp. pursuant
to the Power of Attorney executed by such officers and directors and filed
with the Securities and Exchange Commission.
/s/ PAUL R. INGERSOLL
- ------------------------------------------
Paul R. Ingersoll
Attorney-in-fact
II-11
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, BAT Acquisition
Corp. has duly caused this Amendment No. 1 to Registration Statement on Form
S-4 to be signed on its behalf by the undersigned, thereunto duly authorized,
in the City of Evanston, State of Illinois, on April 20, 1998.
BAT ACQUISITION CORP.
/s/ PAUL R. INGERSOLL
BY: _________________________________
Paul R. Ingersoll
Vice President, Treasurer and
Secretary
Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 1 to Registration Statement on Form S-4 has been signed on April 20, 1998
by the following persons in the capacities indicated:
<TABLE>
<CAPTION>
SIGNATURE CAPACITY
--------- --------
<S> <C>
* President, Chief Executive Officer and
___________________________________________ Director (Principal Executive Officer)
Kevin P. Rodgers
* Chief Financial Officer (Principal
___________________________________________ Financial Officer and Principal
Dennis J. O'Connor Accounting Officer)
* Director
___________________________________________
Carl D. Thoma
* Director
___________________________________________
William C. Kessinger
</TABLE>
- --------
*The undersigned, by signing his name hereto, does sign and execute this
Amendment No. 1 to Registration Statement on Form S-4 on behalf of the
above named officers and directors of BAT Acquisition Corp. pursuant to the
Power of Attorney executed by such officers and directors and filed with
the Securities and Exchange Commission.
/s/ PAUL R. INGERSOLL
- -------------------------------
Paul R. Ingersoll
Attorney-in-fact
II-12
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, Albany Ladder
Company, Inc. has duly caused this Amendment No. 1 to Registration Statement
on Form S-4 to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Evanston, State of Illinois, on April 20, 1998.
ALBANY LADDER COMPANY, INC.
/s/ PAUL R. INGERSOLL
BY: ____________________________
Paul R. Ingersoll
Vice President, Treasurer and
Secretary
Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 1 to Registration Statement on Form S-4 has been signed on April 20, 1998
by the following persons in the capacities indicated:
<TABLE>
<CAPTION>
SIGNATURE CAPACITY
--------- --------
<S> <C>
* President, Chief Executive Officer and
___________________________________________ Director (Principal Executive Officer)
Kevin P. Rodgers
* Chief Financial Officer (Principal
___________________________________________ Financial Officer and Principal
Dennis J. O'Connor Accounting Officer)
* Director
___________________________________________
Carl D. Thoma
* Director
___________________________________________
William C. Kessinger
</TABLE>
- --------
*The undersigned, by signing his name hereto, does sign and execute this
Amendment No. 1 to Registration Statement on Form S-4 on behalf of the
above named officers and directors of Albany Ladder Company, Inc. pursuant
to the Power of Attorney executed by such officers and directors and filed
with the Securities and Exchange Commission.
/s/ PAUL R. INGERSOLL
- -------------------------------
Paul R. Ingersoll
Attorney-in-fact
II-13
<PAGE>
SCHEDULE I
NATIONAL EQUIPMENT SERVICES, INC.
(PARENT COMPANY ONLY)
CONDENSED FINANCIAL INFORMATION OF REGISTRANT
BALANCE SHEETS
(IN THOUSANDS)
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31,
1996 1997
------------ ------------
<S> <C> <C>
ASSETS:
Cash and cash equivalents.......................... $ 12 $ 34,789
Property and equipment, net........................ 17 87
Investment in subsidiaries......................... -- 86,504
Loan origination costs, net........................ -- 6,270
Prepaid and other assets, net...................... 187 222
----- --------
Total assets..................................... $ 216 $127,872
===== ========
LIABILITIES:
Accounts payable................................... $ -- $ 1,140
Accrued interest................................... -- 1,057
Accrued expenses and other liabilities............. 110 420
Debt............................................... -- 98,782
----- --------
Total liabilities................................ 110 101,399
Commitments and contingencies (Note 5)
STOCKHOLDERS' EQUITY:
Class A Common stock, $0.01 par, 50,000 shares
authorized, 0 and 25,011 shares issued and
outstanding, respectively......................... -- 1
Class B Common stock, $0.01 par, 150,000 shares
authorized, 30,108 and 89,900 shares issued and
outstanding, respectively......................... 1 1
Additional paid-in capital......................... 301 25,663
Retained earnings (accumulated deficit)............ (195) 910
Stock subscriptions receivable..................... (1) (102)
----- --------
Total stockholders' equity....................... 106 26,473
----- --------
Total liabilities and stockholders' equity....... $ 216 $127,872
===== ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
S-1
<PAGE>
SCHEDULE I
NATIONAL EQUIPMENT SERVICES, INC.
(PARENT COMPANY ONLY)
CONDENSED FINANCIAL INFORMATION OF REGISTRANT
STATEMENTS OF OPERATIONS
(IN THOUSANDS)
<TABLE>
<CAPTION>
FOR THE PERIOD
FROM INCEPTION
(JUNE 4, 1996) FOR THE YEAR
THROUGH ENDED
DECEMBER 31, DECEMBER 31,
1996 1997
-------------- ------------
<S> <C> <C>
Equity in net income of subsidiaries................ $ -- $2,060
Selling, general and administrative expenses........ 333 1,352
Non-rental depreciation and amortization............ 3 54
----- ------
Operating income (loss)............................. (336) 654
Other income, net................................... -- 1,155
Interest income (expense), net...................... 4 (704)
----- ------
Income (loss) before income taxes................... (332) 1,105
Income tax benefit.................................. (137) --
----- ------
Net income (loss)................................... $(195) $1,105
===== ======
</TABLE>
The accompanying notes are an integral part of these financial statements.
S-2
<PAGE>
SCHEDULE I
NATIONAL EQUIPMENT SERVICES, INC. AND SUBSIDIARIES
(PARENT COMPANY ONLY)
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
FOR THE PERIOD
FROM INCEPTION
(JUNE 4, 1996) FOR THE YEAR
THROUGH ENDED
DECEMBER 31, DECEMBER 31,
1996 1997
-------------- ------------
<S> <C> <C>
OPERATING ACTIVITIES:
Net income (loss)................................ $(195) $ 1,105
Adjustments to reconcile net income (loss) to net
cash provided by operating activities:
Depreciation and amortization.................. 3 447
Undistributed equity income in subsidiaries.... -- (2,060)
Changes in operating assets and liabilities:
Prepaid and other assets..................... (187) (72)
Accounts payable............................. -- 1,140
Accrued expenses and other liabilities....... 110 1,367
----- ---------
Net cash provided by (used in) operating
activities................................ (269) 1,927
----- ---------
INVESTING ACTIVITIES:
Net cash paid for acquisitions................... -- (68,994)
Investment in subsidiaries....................... -- (15,450)
Purchases of property and equipment.............. (20) (88)
----- ---------
Net cash used in investing activities...... (20) (84,532)
----- ---------
FINANCING ACTIVITIES:
Proceeds from long-term debt..................... -- 222,307
Payments on long-term debt....................... -- (123,526)
Net proceeds from sales of common stock.......... 301 25,263
Payments of loan origination costs............... -- (6,662)
----- ---------
Net cash provided by financing activities.. 301 117,382
----- ---------
Net increase in cash and cash equivalents.......... 12 34,777
Cash and cash equivalents at beginning of period... -- 12
----- ---------
Cash and cash equivalents at end of period......... $ 12 $ 34,789
===== =========
SUPPLEMENTAL NON-CASH FLOW INFORMATION:
Cash paid for interest........................... $ -- $ 2,707
===== =========
Cash paid for income taxes....................... $ -- $ 1,113
===== =========
Non-cash issuance of stock....................... $ 1 $ 101
===== =========
</TABLE>
The accompanying notes are an integral part of these financial statements.
S-3
<PAGE>
SCHEDULE I
NATIONAL EQUIPMENT SERVICES, INC.
(PARENT COMPANY ONLY)
CONDENSED FINANCIAL INFORMATION OF REGISTRANT
STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
(IN THOUSANDS)
<TABLE>
<CAPTION>
COMMON STOCK RETAINED TOTAL
--------------- ADDITIONAL EARNINGS STOCK STOCK-
CLASS A CLASS B PAID-IN (ACCUMULATED SUBSCRIPTIONS HOLDERS'
SHARES SHARES CAPITAL DEFICIT) RECEIVABLE EQUITY
------- ------- ---------- ------------ ------------- --------
<S> <C> <C> <C> <C> <C> <C>
Shares issued at
inception (June 4,
1996).................. $-- $ 1 $ 301 $ -- $ (1) $ 301
Net loss................ -- -- -- (195) -- (195)
---- ---- ------- ----- ----- -------
Balance at December 31,
1996................... -- 1 301 (195) (1) 106
Sale of shares.......... 1 -- 25,362 -- (101) 25,262
Net income.............. -- -- -- 1,105 -- 1,105
---- ---- ------- ----- ----- -------
Balance at December 31,
1997................... $ 1 $ 1 $25,663 $ 910 $(102) $26,473
==== ==== ======= ===== ===== =======
</TABLE>
The accompanying notes are an integral part of these financial statements.
S-4
<PAGE>
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION
National Equipment Services, Inc. ("NES") was organized on June 4, 1996
under the laws of Delaware for the purpose of owning and operating equipment
rental facilities by means of acquiring existing businesses. NES is primarily
involved in the rental of equipment to construction and industrial users. NES
operates from locations in Alabama, Georgia, Louisiana, Nevada, Texas and
Virginia.
FINANCIAL STATEMENT PRESENTATION
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
CASH AND CASH EQUIVALENTS
Cash and cash equivalents are highly liquid investments with original
maturities of three months or less.
ADOPTION OF NEW ACCOUNTING PRONOUNCEMENT
Since inception, NES adopted Statement of Financial Accounting Standards
(SFAS) No. 121, Accounting for the Impairment of Long-Lived Assets and Long-
Lived Assets to be Disposed of, which requires impairment losses to be
recorded on long-lived assets used in operations when indicators of impairment
are present and the assets' carrying amounts and related goodwill exceed the
undiscounted cash flows estimated to be generated by those assets. SFAS No.
121 also requires impairment losses to be recorded when the carrying amount of
long-lived assets that are expected to be disposed of exceeds their fair
values, net of disposal costs. SFAS No. 121 did not have a material impact on
NES's financial position or results of operations for the period from
inception (June 4, 1996) through December 31, 1996 or year ended December 31,
1997.
EARNINGS PER SHARE
In February 1997, the Financial Accounting Standards Board ("FASB") issued
SFAS No. 128 "Earnings per Share." For the Company, SFAS No. 128 will be
effective for the year ended December 31, 1997. SFAS No. 128 simplifies the
standards required under current accounting rules for computing earnings per
share and replaces the presentation of primary earnings per share and fully
diluted earnings per share with a presentation of basic earnings per share
("basic EPS") and diluted earnings per share ("diluted EPS"). Basic EPS
excludes dilution and is determined by dividing income available to common
stockholders by the weighted average number of common shares outstanding
during the period. Diluted EPS reflects the potential dilution that could
occur if securities and other contracts to issue common stock were exercised
or converted into common stock. Diluted EPS is computed similarly to fully
diluted earnings per share under current accounting rules. The implementation
of SFAS No. 128 is not expected to have a material effect on the Company's
earnings per share as determined under current accounting rules.
REPORTING COMPREHENSIVE INCOME
In June 1997, the FASB issued SFAS No. 130, "Reporting Comprehensive
Income." SFAS No. 130 establishes standards for reporting and display of
comprehensive income and its components (revenues, expenses, gains, and
losses) in a full set of general-purpose financial statements. The Statement
requires that all items that are required to be recognized under accounting
standards as components of comprehensive income be reported in a financial
statement that is displayed with the same prominence as other financial
statements. SFAS No. 130 requires that an enterprise (a) classify items of
other comprehensive income by their nature in a financial statement and (b)
display the accumulated balance of other comprehensive income separately from
retained earnings and additional paid-in capital in the equity section of a
statement of financial position. The Statement is
S-5
<PAGE>
effective for fiscal years beginning after December 15, 1997. Reclassification
of financial statements for earlier periods provided for comparative purposes
is required. The Company intends to adopt SFAS No. 130 in 1998.
LOAN ORIGINATION COSTS
Loan origination costs are stated at cost and amortized to interest expense
using the effective interest method over the life of the loan. Amortization
expense related to loan origination costs aggregated $392,000 for the year
ended December 31, 1997.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying amounts reported in the consolidated balance sheets for cash,
trade accounts receivable, accounts payable and other liabilities approximate
fair value due to the immediate to short-term maturity of these financial
instruments. The fair value of the Senior Subordinated Notes is based on
quoted market prices and approximates the carrying value at December 31, 1997.
The carrying value of bank debt approximates fair value as the interest on the
bank debt is reset every 30 to 90 days to reflect current market rates.
INCOME TAXES
Provisions are made to record deferred income taxes in recognition of items
reported differently for financial reporting purposes than for federal and
state income tax purposes. NES records deferred income taxes using the
liability method in accordance with Statement of Financial Accounting
Standards No. 109, Accounting for Income Taxes. The Company and its
subsidiaries will file a consolidated tax return for the year ended December
31, 1997.
RELATED PARTY TRANSACTIONS
As disclosed in these financial statements, NES has participated in certain
transactions with related parties.
2. ACQUISITIONS
In 1997, NES purchased the following rental equipment companies:
<TABLE>
<CAPTION>
PURCHASE
ACQUISITION DATE COMPANY LOCATION PRICE
----------------- ----------------------------- ---------------- -----------
<C> <S> <C> <C>
January 6, 1997 Brazos Rental & Tool, Inc.,
Industrial Crane Maintenance
Systems, Inc., and Safe Load
Work Products, Inc. Brazoria, TX $ 5,000,000
February 18, 1997 Aerial Platforms, Inc. Atlanta, GA $ 4,150,000
March 17, 1997 Lone Star Rentals, Inc. Houston, TX $10,950,000
April 1, 1997 BAT Rentals, Inc. Las Vegas, NV $15,900,000
July 1, 1997 Sprintank Houston, TX $25,300,000
July 18, 1997 MST Enterprises, Inc. Harrisonburg, VA $ 6,000,000
</TABLE>
The purchase prices above are subject to a customary purchase price
adjustment mechanism and assumption of certain seller liabilities.
S-6
<PAGE>
The following pro forma financial information represents the unaudited pro
forma results of operations as if the aforementioned acquisitions had been
completed on January 1, 1996 and January 1, 1997, after giving effect to
certain adjustments including increased depreciation and amortization of
property and equipment and other assets and interest expense for acquisition
debt. These pro forma results have been prepared for comparative purposes only
and do not purport to be indicative of the results of operations which would
have been achieved had these acquisitions been completed as of these dates,
nor are the results indicative of NES's future results of operations.
<TABLE>
<CAPTION>
FOR THE YEAR FOR THE YEAR
ENDED ENDED
DECEMBER 31, DECEMBER 31,
1996 1997
(UNAUDITED) (UNAUDITED)
------------ -------------
(IN THOUSANDS)
<S> <C> <C>
Revenues....................................... $48,040 $56,858
Operating income............................... 9,012 10,382
Net income..................................... 158 1,143
</TABLE>
3. DEBT
Debt consists of the following (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
1997
------------
<S> <C>
Senior subordinated notes, interest at 10% payable semi-
annually, due November 30, 2004............................ $98,782
Revolving credit facility loans, interest at the federal
funds rate plus 0.5% or prime rate both plus 1.0%, or the
eurodollar rate plus 2.5%, due no later than July 1, 2002.. --
Term loan, interest at the federal funds rate plus 0.5% or
prime rate both plus 1.0%, or the eurodollar rate plus
2.5%, principal payments due quarterly of $625 through June
1, 1998, $875 through June 1, 1999 and $1,125 through June
1, 2001.................................................... --
-------
$98,782
=======
</TABLE>
On November 20, 1997, NES issued $100 million of Senior Subordinated Notes
(the "Notes") at a discount netting proceeds of $98,767,000. NES accretes the
original issue discount over the term of the Notes using the effective
interest method. The Notes mature on November 30, 2004. Interest on the Notes
accrues at a rate of 10% per year and is payable semi-annually in arrears on
May 30 and November 30 commencing on May 30, 1998.
The Notes are redeemable at the option of the Company at any time after
November 30, 2001 at a redemption price of 105% of the principal amount from
November 30, 2001 to November 29, 2002, at 102.5% from November 30, 2002 to
November 29, 2003 and 100% after November 30, 2003, plus accrued and unpaid
interest. The Company may at any time prior to November 30, 2000 on any one or
more occasions redeem up to 33% of the aggregate principal amount of the Notes
at a redemption price of 110% of the principal amount plus accrued and unpaid
interest with the net cash proceeds of a public offering of common stock of
NES within 45 days of the closing of such public offering. In addition, at any
time prior to November 30, 2001, the Notes may be redeemed as a whole, at the
option of NES, upon the occurrence of or in connection with a change of
control. Upon certain changes in control, the noteholders will have the right
to require redemption at a cash price of 101% of the principal amount plus
accrued and unpaid interest.
All of the Company's wholly-owned subsidiaries make full, unconditional,
joint and several guarantees of the notes. The separate financial statements
of each of these wholly-owned subsidiaries are not presented as management
believes they are not individually meaningful for presentations.
S-7
<PAGE>
On July 1, 1997, NES entered into a credit facility agreement with First
Union Commercial Corporation (the "Credit Agreement"). The Credit Agreement
provides for a secured revolving line of credit of $100 million and a term
loan of $15 million. Interest accrues at rates of the greater of the annual
Federal Funds Rate plus 0.5% or the prime rate both plus 0.5% to 1.25% based
on NES's leverage ratio or at a rate of LIBOR/(1- eurodollar reserve
percentage) plus 2.0% to 2.75% based on NES's leverage ratio. Principal
payments for credit facility loans (to be applied first to the term loan and
if necessary to revolving loans) are due annually at the lesser of 25% of
excess cash flow or $1 million. Principal payments for the term loan are due
quarterly at $625,000 for the first four quarters, $875,000 for the next four
quarters and $1,125,000 for the next eight quarters. Substantially all assets
and stock of NES are pledged as collateral for the credit facility. NES pays
commitment fees of 0.5% to 0.375% on the unused portion of the outstanding
line of credit balance based on NES's leverage ratio. The term loan was repaid
as of December 31, 1997.
The Indenture for the Notes and the Credit Agreement contain a number of
covenants that, among other things, require NES to maintain certain financial
ratios and set certain limitations on the granting of liens, assets sales,
additional indebtedness, transactions with affiliates, restricted payments,
investments and issuances of stock. NES is in compliance with all covenants.
The average interest rate for the year ended December 31, 1997 was 9.8%. NES
incurred interest expense of $76,000 on borrowings from related parties for
the year ended December 31, 1997.
4. INCOME TAXES
The income tax provision is comprised of current federal and state income
tax benefit of $(137,100) for the period from inception (June 4, 1996) through
December 31, 1996. Deferred tax benefit for this period was immaterial.
The provision for income taxes differs from the amount of income tax
determined by applying the U.S. statutory federal income tax rate of 34% to
income before income taxes as a result of the following (in thousands):
<TABLE>
<CAPTION>
FOR THE PERIOD
FROM INCEPTION
(JUNE 4, 1996) FOR THE YEAR
THROUGH ENDED
DECEMBER 31, DECEMBER 31,
1996 1997
-------------- ------------
<S> <C> <C>
Federal income taxes.......................... $(113) $654
State income taxes, net of federal benefit.... (16) 94
Other......................................... (8) 70
----- ----
$(137) $818
===== ====
</TABLE>
For the year ended December 31, 1997, the income tax provision was recorded
at the subsidiary level.
5. COMMON STOCK
On June 4, 1996, in connection with the formation of NES, NES authorized
25,000 shares of Class A Common stock (24,250 of which were reserved for
issuance to NES's majority stockholder), par value $0.01, and 150,000 shares
of Class B Common stock (75,000 of which were reserved for issuance to NES's
majority stockholder), par value $0.01. On October 28, 1997, the authorized
shares of Class A Common stock were increased to 50,000.
Each calendar quarter, each share of Class A Common is entitled to a yield
in the amount of 10% per year of the sum of such share's unreturned original
cost plus the unpaid yield for all prior quarters. As of December 31, 1997,
the unpaid yield on the Class A Common aggregated $1,608,000. Class A Common
stockholders, as a
S-8
<PAGE>
class, are entitled to a number of votes equal to 10% of the number of votes
allocable to all Common Stock. Upon any distribution, Class A Common
stockholders are entitled to (i) the unpaid yield, (ii) any unreturned
original cost of the shares and (iii) 10% of any remaining distribution. Class
B Common stockholders are entitled to 90% of any remaining distribution after
payment to the Class A Common stockholders of all payments under clauses (i)
and (ii) set forth in the preceding sentence. Additionally, only in the event
of a successful initial public offering can the Class A Common stockholders
require a mandatory redemption of any or all of the shares attributable to the
unpaid yield and original cost of the shares.
NES may not declare additional distributions or dividends other than the
amounts described above for Class A Common shares, issue any debt securities
containing equity features, sell or dispose of more than 5% of the
consolidated assets of the Company in any transaction or series of related
transactions, acquire an interest in a business, acquire a business outside of
the rental equipment industry, or enter into certain related party
transactions, without the consent of a majority of the Class A Common and
Class B Common stockholders.
Class B Common stock sold to executives of NES vests over a 5 year period.
Unpaid notes receivable of $1,000 and $102,000 as of December 31, 1996 and
December 31, 1997, respectively, from executives of NES for shares of Class B
Common stock are classified as stock subscriptions receivable.
6. COMMITMENTS AND CONTINGENCIES
NES is party to legal proceedings and potential claims arising in the
ordinary course of its business. In the opinion of management, the ultimate
resolution of these matters will have no material adverse effect on NES's
financial position, results of operations or cash flows.
7. EMPLOYEE BENEFIT PLANS
The Company sponsors a profit sharing and 401(k) plan (the "Plan") in which
employees over 21 years of age with greater than one-half year of service are
eligible. Under the Plan, NES contributes a discretionary percentage (2.5% for
the year ended December 31, 1997) of each eligible employee's base annual
wages to a trust out of its net profits. In addition, eligible employees can
defer up to 15% of their salary with a partially matching contribution by NES
of 50% of the first 5% of the employee contribution. The employer
contributions vest over a five year period. Contributions to the Plan were
made by the Company's subsidiaries.
8. RELATED PARTY TRANSACTIONS
Pursuant to a Professional Services Agreement dated January 6, 1997, NES
pays management fees of $200,000 per year and investment fees of 1% of all
debt and equity financings of NES to an affiliate of NES's majority
stockholder, who owns 95.0% of the Class A Common stock and 83% of the Class B
Common stock. Total fees paid during the year ended December 31, 1997 were
$417,000 and fees owed at December 31, 1997 were $630,000.
In connection with several of the acquisitions, NES entered into lease
agreements for certain facilities with employees of NES who were prior owners
of the acquired companies. Amounts due under these leases are included in the
future minimum rental commitments under noncancelable operating leases
schedule in Note 10 above.
Stock subscriptions receivable of $1,000 and $102,000 as of December 31,
1996 and 1997, respectively, relate to notes due from officers of NES related
to purchases of Class B Common Stock and are secured by the purchased Class B
Common shares. Interest on the notes accrues at the federal funds rate and is
payable in full at maturity on June 4, 2006 or upon termination of employment.
Accrued interest on these notes was $0 and $8,000 for the period from
inception (June 4, 1996) through December 31, 1996 and the year ended December
31, 1997, respectively.
S-9
<PAGE>
9. SUBSEQUENT EVENTS
Subsequent to year end, NES purchased the following rental equipment
companies:
<TABLE>
<CAPTION>
PURCHASE
ACQUISITION DATE COMPANY LOCATION PRICE
---------------- --------------------------- ---------------- -----------
<C> <S> <C> <C>
January 12, 1998 Genpower Pump and Deer Park, TX $ 8,000,000
Equipment Co.
January 16, 1998 Eagle Scaffolding and
Equipment Co. Las Vegas, NV $ 3,290,000
January 23, 1998 Grand Hi-Reach, Inc. Byron Center, MI $ 8,120,000
February 4, 1998 Work Safe Supply Company, Grandville, MI $ 7,845,000
Inc.
March 2, 1998 Dragon Rentals (division of Beaumont, TX $23,000,000
the Modern Group, Inc.)
March 4, 1998 Cormier Equipment Oakland, ME $27,500,000
Corporation
March 30, 1998 Albany Ladder Albany, NY $43,454,000
</TABLE>
The purchase prices above are subject to a customary purchase price
adjustment mechanism and assumption of certain seller liabilities. These
acquisitions will be accounted for under the purchase method based on the
purchase prices. Under the purchase method of accounting NES will allocate the
costs of these acquisitions, as of the respective closing dates, to the assets
acquired and liabilities assumed based on their respective fair values.
The operating results of these acquisitions will be included in NES's
consolidated results of operations from the date of acquisition. The following
pro forma financial information represents the unaudited pro forma results of
operations as if the aforementioned acquisitions had been completed on January
1, 1996 and January 1, 1997, after giving effect to certain adjustments
including increased depreciation and amortization of property and equipment
and intangible assets and interest expense for acquisition debt. These pro
forma results have been prepared for comparative purposes only and do not
purport to be indicative of the results of operations which would have been
achieved had these acquisitions been completed as of these dates, nor are the
results indicative of NES's future results of operations.
<TABLE>
<CAPTION>
FOR THE YEAR FOR THE YEAR
ENDED ENDED
DECEMBER 31, DECEMBER 31,
1996 1997
(UNAUDITED) (UNAUDITED)
------------ ------------
(IN THOUSANDS)
<S> <C> <C>
Revenues........................................ $120,475 $146,000
Operating income................................ 19,234 26,821
Net income...................................... 751 5,439
</TABLE>
Additionally, subsequent to year end, NES entered into a definitive purchase
agreement to acquire a rental equipment company with operations in nine
southern and mid-western states. This pending acquisition is expected to close
in the second quarter of 1998.
S-10
<PAGE>
NATIONAL EQUIPMENT SERVICES, INC. AND SUBSIDIARIES
SCHEDULE II -- VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
(AMOUNTS IN THOUSANDS OF DOLLARS)*
<TABLE>
<CAPTION>
COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E
ADDITIONS
---------------------------------- -------
(1) (2)
BALANCE AT CHARGED TO COST CHARGED TO OTHER WRITE- BALANCE AT
DESCRIPTION JANUARY 1, 1997 AND EXPENSES ACCOUNTS--DESCRIBE OFFS DECEMBER 31, 1997
- ------------------------ --------------- --------------- ------------------ -------- -----------------
<S> <C> <C> <C> <C> <C> <C> <C>
Allowance for doubtful
accounts............... $ 0 $479 $ 0 $225 $254
Reserve for obsolete
inventory.............. $ 0 $732 $ 0 $242 $490
</TABLE>
- --------
* There were no valuation and qualifying accounts and reserves as of December
31, 1996 or during the period then ended.
S-11
<PAGE>
Exhibit 3.3
CERTIFICATE OF INCORPORATION
----------------------------
OF
--
NES MICHIGAN ACQUISITION CORP.
------------------------------
ARTICLE ONE
-----------
The name of the corporation is NES Michigan Acquisition Corp.
ARTICLE TWO
-----------
The address of the corporation's registered office in the State of
Delaware is 1013 Centre Road, in the City of Wilmington, County of New Castle,
19805. The name of its registered agent at such address is Corporation Service
Company.
ARTICLE THREE
-------------
The nature of the business or purposes to be conducted or promoted is
to engage in any lawful act or activity for which corporations may be organized
under the General Corporation Law of the State of Delaware.
ARTICLE FOUR
------------
The total number of shares of stock which the corporation has
authority to issue is 1,000 shares of Common Stock, with a par value of $.01 per
share.
ARTICLE FIVE
------------
The name and mailing address of the sole incorporator are as follows:
<PAGE>
NAME MAILING ADDRESS
---- ---------------
Joan D. Donovan 200 East Randolph Drive
Suite 5700
Chicago, Illinois 60601
ARTICLE SIX
-----------
The corporation is to have perpetual existence.
ARTICLE SEVEN
-------------
In furtherance and not in limitation of the powers conferred by
statute, the board of directors of the corporation is expressly authorized to
make, alter or repeal the by-laws of the corporation.
ARTICLE EIGHT
-------------
Meetings of stockholders may be held within or without the State of
Delaware, as the by-laws of the corporation may provide. The books of the
corporation may be kept outside the State of Delaware at such place or places as
may be designated from time to time by the board of directors or in the by-laws
of the corporation. Election of directors need not be by written ballot unless
the by-laws of the corporation so provide.
ARTICLE NINE
------------
To the fullest extent permitted by the General Corporation Law of the
State of Delaware as the same exists or may hereafter be amended, a director of
this corporation shall not be liable to the corporation or its stockholders for
monetary damages for a breach of fiduciary duty as a director. Any repeal or
modification of this ARTICLE NINE shall not adversely affect any right or
------------
protection of a director of the corporation existing at the time of such repeal
or modification.
-2-
<PAGE>
ARTICLE TEN
-----------
The corporation expressly elects not to be governed by Section 203 of
the General Corporation Law of the State of Delaware.
ARTICLE ELEVEN
--------------
The corporation reserves the right to amend, alter, change or repeal
any provision contained in this certificate of incorporation in the manner now
or hereafter prescribed herein and by the laws of the State of Delaware, and all
rights conferred upon stockholders herein are granted subject to this
reservation.
I, THE UNDERSIGNED, being the sole incorporator hereinbefore named,
for the purpose of forming a corporation pursuant to the General Corporation Law
of the State of Delaware, do make this certificate, hereby declaring and
certifying that this is my act and deed and the facts stated herein are true,
and accordingly have hereunto set my hand on the 12th day of January, 1998.
/s/ Joan D Donovan
------------------
Joan D. Donovan, Sole Incorporator
-3-
<PAGE>
Exhibit 3.4
BY-LAWS
-------
OF
--
NES MICHIGAN ACQUISITION CORP.
A Delaware Corporation
ARTICLE I
---------
OFFICES
-------
Section 1. Registered Office. The registered office of the corporation
--------- -----------------
in the State of Delaware shall be located at 9 East Loockerman Street, in the
city of Dover, County of Kent. The name of the corporation's registered agent
at such address shall be National Registered Agents, Inc.
Section 2. Other Offices. The corporation may also have offices at
--------- -------------
such other places, both within and without the State of Delaware, as the board
of directors may from time to time determine or the business of the corporation
may require.
ARTICLE II
----------
MEETINGS OF STOCKHOLDERS
------------------------
Section 1. Place and Time of Meetings. The date, time and place of the
--------- --------------------------
annual meeting shall be determined by the president and chief executive officer
of the corporation; provided, that if the president and chief executive officer
does not act, the board of directors shall determine the date, time and place of
such meeting.
Section 2. Special Meetings. Special meetings of stockholders may be
--------- ----------------
called for any purpose (including, without limitation, the filling of board
vacancies and newly created directorships) and may be held at such time and
place, within or without the State of Delaware, as shall be stated in a notice
of meeting or in a duly executed waiver of notice thereof. Such meetings may be
called at any time by the board of directors or the president and chief
executive officer and shall be called by the president and chief executive
officer upon the written request of holders of shares entitled to cast not less
than 51% percent of the votes at the meeting, or by the written request of the
holders of not less than 51% of the outstanding shares of any series or class of
the Corporation's stock. Such written request shall state the purpose or
purposes of the meeting and shall be delivered to the president and chief
executive officer. On such written request, the president and
<PAGE>
chief executive officer shall fix a date and time for such meeting within two
(2) days of the date requested for such meeting in such written request. A
special meeting shall in any event be held within (10) days of the creation of a
board vacancy or new directorship.
Section 3. Place of Meetings. The board of directors may designate any
--------- -----------------
place, either within or without the State of Delaware, as the place of meeting
for any annual meeting or for any special meeting called by the board of
directors. If no designation is made, or if a special meeting be otherwise
called, the place of meeting shall be the principal executive office of the
corporation.
Section 4. Notice. Whenever stockholders are required or permitted to
--------- ------
take action at a meeting, written or printed notice stating the place, date,
time, and, in the case of special meetings, the purpose or purposes, of such
meeting, shall be given to each stockholder entitled to vote at such meeting not
less than 10 nor more than 60 days before the date of the meeting. All such
notices shall be delivered, either personally or by mail, by or at the direction
of the board of directors, the president and chief executive officer or the
secretary, and if mailed, such notice shall be deemed to be delivered when
deposited in the United States mail, postage prepaid, addressed to the
stockholder at his, her or its address as the same appears on the records of the
corporation. Attendance of a person at a meeting shall constitute a waiver of
notice of such meeting, except when the person attends for the express purpose
of objecting at the beginning of the meeting to the transaction of any business
because the meeting is not lawfully called or convened.
Section 5. Stockholders List. The officer having charge of the stock
--------- -----------------
ledger of the corporation shall make, at least 10 days before every meeting of
the stockholders, a complete list of the stockholders entitled to vote at such
meeting arranged in alphabetical order, showing the address of each stockholder
and the number of shares registered in the name of each stockholder. Such list
shall be open to the examination of any stockholder, for any purpose germane to
the meeting, during ordinary business hours, for a period of at least 10 days
prior to the meeting, either at a place within the city where the meeting is to
be held, which place shall be specified in the notice of the meeting or, if not
so specified, at the place where the meeting is to be held. The list shall also
be produced and kept at the time and place of the meeting during the whole time
thereof, and may be inspected by any stockholder who is present.
Section 6. Quorum. The holders of a majority of the outstanding shares
--------- ------
of capital stock, present in person or represented by proxy, shall constitute a
quorum at all meetings of the stockholders, except as otherwise provided by
statute or by the certificate of incorporation. If a quorum is not present, the
holders of a majority of the shares present in person or represented by proxy at
the meeting, and entitled to vote at the meeting, may adjourn the meeting to
another time and/or place.
Section 7. Adjourned Meetings. When a meeting is adjourned to another
--------- ------------------
time and place, notice need not be given of the adjourned meeting if the time
and place thereof are announced at the meeting at which the adjournment is
taken. At the adjourned meeting the corporation may transact any business which
might have been transacted at
2
<PAGE>
the original meeting. If the adjournment is for more than thirty days, or if
after the adjournment a new record date is fixed for the adjourned meeting, a
notice of the adjourned meeting shall be given to each stockholder of record
entitled to vote at the meeting.
Section 8. Vote Required. When a quorum is present, the affirmative
--------- -------------
vote of the majority of shares present in person or represented by proxy at the
meeting and entitled to vote on the subject matter shall be the act of the
stockholders, unless the question is one upon which by express provisions of an
applicable law or of the certificate of incorporation a different vote is
required, in which case such express provision shall govern and control the
decision of such question.
Section 9. Voting Rights. Except as otherwise provided by the General
--------- -------------
Corporation Law of the State of Delaware or by the certificate of incorporation
of the corporation or any amendments thereto and subject to Section 3 of Article
VI hereof, every stockholder shall at every meeting of the stockholders be
entitled to one vote in person or by proxy for each share of common stock held
by such stockholder.
Section 10. Proxies. Each stockholder entitled to vote at a meeting of
---------- -------
stockholders or to express consent or dissent to corporate action in writing
without a meeting may authorize another person or persons to act for him or her
by proxy, but no such proxy shall be voted or acted upon after three years from
its date, unless the proxy provides for a longer period.
Section 11. Action by Written Consent. Unless otherwise provided in the
---------- -------------------------
certificate of incorporation, any action required to be taken at any annual or
special meeting of stockholders of the corporation, or any action which may be
taken at any annual or special meeting of such stockholders, may be taken
without a meeting, without prior notice and without a vote, if a consent or
consents in writing, setting forth the action so taken and bearing the dates of
signature of the stockholders who signed the consent or consents, shall be
signed by the holders of outstanding stock having not less than the minimum
number of votes that would be necessary to authorize or take such action at a
meeting at which all shares entitled to vote thereon were present and voted and
shall be delivered to the corporation by delivery to its registered office in
the state of Delaware, or the corporation's principal place of business, or an
officer or agent of the corporation having custody of the book or books in which
proceedings of meetings of the stockholders are recorded. Delivery made to the
corporation's registered office shall be by hand or by certified or registered
mail, return receipt requested. All consents properly delivered in accordance
with this section shall be deemed to be recorded when so delivered. No written
consent shall be effective to take the corporate action referred to therein
unless, within sixty days of the earliest dated consent delivered to the
corporation as required by this section, written consents signed by the holders
of a sufficient number of shares to take such corporate action are so recorded.
Prompt notice of the taking of the corporate action without a meeting by less
than unanimous written consent shall be given to those stockholders who have not
consented in writing. Any action taken pursuant to such written
3
<PAGE>
consent or consents of the stockholders shall have the same force and effect as
if taken by the stockholders at a meeting thereof.
ARTICLE III
-----------
DIRECTORS
---------
Section 1. General Powers. The business and affairs of the corporation
--------- --------------
shall be managed by or under the direction of the board of directors.
Section 2. Number, Election and Term of Office. The number of
--------- -----------------------------------
directors which shall constitute the first board shall be three (3).
Thereafter, the number of directors shall be established from time to time by
resolution of the board. The directors shall be elected by a plurality of the
votes of the shares present in person or represented by proxy at the meeting and
entitled to vote in the election of directors. The directors shall be elected
in this manner at the annual meeting of the stockholders, except as provided in
Section 4 of this Article III. Each director elected shall hold office until a
successor is duly elected and qualified or until his or her earlier death,
resignation or removal as hereinafter provided.
Section 3. Removal and Resignation. Any director or the entire board
--------- -----------------------
of directors may be removed at any time, with or without cause, by the holders
of a majority of the shares then entitled to vote at an election of directors.
Whenever the holders of any class or series are entitled to elect one or more
directors by the provisions of the corporation's certificate of incorporation,
the provisions of this section shall apply, in respect to the removal without
cause of a director or directors so elected, to the vote of the holders of the
outstanding shares of that class or series and not to the vote of the
outstanding shares as a whole.
Section 4. Vacancies. Except as otherwise provided by the Certificate
--------- ---------
of Incorporation of the corporation or any amendments thereto, board vacancies
and newly created directorships resulting from any increase in the authorized
number of directors shall be filled by a majority vote of the holders of the
corporation's outstanding stock entitled to vote thereon, and each director so
chosen shall hold office until the next annual meeting of the stockholders and
until a successor is duly elected and qualified or until his or her earlier
death, resignation or removal as provided.
Section 5. Annual Meetings. The annual meeting of each newly elected
--------- ---------------
board of directors shall be held without other notice than this by-law
immediately after, and at the same place as, the annual meeting of stockholders.
Section 6. Other Meetings and Notice. Regular meetings, other than the
--------- -------------------------
annual meeting, of the board of directors may be held without notice at such
time and at such place as shall from time to time be determined by resolution of
the board. Special meetings of the board of directors may be called by or at
the request of the president and chief executive officer on at least 24 hours
notice to each director, either personally, by
4
<PAGE>
telephone, by mail, or by telegraph; in like manner and on like notice the
president and chief executive officer must call a special meeting on the written
request of at least one of the directors.
Section 7. Quorum, Required Vote and Adjournment. A majority of the
--------- -------------------------------------
total number of directors then in office shall constitute a quorum for the
transaction of business, provided that in no event shall a quorum consist of
less than one-third of the total number of directors established by the
stockholders pursuant to Section 2 or this Article III. The vote of a majority
of directors present at a meeting at which a quorum is present shall be the act
of the board of directors. If a quorum shall not be present at any meeting of
the board of directors, the directors present thereat may adjourn the meeting
from time to time, without notice other than announcement at the meeting, until
a quorum shall be present.
Section 8. Committee. The board of directors may, by resolution passed
--------- ---------
by a majority of the whole board, designate one or more committees, each
committee to consist of one or more of the directors of the corporation, which
to the extent provided in such resolution or these by-laws shall have and may
exercise the powers of the board of directors in the management and affairs of
the corporation except as otherwise limited by law. The board of directors may
designate one or more directors as alternate members of any committee, who may
replace any absent or disqualified member at any meeting of the committee. Such
committee or committees shall have such name or names as may be determined from
time to time by resolution adopted by the board of directors. Each committee
shall keep regular minutes of its meetings and report the same to the board of
directors when required.
Section 9. Committee Rules. Each committee of the board of directors
--------- ---------------
may fix its own rules of procedure and shall hold its meetings as provided by
such rules, except as may otherwise be provided by a resolution of the board of
directors designating such committee. In the event that a member and that
member's alternate, if alternates are designated by the board of directors as
provided in Section 8 of this Article III, of such committee is or are absent or
disqualified, the member or members thereof present at any meeting and not
disqualified from voting, whether or not such member or members constitute a
quorum, may unanimously appoint another member of the board of directors to act
at the meeting in place of any such absent or disqualified member.
Section 10. Communications Equipment. Members of the board of directors
---------- -------------------------
or any committee thereof may participate in and act at any meeting of such board
or committee through the use of a conference telephone or other communications
equipment by means of which all persons participating in the meeting can hear
each other, and participation in the meeting pursuant to this section shall
constitute presence in person at the meeting.
Section 11. Waiver of Notice and Presumption of Assent. Any member of
---------- ------------------------------------------
the board of directors or any committee thereof who is present at a meeting
shall be conclusively presumed to have waived notice of such meeting except when
such member attends for the express purpose of objecting at the beginning of the
meeting to the
5
<PAGE>
transaction of any business because the meeting is not lawfully called or
convened. Such member shall be conclusively presumed to have assented to any
action taken unless his or her dissent shall be entered in the minutes of the
meeting or unless his or her written dissent to such action shall be filed with
the person acting as the secretary of the meeting before the adjournment thereof
or shall be forwarded by registered mail to the secretary of the corporation
immediately after the adjournment of the meeting. Such right to dissent shall
not apply to any member who voted in favor of such action.
Section 12. Action by Written Consent. Unless otherwise restricted by
---------- -------------------------
the certificate of incorporation, any action required or permitted to be taken
at any meeting of the board of directors, or of any committee thereof, may be
taken without a meeting if all members of the board or committee, as the case
may be, consent thereto in writing, and the writing or writings are filed with
the minutes of proceedings of the board or committee.
ARTICLE IV
----------
OFFICERS
--------
Section 1. Number. The officers of the corporation shall be elected by
--------- ------
the board of directors and shall consist of a chairman of the board, a president
and chief executive officer, one or more vice-presidents, a secretary, a
treasurer, and such other officers and assistant officers as may be deemed
necessary or desirable by the board of directors. Any number of offices may be
held by the same person. In its discretion, the board of directors may choose
not to fill any office for any period as it may deem advisable, except that the
offices of president and chief executive officer and secretary shall be filled
as expeditiously as possible.
Section 2. Election and Term of Office. The officers of the
--------- ---------------------------
corporation shall be elected annually by the board of directors at its first
meeting held after each annual meeting of stockholders or as soon thereafter as
conveniently may be. Vacancies may be filled or new offices created and filled
at any meeting of the board of directors. Each officer shall hold office until
a successor is duly elected and qualified or until his or her earlier death,
resignation or removal as hereinafter provided.
Section 3. Removal. Any officer or agent elected by the board of
--------- -------
directors may be removed by the board of directors whenever in its judgment the
best interests of the corporation would be served thereby, but such removal
shall be without prejudice to the contract rights, if any, of the person so
removed.
Section 4. Vacancies. Any vacancy occurring in any office because of
--------- ---------
death, resignation, removal, disqualification or otherwise, may be filled by the
board of directors for the unexpired portion of the term by the board of
directors then in office.
6
<PAGE>
Section 5. Compensation. Compensation of all officers shall be fixed
--------- ------------
by the board of directors, and no officer shall be prevented from receiving such
compensation by virtue of his or her also being a director of the corporation.
Section 6. Chairman of the Board. The chairman of the board shall be
--------- ---------------------
the chief executive officer of the corporation, and shall have the powers and
perform the duties incident to that position. Subject to the powers of the
board of directors, he or she shall be in the general and active charge of the
entire business and affairs of the corporation, and shall be its chief policy
making officer. He or she shall preside at all meetings of the board of
directors and stockholders and shall have such other powers and perform such
other duties as may be prescribed by the board of directors or provided in these
by-laws. Whenever the president and chief executive officer is unable to serve,
by reason of sickness, absence or otherwise, the chairman of the board shall
perform all the duties and responsibilities and exercise all the powers of the
president and chief executive officer.
Section 7. The President and Chief Executive Officer. The president
--------- -----------------------------------------
and chief executive officer shall subject to the powers of the board of
directors, and the chairman of the board, shall have general charge of the
business, affairs and property of the corporation, and control over its
officers, agents and employees; and shall see that all orders and resolutions
other board of directors are carried into effect. The president and chief
executive officer shall execute bonds, mortgages and other contracts requiring a
seal, under the seal other corporation, except where required or permitted by
law to be otherwise signed and executed and except where the signing and
execution thereof shall be expressly delegated by the board of directors to some
other officer or agent of the corporation. The president and chief executive
officer shall have such other powers and perform such other duties as may be
prescribed by the chairman of the board or the board of directors or as may be
provided in these by-laws.
Section 8. Vice-Presidents. The vice-president, or if there shall be
--------- ---------------
more than one, the vice-presidents in the order determined by the board of
directors or by the president and chief executive officer, shall, in the absence
or disability of the president and chief executive officer, act with all of the
powers and be subject to all the restrictions of the president and chief
executive officer. The vice-presidents shall also perform such other duties and
have such other powers as the board of directors the chairman of the board, the
president and chief executive officer or these by-laws may, from time to time,
prescribe.
Section 9. The Secretary and Assistant Secretaries. The secretary
--------- ---------------------------------------
shall attend all meetings of the board of directors, all meetings of the
committees thereof and all meetings of the stockholders and record all the
proceedings of the meetings in a book or books to be kept for that purpose.
Under the president and chief executive officer's supervision, the secretary
shall give, or cause to be given, all notices required to be given by these by-
laws or by law; shall have such powers and perform such duties as the board of
directors, the chairman of the board, the president and chief executive officer
or these by-laws may, from time to time, prescribe; and shall have custody of
the corporate seal of the corporation. The secretary, or an assistant
secretary, shall have authority to affix the corporate seal to any instrument
requiring it and when so affixed, it may be attested by his
7
<PAGE>
or her signature or by the signature of such assistant secretary. The board of
directors may give general authority to any other officer to affix the seal of
the corporation and to attest the affixing by his or her signature. The
assistant secretary, or if there be more than one, the assistant secretaries in
the order determined by the board of directors, shall, in the absence or
disability of the secretary, perform the duties and exercise the powers of the
secretary and shall perform such other duties and have such other powers as the
board of directors, the chairman of the board, the president and chief executive
officer, or secretary may, from time to time, prescribe.
Section 10. The Treasurer and Assistant Treasurer. The treasurer shall
---------- -------------------------------------
have the custody of the corporate funds and securities; shall keep full and
accurate accounts of receipts and disbursements in books belonging to the
corporation; shall deposit all monies and other valuable effects in the name and
to the credit of the corporation as may be ordered by the board of directors;
shall cause the funds of the corporation to be disbursed when such disbursements
have been duly authorized, taking proper vouchers for such disbursements; and
shall render to the president and chief executive officer and the board of
directors, at its regular meeting or when the board of directors so requires, an
account of the corporation; shall have such powers and perform such duties as
the board of directors, the chairman of the board, the president and chief
executive officer or these by-laws may, from time to time, prescribe. If
required by the board of directors, the treasurer shall give the corporation a
bond (which shall be rendered every six years) in such sums and with such surety
or sureties as shall be satisfactory to the board of directors for the faithful
performance of the duties of the office of treasurer and for the restoration to
the corporation, in case of death, resignation, retirement, or removal from
office, of all books, papers, vouchers, money, and other property of whatever
kind in the possession or under the control of the treasurer belonging to the
corporation. The assistant treasurer, or if there shall be more than one, the
assistant treasurers in the order determined by the board of directors, shall in
the absence or disability of the treasurer, perform the duties and exercise the
powers of the treasurer. The assistant treasurers shall perform such other
duties and have such other powers as the board of directors, the chairman of the
board, the president and chief executive officer or treasurer may, from time to
time, prescribe.
Section 11. Other Officers, Assistant Officers and Agents. officers,
---------- ---------------------------------------------
assistant officers and agents, if any, other than those whose duties are
provided for in these by-laws, shall have such authority and perform such duties
as may from time to time be prescribed by resolution of the board of directors.
Section 12. Absence or Disability of Officers. In the case of the
---------- ---------------------------------
absence or disability of any officer of the corporation and of any person hereby
authorized to act in such officer's place during such officer's absence or
disability, the board of directors may by resolution delegate the powers and
duties of such officer to any other officer or to any director, or to any other
person whom it may select.
8
<PAGE>
ARTICLE V
---------
INDEMNIFICATION OF OFFICERS, DIRECTORS AND OTHERS
-------------------------------------------------
Section 1. Nature of Indemnity. Each person who was or is made a party
--------- -------------------
or is threatened to be made a party to or is involved in any action, suit or
proceeding, whether civil, criminal, administrative or investigative
(hereinafter a "proceeding"), by reason of the fact that he or she, or a person
of whom he or she is the legal representative, is or was a director or officer,
of the corporation or is or was serving at the request of the corporation as a
director, officer, employee, fiduciary, or agent of another corporation or of a
partnership, joint venture, trust or other enterprise, shall be indemnified and
held harmless by the corporation to the fullest extent which it is empowered to
do so unless prohibited from doing so by the General Corporation Law of the
State of Delaware, as the same exists or may hereafter be amended (but, in the
case of any such amendment, only to the extent that such amendment permits the
corporation to provide broader indemnification rights than said law permitted
the corporation to provide prior to such amendment) against all expense,
liability and loss (including attorneys' fees actually and reasonably incurred
by such person in connection with such proceeding) and such indemnification
shall inure to the benefit of his or her heirs, executors and administrators;
provided, however, that, except as provided in Section 2 hereof, the corporation
shall indemnify any such person seeking indemnification in connection with a
proceeding initiated by such person only if such proceeding was authorized by
the board of directors of the corporation. The right to indemnification
conferred in this Article V shall be a contract right and, subject to Sections 2
and 5 hereof, shall include the right to be paid by the corporation the expenses
incurred in defending any such proceeding in advance of its final disposition.
The corporation may, by action of its board of directors, provide
indemnification to employees and agents of the corporation with the same scope
and effect as the foregoing indemnification of directors and officers.
Section 2. Procedure for Indemnification of Directors and Officers.
--------- -------------------------------------------------------
Any indemnification of a director or officer of the corporation under Section 1
of this Article V or advance of expenses under Section 5 of this Article V shall
be made promptly, and in any event within 30 days, upon the written request of
the director or officer. If a determination by the corporation that the
director or officer is entitled to indemnification pursuant to this Article V is
required, and the corporation fails to respond within sixty days to a written
request for indemnity, the corporation shall be deemed to have approved the
request. If the corporation denies a written request for indemnification or
advancing of expenses, in whole or in part, or if payment in full pursuant to
such request is not made within 30 days, the right to indemnification or
advances as granted by this Article V shall be enforceable by the director or
officer in any court of competent jurisdiction. Such person's costs and
expenses incurred in connection with successfully establishing his or her right
to indemnification, in whole or in part, in any such action shall also be
indemnified by the corporation. It shall be a defense to any such action (other
than an action brought to enforce a claim for expenses incurred in defending any
proceeding in advance of its final disposition where the required undertaking,
if any, has been tendered to the corporation) that the claimant has not met the
standards of conduct which make it permissible under
9
<PAGE>
the General Corporation Law of the State of Delaware for the corporation to
indemnify the claimant for the amount claimed, but the burden of such defense
shall be on the corporation. Neither the failure of the corporation (including
its board of directors, independent legal counsel or its stockholders) to have
made a determination prior to the commencement of such action that
indemnification of the claimant is proper in the circumstances because he or she
has met the applicable standard of conduct set forth in the General Corporation
Law of the State of Delaware, nor an actual determination by the corporation
(including its board of directors, independent legal counsel, or its
stockholders) that the claimant has not met such applicable standard of conduct,
shall be a defense to the action or create a presumption that the claimant has
not met the applicable standard of conduct.
Section 3. Article Not Exclusive. The rights to indemnification and
--------- ---------------------
the payment of expenses incurred in defending a proceeding in advance of its
final disposition conferred in this Article V shall not be exclusive of any
other right which any person may have or hereafter acquire under any statute,
provision of the certificate of incorporation, by-law, agreement, vote of
stockholders or disinterested directors or otherwise.
Section 4. Insurance. The corporation may purchase and maintain
--------- ---------
insurance on its own behalf and on behalf of any person who is or was a
director, officer, employee, fiduciary, or agent of the corporation or was
serving at the request of the corporation as a director, officer, employee or
agent of another corporation, partnership, joint venture, trust or other
enterprise against any liability asserted against him or her and incurred by him
or her in any such capacity, whether or not the corporation would have the power
to indemnify such person against such liability under this Article V.
Section 5. Expenses. Expenses incurred by any person described in
--------- --------
Section 1 of this Article V in defending a proceeding shall be paid by the
corporation in advance of such proceeding's final disposition unless otherwise
determined by the board of directors in the specific case upon receipt of an
undertaking by or on behalf of the director or officer to repay such amount if
it shall ultimately be determined that he or she is not entitled to be
indemnified by the corporation. Such expenses incurred by other employees and
agents may be so paid upon such terms and conditions, if any, as the board of
directors deems appropriate.
Section 6. Employees and Agents. Persons who are not covered by the
--------- --------------------
foregoing provisions of this Article V and who are or were employees or agents
of the corporation, or who are or were serving at the request of the corporation
as employees or agents of another corporation, partnership, joint venture, trust
or other enterprise, may be indemnified to the extent authorized at any time or
from time to time by the board of directors.
Section 7. Contract Rights. The provisions of this Article V shall be
--------- ---------------
deemed to be a contract right between the corporation and each director or
officer who serves in any such capacity at any time while this Article V and the
relevant provisions of the General Corporation Law of the State of Delaware or
other applicable law are in effect, and any
10
<PAGE>
repeal or modification of this Article V or any such law shall not affect any
rights or obliga tions then existing with respect to any state of facts or
proceeding then existing.
Section 8. Merger or Consolidation. For purposes of this Article V,
--------- -----------------------
references to "the corporation" shall include, in addition to the resulting
corporation, any constituent corporation (including any constituent of a
constituent) absorbed in a consolidation or merger which, if its separate
existence had continued, would have had power and authority to indemnify its
directors, officers, and employees or agents, so that any person who is or was a
director, officer, employee or agent of such constituent corporation, or is or
was serving at the request of such constituent corporation as a director,
officer, employee or agent of another corporation, partnership, joint venture,
trust or other enterprise, shall stand in the same position under this Article V
with respect to the resulting or surviving corporation as he or she would have
with respect to such constituent corporation if its separate existence had
continued.
ARTICLE VI
CERTIFICATES OF STOCK
Section 1. Form. Every holder of stock in the corporation shall be
--------- ----
entitled to have a certificate, signed by, or in the name of the corporation by
the chairman, president and chief executive officer or a vice-president and the
secretary or an assistant secretary of the corporation, certifying the number of
shares owned by such holder in the corporation. If such a certificate is
countersigned (1) by a transfer agent or an assistant transfer agent other than
the corporation or its employee or (2) by a registrar, other than the
corporation or its employee, the signature of any such chairman, president and
chief executive officer, vice-president, secretary, or assistant secretary may
be facsimiles. In case any officer or officers who have signed, or whose
facsimile signature or signatures have been used on, any such certificate or
certificates shall cease to be such officer or officers of the corporation
whether because of death, resignation or otherwise before such certificate or
certificates have been delivered by the corporation, such certificate or
certificates may nevertheless be issued and delivered as though the person or
persons who signed such certificate or certificates or whose facsimile signature
or signatures have been used thereon had not ceased to be such officer or
officers of the corporation. All certificates for shares shall be consecutively
numbered or otherwise identified. The name of the person to whom the shares
represented thereby are issued, with the number of shares and date of issue,
shall be entered on the books of the corporation. Shares of stock of the
corporation shall only be transferred on the books of the corporation by the
holder of record thereof or by such holder's attorney duly authorized in
writing, upon surrender to the corporation of the certificate or certificates
for such shares endorsed by the appropriate person or persons, with such
evidence of the authenticity of such endorsement, transfer, authorization, and
other matters as the corporation may reasonably require, and accompanied by all
necessary stock transfer stamps. In that event, it shall be the duty of the
corporation to issue a new certificate to the person entitled thereto, cancel
the old certificate or certificates, and record the transaction on its books.
The board of directors
11
<PAGE>
may appoint a bank or trust Company organized under the laws of the United
States or any state thereof to act as its transfer agent or registrar, or both
in connection with the transfer of any class or series of securities of the
corporation.
Section 2. Lost Certificates. The board of directors may direct a new
--------- -----------------
certificate or certificates to be issued in place of any certificate or
certificates previously issued by the corporation alleged to have been lost,
stolen, or destroyed, upon the making of an affidavit of that fact by the person
claiming the certificate of stock to be lost, stolen, or destroyed. When
authorizing such issue of a new certificate or certificates, the board of
directors may, in its discretion and as a condition precedent to the issuance
thereof, require the owner of such lost, stolen, or destroyed certificate or
certificates, or his or her legal representative, to give the corporation a bond
sufficient to indemnify the corporation against any claim that may be made
against the corporation on account of the loss, theft or destruction of any such
certificate or the issuance of such new certificate.
Section 3. Fixing a Record Date for Stockholder Meetings. In order
--------- ---------------------------------------------
that the corporation may determine the stockholders entitled to notice of or to
vote at any meeting of stockholders or any adjournment thereof, the board of
directors may fix a record date, which record date shall not precede the date
upon which the resolution fixing the record date is adopted by the board of
directors, and which record date shall not be more than sixty nor less than ten
days before the date of such meeting. If no record date is fixed by the board
of directors, the record date for determining stockholders entitled to notice of
or to vote at a meeting of stockholders shall be the close of business on the
next day preceding the day on which notice is given, or if notice is waived, at
the close of business on the day next preceding the day on which the meeting is
held. A determination of stockholders of record entitled to notice of or to
vote at a meeting of stockholders shall apply to any adjournment of the meeting;
provided, however, that the board of directors may fix a new record date for the
adjourned meeting.
Section 4. Fixing a Record Date for Action by Written Consent. In
--------- --------------------------------------------------
order that the corporation may determine the stockholders entitled to consent to
corporate action in writing without a meeting, the board of directors may fix a
record date, which record date shall not precede the date upon which the
resolution fixing the record date is adopted by the board of directors, and
which date shall not be more than ten days after the date upon which the
resolution fixing the record date is adopted by the board of directors. If no
record date has been fixed by the board of directors, the record date for
determining stockholders entitled to consent to corporate action in writing
without a meeting, when no prior action by the board of directors is required by
statute, shall be the first date on which a signed written consent setting forth
the action taken or proposed to be taken is delivered to the corporation by
delivery to its registered office in the State of Delaware, its principal place
of business, or an officer or agent of the corporation having custody of the
book in which proceedings of meetings of stockholders are recorded. Delivery
made to the corporation's registered office shall be by hand or by certified or
registered mail, return receipt requested. If no record date has been fixed by
the board of directors and prior action by the board of directors is required by
statute, the record date for determining stockholders entitled to consent to
corporate action in writing without a meeting shall be at the close of
12
<PAGE>
business on the day on which the board of directors adopts the resolution taking
such prior action.
Section 5. Fixing a Record Date for Other Purposes. In order that the
--------- ---------------------------------------
corporation may determine the stockholders entitled to receive payment of any
dividend or other distribution or allotment or any rights or the stockholders
entitled to exercise any rights in respect of any change, conversion or exchange
of stock, or for the purposes of any other lawful action, the board of directors
may fix a record date, which record date shall not precede the date upon which
the resolution fixing the record date is adopted, and which record date shall be
not more than sixty days prior to such action. If no record date is fixed, the
record date for determining stockholders for any such purpose shall be at the
close of business on the day on which the board of directors adopts the
resolution relating thereto.
Section 6. Registered Stockholders. Prior to the surrender to the
--------- -----------------------
corporation of the certificate or certificates for a share or shares of stock
with a request to record the transfer of such share or shares, the corporation
may treat the registered owner as the person entitled to receive dividends, to
vote, to receive notifications, and otherwise to exercise all the rights and
powers of an owner.
Section 7. Subscriptions for Stock. Unless otherwise provided for in
--------- -----------------------
the subscription agreement, subscriptions for shares shall be paid in full at
such time, or in such installments and at such times, as shall be determined by
the board of directors. Any call made by the board of directors for payment on
subscriptions shall be uniform as to all shares of the same class or as to all
shares of the same series. In case of default in the payment of any installment
or call when such payment is due, the corporation may proceed to collect the
amount due in the same manner as any debt due the corporation.
ARTICLE VII
-----------
GENERAL PROVISIONS
------------------
Section 1. Dividends. Dividends upon the capital stock of the
--------- ---------
corporation, subject to the provisions of the certificate of incorporation, if
any, may be declared by the board of directors at any regular or special
meeting, pursuant to law. Dividends may be paid in cash, in property, or in
shares of the capital stock, subject to the provisions of the certificate of
incorporation. Before payment of any dividend, there may be set aside out of
any funds of the corporation available for dividends such sum or sums as the
directors from time to time, in their absolute discretion, think proper as a
reserve or reserves to meet contingencies, or for equalizing dividends, or for
repairing or maintaining any property of the corporation, or any other purpose
and the directors may modify or abolish any such reserve in the manner in which
it was created.
13
<PAGE>
Section 2. Checks, Drafts or Orders. All checks, drafts, or other
--------- ------------------------
orders for the payment of money by or to the corporation and all notes and other
evidences of indebtedness issued in the name of the corporation shall be signed
by such officer or officers, agent or agents of the corporation, and in such
manner, as shall be determined by resolution of the board of directors or a duly
authorized committee thereof.
Section 3. Contracts. The board of directors may authorize any officer
--------- ---------
or officers, or any agent or agents, of the corporation to enter into any
contract or to execute and deliver any instrument in the name of and on behalf
of the corporation, and such authority may be general or confined to specific
instances.
Section 4. Loans. The corporation may lend money to, or guarantee any
--------- -----
obligation of, or otherwise assist any officer or other employee of the
corporation or of its subsidiary, including any officer or employee who is a
director of the corporation or its subsidiary, whenever, in the judgment of the
directors, such loan, guaranty or assistance may reasonably be expected to
benefit the corporation. The loan, guaranty or other assistance may be with or
without interest, and may be unsecured, or secured in such manner as the board
of directors shall approve, including, without limitation, a pledge of shares of
stock of the corporation. Nothing in this section contained shall be deemed to
deny, limit or restrict the powers of guaranty or warranty of the corporation at
common law or under any statute. No loans shall be made or contracted on behalf
of the corporation and no evidences of indebtedness shall be issued in its name
unless authorized by resolution of the board of directors. Such authority may
be general or confined to specific instances.
Section 5. Fiscal Year. The fiscal year of the corporation shall be
--------- -----------
fixed by resolution of the board of directors.
Section 6. Corporate Seal. The board of directors shall provide a
--------- --------------
corporate seal which shall be in the form of a circle and shall have inscribed
thereon the name of the corporation and the words "Corporate Seal, Delaware".
The seal may be used by causing it or a facsimile thereof to be impressed or
affixed or reproduced or otherwise.
Section 7. Voting Securities Owned By Corporation. Voting securities
--------- --------------------------------------
in any other corporation held by the corporation shall be voted by the president
and chief executive officer, unless the board of directors specifically confers
authority to vote with respect thereto, which authority may be general or
confined to specific instances, upon some other person or officer. Any person
authorized to vote securities shall have the power to appoint proxies, with
general power of substitution.
Section 8. Inspection of Books and Records. Any stockholder of record,
--------- -------------------------------
in person or by attorney or other agent, shall, upon written demand under oath
stating the purpose thereof, have the right during the usual hours for business
to inspect for any proper purpose the corporation's stock ledger, a list of its
stockholders, and its other books and records, and to make copies or extracts
therefrom. A proper purpose shall mean any purpose reasonably related to such
person's interest as a stockholder. In every instance
14
<PAGE>
where an attorney or other agent shall be the person who seeks the right to
inspection, the demand under oath shall be accompanied by a power of attorney or
such other writing which authorizes the attorney or other agent to So act on
behalf of the stockholder. The demand under oath shall be directed to the
corporation at its registered office in the State of Delaware or at its
principal place of business.
Section 9. Section Headings. Section headings in these bylaws are for
--------- ----------------
convenience of reference only and shall not be given any substantive effect in
limiting or otherwise construing any provision herein.
Section 10. Inconsistent Provisions. In the event that any provision of
---------- -----------------------
these by-laws is or becomes inconsistent with any provision of the certificate
of incorporation, the General Corporation Law of the State of Delaware or any
other applicable law, the provision of these by-laws shall not be given any
effect to the extent of such inconsistency but shall otherwise be given full
force and effect.
ARTICLE VIII
------------
AMENDMENTS
----------
These by-laws may be amended, altered, or repealed and new bylaws adopted
at any meeting of the board of directors by a majority vote. The fact that the
power to adopt, amend, alter, or repeal the by-laws has been conferred upon the
board of directors shall not divest the stockholders of the same powers.
15
<PAGE>
Exhibit 3.9
CERTIFICATE OF INCORPORATION
----------------------------
OF
--
NES EAST ACQUISITION CORP.
--------------------------
ARTICLE ONE
-----------
The name of the corporation is NES East Acquisition Corp.
ARTICLE TWO
-----------
The address of the corporation's registered office in the State of
Delaware is 9 East Loockerman Street, in the City of Dover, County of Kent
19901. The name of its registered agent at such address is National Registered
Agents, Inc.
ARTICLE THREE
-------------
The nature of the business or the purpose to be conducted or promoted
is to engage in any lawful act or activity for which corporations may be
organized under the General Corporation Law of the State of Delaware.
ARTICLE FOUR
------------
The total number of shares of stock which the corporation has
authority to issue is 1,000 shares of Common Stock, with a par value of $.01 per
share.
ARTICLE FIVE
------------
The name and mailing address of the sole incorporator are as follows:
NAME MAILING ADDRESS
---- ---------------
Joan D. Donovan 200 East Randolph Drive
Suite 5700
Chicago, Illinois 60601
<PAGE>
ARTICLE SIX
-----------
The corporation is to have perpetual existence.
ARTICLE SEVEN
-------------
In furtherance and not in limitation of the powers conferred by
statute, the board of directors of the corporation is expressly authorized to
make, alter or repeal the by-laws of the corporation.
ARTICLE EIGHT
-------------
Meetings of stockholders may be held within or without the State of
Delaware, as the by-laws of the corporation may provide. The books of the
corporation may be kept outside the State of Delaware at such place or places as
may be designated from time to time by the board of directors or in the by-laws
of the corporation. Election of directors need not be by written ballot unless
the by-laws of the corporation so provide.
ARTICLE NINE
------------
To the fullest extent permitted by the General Corporation Law of the
State of Delaware as the same exists or may hereafter be amended, a director of
this corporation shall not be liable to the corporation or its stockholders for
monetary damages for a breach of fiduciary duty as a director. Any repeal or
modification of this ARTICLE NINE shall not adversely affect any right or
------------
protection of a director of the corporation existing at the time of such repeal
or modification.
ARTICLE TEN
-----------
The corporation expressly elects not to be governed by Section 203 of
the General Corporation Law of the State of Delaware.
-2-
<PAGE>
ARTICLE ELEVEN
--------------
The corporation reserves the right to amend, alter, change or repeal
any provision contained in this certificate of incorporation in the manner now
or hereafter prescribed herein, by the unanimous written consent of the board of
directors of the corporation and by the laws of the State of Delaware, and all
rights conferred upon stockholders herein are granted subject to this
reservation.
I, THE UNDERSIGNED, being the sole incorporator hereinbefore named,
for the purpose of forming a corporation pursuant to the General Corporation Law
of the State of Delaware, do make this certificate, hereby declaring and
certifying that this is my act and deed and the facts stated herein are true,
and accordingly have hereunto set my hand on the 3rd day of February, 1998.
/s/ Joan D. Donovan
------------------------
Joan D. Donovan, Sole Incorporator
-3-
<PAGE>
Exhibit 3.10
BY-LAWS
-------
OF
--
NES EAST ACQUISITION CORP.
A Delaware Corporation
ARTICLE I
---------
OFFICES
-------
Section 1. Registered Office. The registered office of the corporation
--------- -----------------
in the State of Delaware shall be located at 9 East Loockerman Street, in the
city of Dover, County of Kent. The name of the corporation's registered agent
at such address shall be National Registered Agents, Inc.
Section 2. Other Offices. The corporation may also have offices at
--------- -------------
such other places, both within and without the State of Delaware, as the board
of directors may from time to time determine or the business of the corporation
may require.
ARTICLE II
----------
MEETINGS OF STOCKHOLDERS
------------------------
Section 1. Place and Time of Meetings. The date, time and place of the
--------- --------------------------
annual meeting shall be determined by the president and chief executive officer
of the corporation; provided, that if the president and chief executive officer
does not act, the board of directors shall determine the date, time and place of
such meeting.
Section 2. Special Meetings. Special meetings of stockholders may be
--------- ----------------
called for any purpose (including, without limitation, the filling of board
vacancies and newly created directorships) and may be held at such time and
place, within or without the State of Delaware, as shall be stated in a notice
of meeting or in a duly executed waiver of notice thereof. Such meetings may be
called at any time by the board of directors or the president and chief
executive officer and shall be called by the president and chief executive
officer upon the written request of holders of shares entitled to cast not less
than 51% percent of the votes at the meeting, or by the written request of the
holders of not less than 51% of the outstanding shares of any series or class of
the Corporation's stock. Such written request shall state the purpose or
purposes of the meeting and shall be delivered to the president and chief
executive officer. On such written request, the president and chief executive
officer shall fix a date and time for such meeting within two (2) days of the
<PAGE>
date requested for such meeting in such written request. A special meeting
shall in any event be held within (10) days of the creation of a board vacancy
or new directorship.
Section 3. Place of Meetings. The board of directors may designate any
--------- -----------------
place, either within or without the State of Delaware, as the place of meeting
for any annual meeting or for any special meeting called by the board of
directors. If no designation is made, or if a special meeting be otherwise
called, the place of meeting shall be the principal executive office of the
corporation.
Section 4. Notice. Whenever stockholders are required or permitted to
--------- ------
take action at a meeting, written or printed notice stating the place, date,
time, and, in the case of special meetings, the purpose or purposes, of such
meeting, shall be given to each stockholder entitled to vote at such meeting not
less than 10 nor more than 60 days before the date of the meeting. All such
notices shall be delivered, either personally or by mail, by or at the direction
of the board of directors, the president and chief executive officer or the
secretary, and if mailed, such notice shall be deemed to be delivered when
deposited in the United States mail, postage prepaid, addressed to the
stockholder at his, her or its address as the same appears on the records of the
corporation. Attendance of a person at a meeting shall constitute a waiver of
notice of such meeting, except when the person attends for the express purpose
of objecting at the beginning of the meeting to the transaction of any business
because the meeting is not lawfully called or convened.
Section 5. Stockholders List. The officer having charge of the stock
--------- -----------------
ledger of the corporation shall make, at least 10 days before every meeting of
the stockholders, a complete list of the stockholders entitled to vote at such
meeting arranged in alphabetical order, showing the address of each stockholder
and the number of shares registered in the name of each stockholder. Such list
shall be open to the examination of any stockholder, for any purpose germane to
the meeting, during ordinary business hours, for a period of at least 10 days
prior to the meeting, either at a place within the city where the meeting is to
be held, which place shall be specified in the notice of the meeting or, if not
so specified, at the place where the meeting is to be held. The list shall also
be produced and kept at the time and place of the meeting during the whole time
thereof, and may be inspected by any stockholder who is present.
Section 6. Quorum. The holders of a majority of the outstanding shares
--------- ------
of capital stock, present in person or represented by proxy, shall constitute a
quorum at all meetings of the stockholders, except as otherwise provided by
statute or by the certificate of incorporation. If a quorum is not present, the
holders of a majority of the shares present in person or represented by proxy at
the meeting, and entitled to vote at the meeting, may adjourn the meeting to
another time and/or place.
Section 7. Adjourned Meetings. When a meeting is adjourned to another
--------- ------------------
time and place, notice need not be given of the adjourned meeting if the time
and place thereof are announced at the meeting at which the adjournment is
taken. At the adjourned meeting the corporation may transact any business which
might have been transacted at the original meeting. If the adjournment is for
more than thirty days, or if after the
2
<PAGE>
adjournment a new record date is fixed for the adjourned meeting, a notice of
the adjourned meeting shall be given to each stockholder of record entitled to
vote at the meeting.
Section 8. Vote Required. When a quorum is present, the affirmative
--------- -------------
vote of the majority of shares present in person or represented by proxy at the
meeting and entitled to vote on the subject matter shall be the act of the
stockholders, unless the question is one upon which by express provisions of an
applicable law or of the certificate of incorporation a different vote is
required, in which case such express provision shall govern and control the
decision of such question.
Section 9. Voting Rights. Except as otherwise provided by the General
--------- -------------
Corporation Law of the State of Delaware or by the certificate of incorporation
of the corporation or any amendments thereto and subject to Section 3 of Article
VI hereof, every stockholder shall at every meeting of the stockholders be
entitled to one vote in person or by proxy for each share of common stock held
by such stockholder.
Section 10. Proxies. Each stockholder entitled to vote at a meeting of
---------- -------
stockholders or to express consent or dissent to corporate action in writing
without a meeting may authorize another person or persons to act for him or her
by proxy, but no such proxy shall be voted or acted upon after three years from
its date, unless the proxy provides for a longer period.
Section 11. Action by Written Consent. Unless otherwise provided in the
---------- -------------------------
certificate of incorporation, any action required to be taken at any annual or
special meeting of stockholders of the corporation, or any action which may be
taken at any annual or special meeting of such stockholders, may be taken
without a meeting, without prior notice and without a vote, if a consent or
consents in writing, setting forth the action so taken and bearing the dates of
signature of the stockholders who signed the consent or consents, shall be
signed by the holders of outstanding stock having not less than the minimum
number of votes that would be necessary to authorize or take such action at a
meeting at which all shares entitled to vote thereon were present and voted and
shall be delivered to the corporation by delivery to its registered office in
the state of Delaware, or the corporation's principal place of business, or an
officer or agent of the corporation having custody of the book or books in which
proceedings of meetings of the stockholders are recorded. Delivery made to the
corporation's registered office shall be by hand or by certified or registered
mail, return receipt requested. All consents properly delivered in accordance
with this section shall be deemed to be recorded when so delivered. No written
consent shall be effective to take the corporate action referred to therein
unless, within sixty days of the earliest dated consent delivered to the
corporation as required by this section, written consents signed by the holders
of a sufficient number of shares to take such corporate action are so recorded.
Prompt notice of the taking of the corporate action without a meeting by less
than unanimous written consent shall be given to those stockholders who have not
consented in writing. Any action taken pursuant to such written consent or
consents of the stockholders shall have the same force and effect as if taken by
the stockholders at a meeting thereof.
3
<PAGE>
ARTICLE III
-----------
DIRECTORS
---------
Section 1. General Powers. The business and affairs of the corporation
--------- --------------
shall be managed by or under the direction of the board of directors.
Section 2. Number, Election and Term of Office. The number of
--------- -----------------------------------
directors which shall constitute the first board shall be three (3).
Thereafter, the number of directors shall be established from time to time by
resolution of the board. The directors shall be elected by a plurality of the
votes of the shares present in person or represented by proxy at the meeting and
entitled to vote in the election of directors. The directors shall be elected
in this manner at the annual meeting of the stockholders, except as provided in
Section 4 of this Article III. Each director elected shall hold office until a
successor is duly elected and qualified or until his or her earlier death,
resignation or removal as hereinafter provided.
Section 3. Removal and Resignation. Any director or the entire board
--------- -----------------------
of directors may be removed at any time, with or without cause, by the holders
of a majority of the shares then entitled to vote at an election of directors.
Whenever the holders of any class or series are entitled to elect one or more
directors by the provisions of the corporation's certificate of incorporation,
the provisions of this section shall apply, in respect to the removal without
cause of a director or directors so elected, to the vote of the holders of the
outstanding shares of that class or series and not to the vote of the
outstanding shares as a whole.
Section 4. Vacancies. Except as otherwise provided by the Certificate
--------- ---------
of Incorporation of the corporation or any amendments thereto, board vacancies
and newly created directorships resulting from any increase in the authorized
number of directors shall be filled by a majority vote of the holders of the
corporation's outstanding stock entitled to vote thereon, and each director so
chosen shall hold office until the next annual meeting of the stockholders and
until a successor is duly elected and qualified or until his or her earlier
death, resignation or removal as provided.
Section 5. Annual Meetings. The annual meeting of each newly elected
--------- ---------------
board of directors shall be held without other notice than this by-law
immediately after, and at the same place as, the annual meeting of stockholders.
Section 6. Other Meetings and Notice. Regular meetings, other than the
--------- -------------------------
annual meeting, of the board of directors may be held without notice at such
time and at such place as shall from time to time be determined by resolution of
the board. Special meetings of the board of directors may be called by or at
the request of the president and chief executive officer on at least 24 hours
notice to each director, either personally, by telephone, by mail, or by
telegraph; in like manner and on like notice the president and chief executive
officer must call a special meeting on the written request of at least one of
the directors.
4
<PAGE>
Section 7. Quorum, Required Vote and Adjournment. A majority of the
--------- -------------------------------------
total number of directors then in office shall constitute a quorum for the
transaction of business, provided that in no event shall a quorum consist of
less than one-third of the total number of directors established by the
stockholders pursuant to Section 2 or this Article III. The vote of a majority
of directors present at a meeting at which a quorum is present shall be the act
of the board of directors. If a quorum shall not be present at any meeting of
the board of directors, the directors present thereat may adjourn the meeting
from time to time, without notice other than announcement at the meeting, until
a quorum shall be present.
Section 8. Committee. The board of directors may, by resolution passed
--------- ---------
by a majority of the whole board, designate one or more committees, each
committee to consist of one or more of the directors of the corporation, which
to the extent provided in such resolution or these by-laws shall have and may
exercise the powers of the board of directors in the management and affairs of
the corporation except as otherwise limited by law. The board of directors may
designate one or more directors as alternate members of any committee, who may
replace any absent or disqualified member at any meeting of the committee. Such
committee or committees shall have such name or names as may be determined from
time to time by resolution adopted by the board of directors. Each committee
shall keep regular minutes of its meetings and report the same to the board of
directors when required.
Section 9. Committee Rules. Each committee of the board of directors
--------- ---------------
may fix its own rules of procedure and shall hold its meetings as provided by
such rules, except as may otherwise be provided by a resolution of the board of
directors designating such committee. In the event that a member and that
member's alternate, if alternates are designated by the board of directors as
provided in Section 8 of this Article III, of such committee is or are absent or
disqualified, the member or members thereof present at any meeting and not
disqualified from voting, whether or not such member or members constitute a
quorum, may unanimously appoint another member of the board of directors to act
at the meeting in place of any such absent or disqualified member.
Section 10. Communications Equipment. Members of the board of directors
---------- -------------------------
or any committee thereof may participate in and act at any meeting of such board
or committee through the use of a conference telephone or other communications
equipment by means of which all persons participating in the meeting can hear
each other, and participation in the meeting pursuant to this section shall
constitute presence in person at the meeting.
Section 11. Waiver of Notice and Presumption of Assent. Any member of
---------- ------------------------------------------
the board of directors or any committee thereof who is present at a meeting
shall be conclusively presumed to have waived notice of such meeting except when
such member attends for the express purpose of objecting at the beginning of the
meeting to the transaction of any business because the meeting is not lawfully
called or convened. Such member shall be conclusively presumed to have assented
to any action taken unless his or her dissent shall be entered in the minutes of
the meeting or unless his or her written dissent to such action shall be filed
with the person acting as the secretary of the meeting
5
<PAGE>
before the adjournment thereof or shall be forwarded by registered mail to the
secretary of the corporation immediately after the adjournment of the meeting.
Such right to dissent shall not apply to any member who voted in favor of such
action.
Section 12. Action by Written Consent. Unless otherwise restricted by
---------- -------------------------
the certificate of incorporation, any action required or permitted to be taken
at any meeting of the board of directors, or of any committee thereof, may be
taken without a meeting if all members of the board or committee, as the case
may be, consent thereto in writing, and the writing or writings are filed with
the minutes of proceedings of the board or committee.
ARTICLE IV
----------
OFFICERS
--------
Section 1. Number. The officers of the corporation shall be elected by
--------- ------
the board of directors and shall consist of a chairman of the board, a president
and chief executive officer, one or more vice-presidents, a secretary, a
treasurer, and such other officers and assistant officers as may be deemed
necessary or desirable by the board of directors. Any number of offices may be
held by the same person. In its discretion, the board of directors may choose
not to fill any office for any period as it may deem advisable, except that the
offices of president and chief executive officer and secretary shall be filled
as expeditiously as possible.
Section 2. Election and Term of Office. The officers of the
--------- ---------------------------
corporation shall be elected annually by the board of directors at its first
meeting held after each annual meeting of stockholders or as soon thereafter as
conveniently may be. Vacancies may be filled or new offices created and filled
at any meeting of the board of directors. Each officer shall hold office until
a successor is duly elected and qualified or until his or her earlier death,
resignation or removal as hereinafter provided.
Section 3. Removal. Any officer or agent elected by the board of
--------- -------
directors may be removed by the board of directors whenever in its judgment the
best interests of the corporation would be served thereby, but such removal
shall be without prejudice to the contract rights, if any, of the person so
removed.
Section 4. Vacancies. Any vacancy occurring in any office because of
--------- ---------
death, resignation, removal, disqualification or otherwise, may be filled by the
board of directors for the unexpired portion of the term by the board of
directors then in office.
Section 5. Compensation. Compensation of all officers shall be fixed
--------- ------------
by the board of directors, and no officer shall be prevented from receiving such
compensation by virtue of his or her also being a director of the corporation.
Section 6. Chairman of the Board. The chairman of the board shall be
--------- ---------------------
the chief executive officer of the corporation, and shall have the powers and
perform the duties
6
<PAGE>
incident to that position. Subject to the powers of the board of directors, he
or she shall be in the general and active charge of the entire business and
affairs of the corporation, and shall be its chief policy making officer. He or
she shall preside at all meetings of the board of directors and stockholders and
shall have such other powers and perform such other duties as may be prescribed
by the board of directors or provided in these by-laws. Whenever the president
and chief executive officer is unable to serve, by reason of sickness, absence
or otherwise, the chairman of the board shall perform all the duties and
responsibilities and exercise all the powers of the president and chief
executive officer.
Section 7. The President and Chief Executive Officer. The president
--------- -----------------------------------------
and chief executive officer shall subject to the powers of the board of
directors, and the chairman of the board, shall have general charge of the
business, affairs and property of the corporation, and control over its
officers, agents and employees; and shall see that all orders and resolutions
other board of directors are carried into effect. The president and chief
executive officer shall execute bonds, mortgages and other contracts requiring a
seal, under the seal other corporation, except where required or permitted by
law to be otherwise signed and executed and except where the signing and
execution thereof shall be expressly delegated by the board of directors to some
other officer or agent of the corporation. The president and chief executive
officer shall have such other powers and perform such other duties as may be
prescribed by the chairman of the board or the board of directors or as may be
provided in these by-laws.
Section 8. Vice-Presidents. The vice-president, or if there shall be
--------- ---------------
more than one, the vice-presidents in the order determined by the board of
directors or by the president and chief executive officer, shall, in the absence
or disability of the president and chief executive officer, act with all of the
powers and be subject to all the restrictions of the president and chief
executive officer. The vice-presidents shall also perform such other duties and
have such other powers as the board of directors the chairman of the board, the
president and chief executive officer or these by-laws may, from time to time,
prescribe.
Section 9. The Secretary and Assistant Secretaries. The secretary
--------- ---------------------------------------
shall attend all meetings of the board of directors, all meetings of the
committees thereof and all meetings of the stockholders and record all the
proceedings of the meetings in a book or books to be kept for that purpose.
Under the president and chief executive officer's supervision, the secretary
shall give, or cause to be given, all notices required to be given by these by-
laws or by law; shall have such powers and perform such duties as the board of
directors, the chairman of the board, the president and chief executive officer
or these by-laws may, from time to time, prescribe; and shall have custody of
the corporate seal of the corporation. The secretary, or an assistant
secretary, shall have authority to affix the corporate seal to any instrument
requiring it and when so affixed, it may be attested by his or her signature or
by the signature of such assistant secretary. The board of directors may give
general authority to any other officer to affix the seal of the corporation and
to attest the affixing by his or her signature. The assistant secretary, or if
there be more than one, the assistant secretaries in the order determined by the
board of directors, shall, in the absence or disability of the secretary,
perform the duties and exercise the powers of the secretary and shall perform
such other duties and have such other powers as the board
7
<PAGE>
of directors, the chairman of the board, the president and chief executive
officer, or secretary may, from time to time, prescribe.
Section 10. The Treasurer and Assistant Treasurer. The treasurer shall
---------- -------------------------------------
have the custody of the corporate funds and securities; shall keep full and
accurate accounts of receipts and disbursements in books belonging to the
corporation; shall deposit all monies and other valuable effects in the name and
to the credit of the corporation as may be ordered by the board of directors;
shall cause the funds of the corporation to be disbursed when such disbursements
have been duly authorized, taking proper vouchers for such disbursements; and
shall render to the president and chief executive officer and the board of
directors, at its regular meeting or when the board of directors so requires, an
account of the corporation; shall have such powers and perform such duties as
the board of directors, the chairman of the board, the president and chief
executive officer or these by-laws may, from time to time, prescribe. If
required by the board of directors, the treasurer shall give the corporation a
bond (which shall be rendered every six years) in such sums and with such surety
or sureties as shall be satisfactory to the board of directors for the faithful
performance of the duties of the office of treasurer and for the restoration to
the corporation, in case of death, resignation, retirement, or removal from
office, of all books, papers, vouchers, money, and other property of whatever
kind in the possession or under the control of the treasurer belonging to the
corporation. The assistant treasurer, or if there shall be more than one, the
assistant treasurers in the order determined by the board of directors, shall in
the absence or disability of the treasurer, perform the duties and exercise the
powers of the treasurer. The assistant treasurers shall perform such other
duties and have such other powers as the board of directors, the chairman of the
board, the president and chief executive officer or treasurer may, from time to
time, prescribe.
Section 11. Other Officers, Assistant Officers and Agents. officers,
---------- ---------------------------------------------
assistant officers and agents, if any, other than those whose duties are
provided for in these by-laws, shall have such authority and perform such duties
as may from time to time be prescribed by resolution of the board of directors.
Section 12. Absence or Disability of Officers. In the case of the
---------- ---------------------------------
absence or disability of any officer of the corporation and of any person hereby
authorized to act in such officer's place during such officer's absence or
disability, the board of directors may by resolution delegate the powers and
duties of such officer to any other officer or to any director, or to any other
person whom it may select.
ARTICLE V
---------
INDEMNIFICATION OF OFFICERS, DIRECTORS AND OTHERS
-------------------------------------------------
Section 1. Nature of Indemnity. Each person who was or is made a party
--------- -------------------
or is threatened to be made a party to or is involved in any action, suit or
proceeding, whether civil, criminal, administrative or investigative
(hereinafter a "proceeding"), by reason of the fact that he or she, or a person
of whom he or she is the legal representative, is or was a
8
<PAGE>
director or officer, of the corporation or is or was serving at the request of
the corporation as a director, officer, employee, fiduciary, or agent of another
corporation or of a partnership, joint venture, trust or other enterprise, shall
be indemnified and held harmless by the corporation to the fullest extent which
it is empowered to do so unless prohibited from doing so by the General
Corporation Law of the State of Delaware, as the same exists or may hereafter be
amended (but, in the case of any such amendment, only to the extent that such
amendment permits the corporation to provide broader indemnification rights than
said law permitted the corporation to provide prior to such amendment) against
all expense, liability and loss (including attorneys' fees actually and
reasonably incurred by such person in connection with such proceeding) and such
indemnification shall inure to the benefit of his or her heirs, executors and
administrators; provided, however, that, except as provided in Section 2 hereof,
the corporation shall indemnify any such person seeking indemnification in
connection with a proceeding initiated by such person only if such proceeding
was authorized by the board of directors of the corporation. The right to
indemnification conferred in this Article V shall be a contract right and,
subject to Sections 2 and 5 hereof, shall include the right to be paid by the
corporation the expenses incurred in defending any such proceeding in advance of
its final disposition. The corporation may, by action of its board of directors,
provide indemnification to employees and agents of the corporation with the same
scope and effect as the foregoing indemnification of directors and officers.
Section 2. Procedure for Indemnification of Directors and Officers.
--------- -------------------------------------------------------
Any indemnification of a director or officer of the corporation under Section 1
of this Article V or advance of expenses under Section 5 of this Article V shall
be made promptly, and in any event within 30 days, upon the written request of
the director or officer. If a determination by the corporation that the
director or officer is entitled to indemnification pursuant to this Article V is
required, and the corporation fails to respond within sixty days to a written
request for indemnity, the corporation shall be deemed to have approved the
request. If the corporation denies a written request for indemnification or
advancing of expenses, in whole or in part, or if payment in full pursuant to
such request is not made within 30 days, the right to indemnification or
advances as granted by this Article V shall be enforceable by the director or
officer in any court of competent jurisdiction. Such person's costs and
expenses incurred in connection with successfully establishing his or her right
to indemnification, in whole or in part, in any such action shall also be
indemnified by the corporation. It shall be a defense to any such action (other
than an action brought to enforce a claim for expenses incurred in defending any
proceeding in advance of its final disposition where the required undertaking,
if any, has been tendered to the corporation) that the claimant has not met the
standards of conduct which make it permissible under the General Corporation Law
of the State of Delaware for the corporation to indemnify the claimant for the
amount claimed, but the burden of such defense shall be on the corporation.
Neither the failure of the corporation (including its board of directors,
independent legal counsel or its stockholders) to have made a determination
prior to the commencement of such action that indemnification of the claimant is
proper in the circumstances because he or she has met the applicable standard of
conduct set forth in the General Corporation Law of the State of Delaware, nor
an actual determination by the corporation (including its board of directors,
independent legal counsel, or its stockholders)
9
<PAGE>
that the claimant has not met such applicable standard of conduct, shall be a
defense to the action or create a presumption that the claimant has not met the
applicable standard of conduct.
Section 3. Article Not Exclusive. The rights to indemnification and
--------- ---------------------
the payment of expenses incurred in defending a proceeding in advance of its
final disposition conferred in this Article V shall not be exclusive of any
other right which any person may have or hereafter acquire under any statute,
provision of the certificate of incorporation, by-law, agreement, vote of
stockholders or disinterested directors or otherwise.
Section 4. Insurance. The corporation may purchase and maintain
--------- ---------
insurance on its own behalf and on behalf of any person who is or was a
director, officer, employee, fiduciary, or agent of the corporation or was
serving at the request of the corporation as a director, officer, employee or
agent of another corporation, partnership, joint venture, trust or other
enterprise against any liability asserted against him or her and incurred by him
or her in any such capacity, whether or not the corporation would have the power
to indemnify such person against such liability under this Article V.
Section 5. Expenses. Expenses incurred by any person described in
--------- --------
Section 1 of this Article V in defending a proceeding shall be paid by the
corporation in advance of such proceeding's final disposition unless otherwise
determined by the board of directors in the specific case upon receipt of an
undertaking by or on behalf of the director or officer to repay such amount if
it shall ultimately be determined that he or she is not entitled to be
indemnified by the corporation. Such expenses incurred by other employees and
agents may be so paid upon such terms and conditions, if any, as the board of
directors deems appropriate.
Section 6. Employees and Agents. Persons who are not covered by the
--------- --------------------
foregoing provisions of this Article V and who are or were employees or agents
of the corporation, or who are or were serving at the request of the corporation
as employees or agents of another corporation, partnership, joint venture, trust
or other enterprise, may be indemnified to the extent authorized at any time or
from time to time by the board of directors.
Section 7. Contract Rights. The provisions of this Article V shall be
--------- ---------------
deemed to be a contract right between the corporation and each director or
officer who serves in any such capacity at any time while this Article V and the
relevant provisions of the General Corporation Law of the State of Delaware or
other applicable law are in effect, and any repeal or modification of this
Article V or any such law shall not affect any rights or obliga tions then
existing with respect to any state of facts or proceeding then existing.
Section 8. Merger or Consolidation. For purposes of this Article V,
--------- -----------------------
references to "the corporation" shall include, in addition to the resulting
corporation, any constituent corporation (including any constituent of a
constituent) absorbed in a consolidation or merger which, if its separate
existence had continued, would have had power and authority to indemnify its
directors, officers, and employees or agents, so that any person who is or
10
<PAGE>
was a director, officer, employee or agent of such constituent corporation, or
is or was serving at the request of such constituent corporation as a director,
officer, employee or agent of another corporation, partnership, joint venture,
trust or other enterprise, shall stand in the same position under this Article V
with respect to the resulting or surviving corporation as he or she would have
with respect to such constituent corporation if its separate existence had
continued.
ARTICLE VI
CERTIFICATES OF STOCK
Section 1. Form. Every holder of stock in the corporation shall be
--------- ----
entitled to have a certificate, signed by, or in the name of the corporation by
the chairman, president and chief executive officer or a vice-president and the
secretary or an assistant secretary of the corporation, certifying the number of
shares owned by such holder in the corporation. If such a certificate is
countersigned (1) by a transfer agent or an assistant transfer agent other than
the corporation or its employee or (2) by a registrar, other than the
corporation or its employee, the signature of any such chairman, president and
chief executive officer, vice-president, secretary, or assistant secretary may
be facsimiles. In case any officer or officers who have signed, or whose
facsimile signature or signatures have been used on, any such certificate or
certificates shall cease to be such officer or officers of the corporation
whether because of death, resignation or otherwise before such certificate or
certificates have been delivered by the corporation, such certificate or
certificates may nevertheless be issued and delivered as though the person or
persons who signed such certificate or certificates or whose facsimile signature
or signatures have been used thereon had not ceased to be such officer or
officers of the corporation. All certificates for shares shall be consecutively
numbered or otherwise identified. The name of the person to whom the shares
represented thereby are issued, with the number of shares and date of issue,
shall be entered on the books of the corporation. Shares of stock of the
corporation shall only be transferred on the books of the corporation by the
holder of record thereof or by such holder's attorney duly authorized in
writing, upon surrender to the corporation of the certificate or certificates
for such shares endorsed by the appropriate person or persons, with such
evidence of the authenticity of such endorsement, transfer, authorization, and
other matters as the corporation may reasonably require, and accompanied by all
necessary stock transfer stamps. In that event, it shall be the duty of the
corporation to issue a new certificate to the person entitled thereto, cancel
the old certificate or certificates, and record the transaction on its books.
The board of directors may appoint a bank or trust Company organized under the
laws of the United States or any state thereof to act as its transfer agent or
registrar, or both in connection with the transfer of any class or series of
securities of the corporation.
Section 2. Lost Certificates. The board of directors may direct a new
--------- -----------------
certificate or certificates to be issued in place of any certificate or
certificates previously issued by the corporation alleged to have been lost,
stolen, or destroyed, upon the making of an affidavit of that fact by the person
claiming the certificate of stock to be lost, stolen, or destroyed.
11
<PAGE>
When authorizing such issue of a new certificate or certificates, the board of
directors may, in its discretion and as a condition precedent to the issuance
thereof, require the owner of such lost, stolen, or destroyed certificate or
certificates, or his or her legal representative, to give the corporation a bond
sufficient to indemnify the corporation against any claim that may be made
against the corporation on account of the loss, theft or destruction of any such
certificate or the issuance of such new certificate.
Section 3. Fixing a Record Date for Stockholder Meetings. In order
--------- ---------------------------------------------
that the corporation may determine the stockholders entitled to notice of or to
vote at any meeting of stockholders or any adjournment thereof, the board of
directors may fix a record date, which record date shall not precede the date
upon which the resolution fixing the record date is adopted by the board of
directors, and which record date shall not be more than sixty nor less than ten
days before the date of such meeting. If no record date is fixed by the board
of directors, the record date for determining stockholders entitled to notice of
or to vote at a meeting of stockholders shall be the close of business on the
next day preceding the day on which notice is given, or if notice is waived, at
the close of business on the day next preceding the day on which the meeting is
held. A determination of stockholders of record entitled to notice of or to
vote at a meeting of stockholders shall apply to any adjournment of the meeting;
provided, however, that the board of directors may fix a new record date for the
adjourned meeting.
Section 4. Fixing a Record Date for Action by Written Consent. In
--------- --------------------------------------------------
order that the corporation may determine the stockholders entitled to consent to
corporate action in writing without a meeting, the board of directors may fix a
record date, which record date shall not precede the date upon which the
resolution fixing the record date is adopted by the board of directors, and
which date shall not be more than ten days after the date upon which the
resolution fixing the record date is adopted by the board of directors. If no
record date has been fixed by the board of directors, the record date for
determining stockholders entitled to consent to corporate action in writing
without a meeting, when no prior action by the board of directors is required by
statute, shall be the first date on which a signed written consent setting forth
the action taken or proposed to be taken is delivered to the corporation by
delivery to its registered office in the State of Delaware, its principal place
of business, or an officer or agent of the corporation having custody of the
book in which proceedings of meetings of stockholders are recorded. Delivery
made to the corporation's registered office shall be by hand or by certified or
registered mail, return receipt requested. If no record date has been fixed by
the board of directors and prior action by the board of directors is required by
statute, the record date for determining stockholders entitled to consent to
corporate action in writing without a meeting shall be at the close of business
on the day on which the board of directors adopts the resolution taking such
prior action.
Section 5. Fixing a Record Date for Other Purposes. In order that the
--------- ---------------------------------------
corporation may determine the stockholders entitled to receive payment of any
dividend or other distribution or allotment or any rights or the stockholders
entitled to exercise any rights in respect of any change, conversion or exchange
of stock, or for the purposes of any other lawful action, the board of directors
may fix a record date, which record date shall not
12
<PAGE>
precede the date upon which the resolution fixing the record date is adopted,
and which record date shall be not more than sixty days prior to such action. If
no record date is fixed, the record date for determining stockholders for any
such purpose shall be at the close of business on the day on which the board of
directors adopts the resolution relating thereto.
Section 6. Registered Stockholders. Prior to the surrender to the
--------- -----------------------
corporation of the certificate or certificates for a share or shares of stock
with a request to record the transfer of such share or shares, the corporation
may treat the registered owner as the person entitled to receive dividends, to
vote, to receive notifications, and otherwise to exercise all the rights and
powers of an owner.
Section 7. Subscriptions for Stock. Unless otherwise provided for in
--------- -----------------------
the subscription agreement, subscriptions for shares shall be paid in full at
such time, or in such installments and at such times, as shall be determined by
the board of directors. Any call made by the board of directors for payment on
subscriptions shall be uniform as to all shares of the same class or as to all
shares of the same series. In case of default in the payment of any installment
or call when such payment is due, the corporation may proceed to collect the
amount due in the same manner as any debt due the corporation.
ARTICLE VII
-----------
GENERAL PROVISIONS
------------------
Section 1. Dividends. Dividends upon the capital stock of the
--------- ---------
corporation, subject to the provisions of the certificate of incorporation, if
any, may be declared by the board of directors at any regular or special
meeting, pursuant to law. Dividends may be paid in cash, in property, or in
shares of the capital stock, subject to the provisions of the certificate of
incorporation. Before payment of any dividend, there may be set aside out of
any funds of the corporation available for dividends such sum or sums as the
directors from time to time, in their absolute discretion, think proper as a
reserve or reserves to meet contingencies, or for equalizing dividends, or for
repairing or maintaining any property of the corporation, or any other purpose
and the directors may modify or abolish any such reserve in the manner in which
it was created.
Section 2. Checks, Drafts or Orders. All checks, drafts, or other
--------- ------------------------
orders for the payment of money by or to the corporation and all notes and other
evidences of indebtedness issued in the name of the corporation shall be signed
by such officer or officers, agent or agents of the corporation, and in such
manner, as shall be determined by resolution of the board of directors or a duly
authorized committee thereof.
Section 3. Contracts. The board of directors may authorize any officer
--------- ---------
or officers, or any agent or agents, of the corporation to enter into any
contract or to execute and
13
<PAGE>
deliver any instrument in the name of and on behalf of the corporation, and such
authority may be general or confined to specific instances.
Section 4. Loans. The corporation may lend money to, or guarantee any
--------- -----
obligation of, or otherwise assist any officer or other employee of the
corporation or of its subsidiary, including any officer or employee who is a
director of the corporation or its subsidiary, whenever, in the judgment of the
directors, such loan, guaranty or assistance may reasonably be expected to
benefit the corporation. The loan, guaranty or other assistance may be with or
without interest, and may be unsecured, or secured in such manner as the board
of directors shall approve, including, without limitation, a pledge of shares of
stock of the corporation. Nothing in this section contained shall be deemed to
deny, limit or restrict the powers of guaranty or warranty of the corporation at
common law or under any statute. No loans shall be made or contracted on behalf
of the corporation and no evidences of indebtedness shall be issued in its name
unless authorized by resolution of the board of directors. Such authority may
be general or confined to specific instances.
Section 5. Fiscal Year. The fiscal year of the corporation shall be
--------- -----------
fixed by resolution of the board of directors.
Section 6. Corporate Seal. The board of directors shall provide a
--------- --------------
corporate seal which shall be in the form of a circle and shall have inscribed
thereon the name of the corporation and the words "Corporate Seal, Delaware".
The seal may be used by causing it or a facsimile thereof to be impressed or
affixed or reproduced or otherwise.
Section 7. Voting Securities Owned By Corporation. Voting securities
--------- --------------------------------------
in any other corporation held by the corporation shall be voted by the president
and chief executive officer, unless the board of directors specifically confers
authority to vote with respect thereto, which authority may be general or
confined to specific instances, upon some other person or officer. Any person
authorized to vote securities shall have the power to appoint proxies, with
general power of substitution.
Section 8. Inspection of Books and Records. Any stockholder of record,
--------- -------------------------------
in person or by attorney or other agent, shall, upon written demand under oath
stating the purpose thereof, have the right during the usual hours for business
to inspect for any proper purpose the corporation's stock ledger, a list of its
stockholders, and its other books and records, and to make copies or extracts
therefrom. A proper purpose shall mean any purpose reasonably related to such
person's interest as a stockholder. In every instance where an attorney or
other agent shall be the person who seeks the right to inspection, the demand
under oath shall be accompanied by a power of attorney or such other writing
which authorizes the attorney or other agent to So act on behalf of the
stockholder. The demand under oath shall be directed to the corporation at its
registered office in the State of Delaware or at its principal place of
business.
14
<PAGE>
Section 9. Section Headings. Section headings in these bylaws are for
--------- ----------------
convenience of reference only and shall not be given any substantive effect in
limiting or otherwise construing any provision herein.
Section 10. Inconsistent Provisions. In the event that any provision of
---------- -----------------------
these by-laws is or becomes inconsistent with any provision of the certificate
of incorporation, the General Corporation Law of the State of Delaware or any
other applicable law, the provision of these by-laws shall not be given any
effect to the extent of such inconsistency but shall otherwise be given full
force and effect.
ARTICLE VIII
------------
AMENDMENTS
----------
These by-laws may be amended, altered, or repealed and new bylaws adopted
at any meeting of the board of directors by a majority vote. The fact that the
power to adopt, amend, alter, or repeal the by-laws has been conferred upon the
board of directors shall not divest the stockholders of the same powers.
15
<PAGE>
EXHIBIT 3.11
CERTIFICATE OF INCORPORATION
OF
ALBANY LADDER COMPANY, INC.
FILED DECEMBER 31, 1947
WITH AMENDMENTS Of 3/21/57,
2/26/87, 10/4/901 12/14/95 AND 9/20/96
- AND -
CERTIFICATE OF MERGER OF SYRACUSE LADDER
AND SCAFFOLDING CO., INC., SOUTH
CENTRAL SCAFFOLDING, INC., & ROCHESTER
SCAFFOLDING & EQUIPMENT CO., INC.
INTO
ALBANY LADDER COMPANY, INC.
FILED 12/21/95
<PAGE>
CERTIFICATE OF INCORPORATION
of
ALBANY LADDER COMPANY INC.
Pursuant to Article Two of the Stock Corporation Law.
We, the undersigned, for the purpose of forming a corporation pursuant
to Article Two of the Stock Corporation Law of the State of New York, certify:
1. The Name of the Corporation shall be:
ALBANY LADDER COMPANY INC.
2. The Purposes for which it is to be formed are:
To do all and everything necessary, suitable and proper for the
accomplishment of any of the purposes or any of the powers hereinafter set
forth, either alone or in association with other corporations, firm or
individuals, and to do every other act or acts, thing or things incidental or
appurtenant to or growing out of or connected with the aforesaid business or
powers or any part or parts thereof and to do or perform any and all act or acts
which any corporation may be lawfully authorized to do, provided the same be not
inconsistent with the laws under which this corporation is organized.
To buy, sell, mortgage, exchange, lease, let, hold for investment or
otherwise, use and operate; real estate of all kinds, improved or unimproved,
and any right or interest therein.
To manufacture, buy and sell and generally deal in plain and extension
ladders of all kinds and sizes, step-ladders, store ladders, rope and chain
ladders, rolling and extension ladders; also scaffolds and scaffolding,
constructed of steel or wood or any other material for use in painting or
interior decorating or for use in the construction, maintenance or demolition of
structures, either interior or exterior, and for any other purposes; also blocks
and falls, rollers, rope and other things used and usable with ladders and
scaffolding; and to engage in the business of letting for hire blocks and falls,
rollers, rope and other things used or usable with ladders and scaffolding.
To manufacture, purchase, rent, sell, use and dispose of all
machinery, tools and apparatus necessary or convenient in and about the
prosecution of its business.
To manufacture, buy, sell, import, export and generally deal in sash,
doors, blinds, trellis, gates, play pens, lawn swings, trapeze, slides, ironing
boards, stools, seats and any other similar articles; also ladders and
scaffolding of all kinds; to acquire timber lands
<PAGE>
and do general lumbering business from which to acquire the material to make
said articles an similar articles.
To conduct a general merchandising and trading business and for the
accomplishment thereof to buy or otherwise acquire, hold, sell or otherwise
dispose of, deal and trade in, as principal, agent or broker, goods, wares,
merchandise and personal property of every kind and description, except bills of
exchange, at wholesale or retail and on commission or otherwise.
To manufacture, design, repair, install, buy, sell, import, export,
exchange or otherwise deal and traffic in woodworking machinery and all kinds of
machinery for saw and planing mills, door and blind work, ladder and scaffolding
work, pattern shops, agricultural works, cabinet and furniture makers' shops and
specially designed machines for different classes of woodwork; to acquire,
purchase, lease, sell or equip, maintain and operate a general machine shop.
3. The total number of shares that may be issued is two hundred
(200), of which one hundred fifty (150) shares are to be Preferred Shares and
are to have a par value of $200 each and fifty (50) shares which are to be known
as Common Shares and are to be without par value.
The capital of the corporation shall be at least equal to the sum of
the aggregate par value of all issued shares having par value, plus the
aggregate amount of consideration received by the corporation for the issuance
of shares without par value, plus such amounts as, from time to time, by
resolution of the board of directors, may be transferred thereto.
4. The shares shall be divided into preferred to consist of one
hundred fifty (150) shares having a par value of $200 per share and common to
consist of fifty (50) shares without par value. The designations, preference,
privileges and voting powers and the restrictions or qualifications of the
shares of each class are:
The preferred stock shall entitle the holder thereof to receive out of
the surplus of the corporation a non-cumulative dividend at the rate of six (6)
per cents per annum, payable annually, before any dividend shall be set apart or
paid on the common stock for such year, and the remainder of the surplus or net
earnings applicable to the payment of dividends shall be distributed as
dividends among the holders of the common stock, as and when the board shall
determine.
In case of liquidation or dissolution or distribution of assets of the
corporation, the holders of preferred stock shall be paid the par amount of such
preferred shares before any amount shall be payable to the holders of the common
stock; and after the payment of the par amount of such preferred shares to the
holders thereof, the balance of the assets and funds of the corporation shall be
distributed wholly among the holders of the common stock.
<PAGE>
The corporation, may, from its surplus profits, retire the preferred
stock on any day on which a dividend thereon shall be payable at the price per
share of two hundred and ten dollars ($210) and accrued dividends, provided it
give at least ninety days' notice of such retirement in the manner to be
provided in the by-laws.
The holders of the preferred stock shall not be entitled to any right
or privilege of voting, concerning any of the affairs of the corporation.
The holders of the preferred stock shall not be entitled to vote in a
proceeding for mortgaging the property and franchises of the corporation
pursuant to Section 15 of the Stock Corporation Law, for guaranteeing the bonds
of another corporation pursuant to Section 19 of the Stock Corporation Law, for
sale of the franchises and property pursuant to Section 20 of the Stock
Corporation Law, for establishing priorities or creating preferences among the
several classes of stock pursuant to Section 36 of the Stock Corporation Law,
for consolidation pursuant to Section 86 of the Stock Corporation Law, for
voluntary dissolution pursuant to Section 105 of the Stock Corporation Law, or
for the change of name pursuant to the General Corporation Law.
The holders of the common stock shall be entitled to one (1) vote of
each share of stock held and such stock is the only stock that shall be entitled
to have a vote or voice in the management of the corporation.
5. The office of the corporation shall be in the Town of Colonie,
County of Albany, State of New York, and the Secretary of State shall forward
all mail to the Corporation at Stop #30, Albany-Schenectady Road, Albany 5, New
York.
6. The duration of the corporation shall be perpetual.
7. The number of directors shall be three (3).
8. The names and the post office addresses of the directors until the
first annual meeting of the stockholders are:
<TABLE>
<CAPTION>
NAMES POST OFFICE ADDRESS
----- -------------------
<S> <C>
Lester J. Heath, Sr. 1609 Central Ave., Albany 5, N.Y.
Lester J. Heath, Jr. 1104 State St., Schenectady, N.Y.
Donald S. Marks 1520 Central Ave., Albany 5, N.Y.
</TABLE>
<PAGE>
9. The name and post office address of each subscriber of this
certificate of incorporation and a statement of the number of shares which each
agrees to take in the corporation are as follows.
<TABLE>
<CAPTION>
NAMES POST OFFICE ADDRESS NO. OF SHARES
----- ------------------- -------------
<S> <C> <C>
Lester J. Heath, Sr. 1609 Central Ave., Albany 5, N.Y. 1
Lester J. Heath, Jr. 1104 State St., Schenectady, N.Y. 1
Donald S. Marks 1520 Central Ave., Albany 5, N.Y. 1
</TABLE>
10. All of the subscribers of this certificate are of full age, at
least two-thirds of them are citizens of the United States, at least one of them
is a resident of the State of New York, and at least one of the persons named as
a director is a citizen of the United States and a resident of the State of New
York.
11. The Secretary of State of the State of New York is hereby
designated as the agent of the corporation upon whom process in any action or
proceeding against it, may be served.
<PAGE>
IN WITNESS WHEREOF, we have made and subscribed this certificate in
triplicate this 30 day of December, 1947.
/s/ Lester J. Heath, Sr.
-----------------------------------
Lester J. Heath, Sr.
-----------------------------------
Donald S. Marks
-----------------------------------
STATE OF NEW YORK )
: SS.
COUNTY OF ALBANY )
On this 30th day of December, 1947, before me personally came LESTER
J. HEATH, SR., LESTER J. HEATH, JR., and DONALD S. MARKS, to me known to be the
persons described in and who executed the foregoing certificate of
incorporation, and they thereupon severally duly acknowledged to me that they
executed the same.
/s/ John J. Glavin
-----------------------------------
Notary Public State of N.Y.
Residing in Albany County
Certificate filed in Rensselaer Co.
My Commission expires Mar. 30, 1948
<PAGE>
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
OF
ALBANY LADDER COMPANY INC.
(Pursuant to Section 36 of the Stock Corporation Law)
We, the undersigned, being the holders of record of all the outstanding
shares of the corporation entitled to vote relation to the proceedings provided
for in this certificate, do hereby certify as follows:
ONE: The name of the corporation is ALBANY LADDER COMPANY INC.
TWO: The certificate of incorporation was filed in the office of the
Secretary of the State of New York on December 1947.
THREE: The certificate of incorporation is amended to effect one or more
of the changes authorized by Subdivision 2 of Section 35 of the Stock
Corporation Law, to wit: to change the number of its authorized shares and to
increase the amount of the capital stock of the corporation in conformity
therewith, and to reclassify the shares.
FOUR: accomplish the increase in number of shares of this corporation and
the increase in its capital stock, Articles "3" and "4" of the, certificate of
incorporation as previously filed are amended to read as follows, to wit:
3. The amount of capital stock is $150,000. The total number of shares
that may be issued is Thirteen Hundred Fifty (1350) shares, of which
one hundred fifty (150) are to be preferred shares and are to have a
par value of Two Hundred Dollars ($200.00) each; and twelve hundred
(1200) shares which are to be known as common shares and are to have a
par value of One Hundred Dollars ($100.00) each and be divided into
two classes consisting of two hundred (200) shares Class A voting
stock and one thousand (1,000) shares Class B nonvoting stock.
4. The shares shall be divided into preferred to consist of, one hundred
fifty (150) shares having a par value of Two Hundred Dollars ($200.00)
per share and common, to consist of two hundred (200) shares Class A
voting stock having a
1
<PAGE>
par value of One Hundred Dollars ($100.00) per share and one thousand
(1,000) shares Class B nonvoting stock having a par value of One
Hundred Dollars ($100.00) per share. The designations, preferences,
privileges and voting powers and the restrictions or clarifications of
the shares are:
The preferred stock shall entitle the holder thereof to receive out of
the surplus of the corporation, a non-cumulative dividend at the rate
of six (6) percent, per annum, payable annually, before any dividend
shall be set apart or paid on the common stock for such year, and the
remainder of the surplus or net earnings applicable to the payment of
dividends shall be distributed as dividends among the holders of the
common stock, as and when the board shall determine, each share of
Class A sharing equally with each share of Class B.
In case of liquidation or dissolution or distribution of assets of the
corporation, the holders of such preferred shares shall be paid the
par amount of such preferred shares before any amount shall be payable
to the holders of common stock; and after the payment of the par
amount of such preferred shares to the holders thereof, the balance of
the assets and funds of the corporation shall be distributed wholly
among the holders of the common stock, each share of Class A sharing
equally with each share of Class B.
The corporation may, from its surplus profits, retire the preferred
stock on any day on which a dividend thereon shall be payable at the
price per share of Two Hundred and Ten Dollars ($210.00) plus declared
but unpaid dividends, provided it give at least ninety (90) days'
notice of such retirement in the manner to be provided in the by-laws.
The holders of the preferred stock shall not be entitled to any right
or privilege of voting, concerning any of the affairs of the
corporation.
The holders of the preferred stock shall not be entitled to vote in a
proceeding for mortgaging the property and franchises of the
corporation pursuant to Section 16 of the Stock Corporation Law, for
guaranteeing the bonds of another corporation pursuant to Section 19
of the Stock Corporation Law for sale of the franchises and property
pursuant to Section 20 of the Stock Corporation Law, for consolidation
pursuant to Section 86 of the Stock Corporation Law, for voluntary
dissolution pursuant to Section 105 of the Stock Corporation Law, or
for the change of name pursuant to the General Corporation Law.
The holders of the Class A common stock shall be entitled to one vote
for each share of stock and such stock is the only stock that shall
have a voice in the management of the corporation.
2
<PAGE>
FIVE: The presently authorized fifty (50) shares of common stock without
par value, all of which are issued shares, are hereby changed to two hundred
(200) shares of Class A voting common stock of the par value of One Hundred
Dollars ($100.00) per share and one thousand 1,000) shares of Class B nonvoting
stock of the par value of One Hundred Dollars per share, at the rate of four (4)
shares of new Class A common stock and twenty (20) shares of new Class B common
stock with par value for each share of the presently authorized and issued
common stock without par value.
IN WITNESS WHEREOF, we have made and subscribed this certificate in
triplicate this 20 day of March, 1957.
/s/ Lester J. Heath, Sr.
------------------------------------
/s/ Helen L. Heath
------------------------------------
/s/ Lester J. Heath, Jr.
------------------------------------
/s/ Donald S. Marks
------------------------------------
STATE OF NEW YORK ) ss.:
COUNTY OF ALBANY )
On this 20th day of March, 1957, before me personally came LESTER J.
HEATH, SR., LESTER J. HEATH, JR., DONALD S. MARKS, and HELEN L. HEATH, to me
know and known to me to be the persons described in and who executed the
foregoing Certificate of Amendment of Certificate of Incorporation, and they
thereupon severally acknowledged to me that they executed the same.
/s/ Thomas C. Plowden-Wardlaw
------------------------------------
Notary Public
3
<PAGE>
STATE OF NEW YORK ) ss.:
COUNTY OF ALBANY )
LESTER J. HEATH, JR., being duly sworn, deposes and says:
That he is the Secretary of Albany Ladder company, Inc., and that the
persons who have executed the foregoing Certificate constitute the holders of
record of all the outstanding shares of the corporation entitled to vote with
relation to the proceedings provided for in the Certificate.
/s/ Lester J. Heath, Jr.
------------------------------------
Subscribed and sworn to before me
this 20th day of March 1957.
/s/ Thomas C. Plowden-Wardlaw
- ---------------------------------
Notary Public
STATE OF NEW YORK ) ss.:
COUNTY OF ALBANY )
LESTER J. HEATH, Sr. and DONALD S. MARKS, being duly and severally
sworn, each for himself deposes and says:
That he, said Lester J. Heath, Sr. resides at 1 Delafield Drive,
Albany 5, New York, and is President; that he, said Donald S. Marks, resides at
1520 Central Avenue, Albany 5, New York, and is Treasurer of Albany Ladder
Company Inc.
That the number of additional shares not resulting from a change of
shares which the corporation is hereby authorized to issue is none; that the
number of shares changed as provided in Subparagraph 5 of Paragraph c of
Subdivision 2 of Section 35 of the Stock Corporation Law is 50 common shares of
no par value. The number of shares resulting from the change is 1200 shares of
the par value of $100 each, to be designated at 200 shares Class A voting common
stock and 1000 shares of Class B nonvoting common stock.
/s/ Lester J. Heath
------------------------------------
/s/ Donald S. Marks
------------------------------------
Subscribed and sworn to before me
this 20th day of March 1957.
/s/ Thomas C. Plowden-Wardlaw
- ---------------------------------
Notary Public
<PAGE>
CERTIFICATE OF AMENDMENT OF THE CERTIFICATE OF
INCORPORATION OF ALBANY LADDER COMPANY INC.
UNDER SECTION 805 OF THE BUSINESS CORPORATION LAW
We, the undersigned, the President and Secretary respectively of ALBANY
LADDER COMPANY INC. hereby certify:
FIRST, that the name of the Corporation is ALBANY LADDER COMPANY INC.
SECOND, that the Certificate of Incorporation was filed by the
Department of State on December 31, 1947.
THIRD, that the Certificate of Incorporation is amended to add the
following provision:
"At all times when the corporation is qualified as a Subchapter S
corporation under the United States Internal Revenue Code or its
successor statute, the corporation is hereby required to make a
mandatory payment to each shareholder of each class of stock of a sum
of money equivalent to the federal and state income tax payments
required of such shareholder on the portion of the corporate profits
(if any) allocated to such shareholder, plus a proportionate share of
the amount by which the tax on said profits at the corporate rate
would exceed the tax on such profits at the individual rate."
FOURTH, that the amendment was authorized and approved by the
unanimous written consent of the Board of Directors and all the
holders of issued and outstanding shares of the Corporation, a copy of
which is annexed hereto and incorporated herein.
IN WITNESS WHEREOF, we have executed this Certificate this 27th day of
December, 1986.
/s/ Lester J. Heath
------------------------------------
President
/s/ Richard R. Rowley
------------------------------------
Secretary
<PAGE>
STATE OF NEW YORK )
) Ss.:
COUNTY OF ALBANY )
RICHARD R. ROWLEY, being duly sworn deposes and says that he is the
Secretary of Albany Ladder Company Inc. , the Corporation and one of the persons
who signed the foregoing Certificate of Amendment, that he has read the
Certificate of Amendment and knows the contents thereof, and that the same is
true to his knowledge.
/s/ Richard R. Rowley
------------------------------------
RICHARD R. ROWLEY
Sworn to before me this
29th day of December, 1986
/s/ Kathleen D. Secor
- --------------------------
NOTARY PUBLIC
<PAGE>
UNANIMOUS WRITTEN CONSENT OF THE BOARD OF DIRECTORS
AND SHAREHOLDERS OF ALBANY LADDER COMPANY INC.
The undersigned, being all of the members of the Board of Directors and
Shareholders of ALBANY LADDER COMPANY INC., a New York Corporation (the
"Company"), do hereby unanimously adopt and consent to the adoption of the
following resolutions, without a meeting:
WHEREAS, each member of the Board of Directors and each
Shareholder of the Company believes it to be in the best interests of
the Company and its Shareholders to amend the Certificate of
Incorporation of the Company to add a new provision thereto providing
as follows:
"At all times when the corporation is qualified as a Subchapter S
corporation under the United States Internal Revenue Code or its
successor statute, the corporation is hereby required to make a
mandatory payment to each shareholder of each class of stock of a sum
of money equivalent to the federal and state income tax payments
required of such shareholder on the portion of the corporate profits
(if any) allocated to such shareholder, plus a proportionate share of
the amount by which the tax on said prof its at the corporate rate
would exceed the tax on such profits at the individual rate."
Now Therefore It Is Hereby
RESOLVED, that the adoption of such amendment is hereby approved,
ratified and confirmed, and in connection therewith the Certificate of
Incorporation be, and hereby is, amended by adding thereto a new
provision to read in its entirety as follows:
"At all times when the corporation is qualified as a Subchapter S
corporation under the United States Internal Revenue Code or its
successor statute, the corporation is hereby required to make a
mandatory payment to each shareholder of each class of stock of a sum
of money equivalent to the federal and state income tax payments
required of such shareholder on the portion of the corporate profits
(if any) allocated to such plus a proportionate share of profits at
the corporate rate would exceed the tax on such profits at the
individual rate."
And it Is Hereby Further
<PAGE>
RESOLVED, that, as amended, the Certificate of Incorporation of
the Company is in all respects ratified, reaffirmed and approved; and
it is further
RESOLVED, that the proper officers of the Company hereby are
authorized and directed to execute and deliver a Certificate of
Amendment and all such further documents, certificates or instruments,
and to take all such further action, as any such officer may deem
necessary, proper, convenient or desirable to carry out and perform
the foregoing resolution and otherwise fully to effectuate the
purposes and intents of the foregoing resolution.
IN WITNESS WHEREOF, the undersigned have executed this consent this 27th
day of December, 1986.
/s/ Lester J. Heath, Jr. /s/ Ellen H. Read
- ----------------------------- -----------------------------
Lester J. Heath, Jr. Ellen H. Read
Director and Shareholder Shareholder
/s/ Lester J. Heath, III /s/ Peggy H. DiPaola
- ----------------------------- -----------------------------
Lester J. Heath, III Peggy H. DiPaola
Director and Shareholder Shareholder
/s/ Ruth V. Heath /s/ Susan M. Heath
- ----------------------------- -----------------------------
Ruth V. Heath Susan M. Heath
Shareholder Shareholder
/s/ Richard R. Rowley
- -----------------------------
Richard R. Rowley
Director
<PAGE>
CERTIFICATE OF AMENDMENT OF THE CERTIFICATE OF
INCORPORATION OF ALBANY LADDER COMPANY INC.
UNDER SECTION 805 OF THE BUSINESS CORPORATION LAW
We, the undersigned, the President and Secretary respectively of ALBANY
LADDER COMPANY INC. hereby certify:
FIRST, that the name of the Corporation is ALBANY LADDER COMPANY INC.
SECOND, that the Certificate of Incorporation was filed by the
Department of State on December 31, 1947.
THIRD, that the Certificate of Incorporation is amended to add the
following provision:
"To the maximum extent now or hereafter permitted by the laws of
the State of New York including but not limited to Section 721 of the
Business Corporation Law or its successor statutes, and without
further action by the stockholders or directors of the Corporation, or
any court, the Corporation will indemnify its officers, directors and
stockholders who are made, or threatened to be made a party to any
action or proceeding whatsoever whether administrative, civil or
criminal, in any court, agency or forum whatsoever, brought by or on
behalf of any party whomsoever by reason of the fact that such person
was an officer, director or stockholder of the Corporation, against
judgments, fines, amounts paid in settlements and reasonable expenses,
including attorneys' fees actually and necessarily incurred as a
result of such actual or threatened action or proceeding, or any
appeal therein and so far as permitted by law, officers and directors
of the Corporation shall not be personally liable to the Corporation
or its stockholders for monetary damages for breach of fiduciary duty,
except for liability fixed by judgment or other final adjudication
which establishes that such acts were acts committed in bad faith or
were the result of actual and deliberate dishonesty and were material
to the cause of action so adjudicated, or for any transaction from
which the officer or director derived a financial profit or other
advantage to which he was not legally entitled. If the laws of the
State of New York are amended after approval of this article
permitting corporate action further eliminating or limiting the
personal liability of officers and directors, then the liability of an
officer or director of the Corporation shall be eliminated or limited
to the fullest extent permitted by the law York State Law, as so
amended.
<PAGE>
Any repeal or modification of the foregoing paragraph by the
Corporation shall not adversely affect any right or protection of a
director of the Corporation existing at the time of such repeal or
modification."
FOURTH, that the amendment was authorized and approved by the
unanimous written consent of the Board of Directors and all the
holders of issued and outstanding shares of the Corporation with
voting power.
IN WITNESS WHEREOF, we have executed this Certificate this 9th day of June,
1987.
/s/ Lester J. Heath, III
------------------------------------
President, Lester J. Heath, III
/s/ Richard R. Rowley
------------------------------------
Secretary, Richard R. Rowley
STATE OF NEW YORK )
) Ss.:
COUNTY OF ALBANY )
RICHARD R. ROWLEY, being duly sworn deposes and says that he is the
Secretary of Albany Ladder Company Inc. and one of the persons who signed the
foregoing Certificate of Amendment, that he has read the Certificate of
Amendment and knows the contents thereof, and that the same is true to his
knowledge.
/s/ Richard R. Rowley
------------------------------------
RICHARD R. ROWLEY
Sworn to before me this
9th day of June, 1987.
/s/ Vicki W. Brahm
- -----------------------------
NOTARY PUBLIC
<PAGE>
UNANIMOUS WRITTEN CONSENT OF THE BOARD OF DIRECTORS
AND SHAREHOLDERS OF ALBANY LADDER COMPANY, INC.
WITH VOTING POWER
The undersigned, being all of the members of the Board of Directors and
Voting Shareholders of ALBANY LADDER COMPANY, INC., a New York Corporation (the
"Company") , do hereby unanimously adopt and consent to the adoption of the
following resolutions, without a meeting:
WHEREAS, each member of the Board of Directors and each
Shareholder of the Company with voting power believes it to be in the
best interests of the Company and its Shareholders to amend the
Certificate of Incorporation of the Company to add a new provision
thereto in the manner hereinafter set forth:
"To the maximum extent now or hereafter permitted by the laws of
the State of New York including but not limited to Section 721 of the
Business Corporation Law or its successor statutes, and without
further action by the stockholders or directors of the Corporation, or
any court, the Corporation will indemnify its officers, directors and
stockholders who are made, or threatened to be made a party to any
action or proceeding whatsoever whether administrative, civil or
criminal, in any court, agency or forum whatsoever, brought by or on
behalf of any party whomsoever by reason of the fact that such person
was an officer, director or stockholder of the Corporation, against
judgments, fines, amounts paid in settlements and reasonable expenses,
including attorneys' fees actually and necessarily incurred as a
result of such actual or threatened action or proceeding, or any
appeal therein and so far as permitted by law, officers and directors
of the Corporation shall not be personally liable to the Corporation
or its stockholders for monetary damages for breach of fiduciary duty,
except for liability filed by judgment or other final adjudication
which establishes that such acts were acts committed in bad faith or
were the result of actual and deliberate dishonesty and were material
to the cause of action so adjudicated, or for any transaction from
which the officer or director derived a financial profit or other
advantage to which was not legally entitled. If the laws of the State
of New York are amended after approval of this article permitting
corporate action further eliminating or limiting the personal
liability of officers and directors, then the liability of an officer
or director of the Corporation shall be eliminated or limited to the
fullest extent permitted by the New York State Law, as so amended.
<PAGE>
Any repeal or modification of the foregoing paragraph by the
Corporation shall not adversely affect any right or protection of a
director of the Corporation existing at the time of such repeal or
modification."
Now Therefore It Is Hereby
RESOLVED, that the adoption of such amendment is hereby approved,
ratified and confirmed, and in connection therewith the Certificate of
Incorporation be, and hereby is, amended by adding thereto a new
provision to read in its entirety as follows:
"To the maximum extent now or hereafter permitted by the laws of
the State of New York including but not limited to Section 721 of the
Business Corporation Law or its successor statutes, and without
further action by the stockholders or directors of the Corporation, or
any court, the Corporation will indemnify its officers, directors and
stockholders who are made, or threatened to be made a party to any
action or proceeding whatsoever whether administrative, civil or
criminal, in any court, agency or forum whatsoever, brought by or on
behalf of any party whomsoever by reason of the fact that such person
was an officer, director or stockholder of the Corporation, against
judgments, fines, amounts paid in settlements and reasonable expenses,
including attorneys' fees actually and necessarily incurred as a
result of such actual or threatened action or proceeding, or any
appeal therein and so far as permitted by law, officers and directors
of the Corporation shall not be personally liable to the Corporation
or its stockholders for monetary damages for breach of fiduciary duty,
except for liability fixed by judgment or other final adjudication
which establishes that such acts were acts committed in bad faith or
were the result of actual and deliberate dishonesty and were material
to the cause of action so adjudicated, or for any transaction from
which the officer or director derived a financial profit or other
advantage to which he was not legally entitled. If the laws of the
State of New York are amended after approval of this article
permitting corporate action further eliminating or limiting the
personal liability of officers and directors, then the liability of an
officer or director of the Corporation shall be eliminated or limited
to the fullest extent permitted by the New York State Law, as so
amended.
Any repeal or modification of the foregoing paragraph by the
Corporation shall not adversely affect any right or protection of
<PAGE>
a director of the Corporation existing at the time of such repeal or
modification."
And It Is Hereby Further
RESOLVED, that, as amended, the Certificate of Incorporation of
the Company is in all respects ratified, reaffirmed and approved; and
it is further
RESOLVED, that the proper officers of the Company hereby are
authorized and directed to execute and deliver a Certificate of
Amendment and all such further documents, certificates or instruments,
and to take all such further action, as any such officer may deem
necessary,, proper, convenient or desirable to carry out and perform
the foregoing resolution and otherwise fully to effectuate the
purposes and intents of the foregoing resolution.
IN WITNESS WHEREOF, the undersigned have executed this consent this 9th day
of June, 1987.
/s/ Lester J. Heath, Jr.
- ----------------------------------
Lester J. Heath, Jr.
Director and Shareholder
/s/ Lester J. Heath, III
- ----------------------------------
Lester J. Heath, III
Director and Shareholder
/s/ Ruth V. Heath
- ----------------------------------
Shareholder
/s/ Richard R. Rowley
- ----------------------------------
Director and Shareholder
<PAGE>
- ---------------------------------------------
In Re: CERTIFICATE OF AMENDMENT OF THE :
CERTIFICATE OF INCORPORATION OF : AFFIDAVIT
ALBANY LADDER COMPANY, INC. :
:
- ---------------------------------------------
STATE OF NEW YORK )
) SS.:
COUNTY OF ALBANY )
Richard R. Rowley being duly sworn, deposes and says:
1. I am the Secretary of Albany Ladder Company, Inc. (hereinafter
referred to as "the Corporation") , which is a domestic corporation duly
organized and incorporated under the laws of the State of New York.
2. The Certificate of Incorporation of the Corporation was filed
with the Department of State on December 31, 1947.
3. The Certificate of Incorporation was amended by the Certificate
of Amendment of the Certificate of Incorporation, executed and dated June 9,
1987. Said Certificate of Amendment of the Corporation is annexed hereto/and
incorporated herein.
4. Said Certificate of Amendment of the Corporation has not been
rescinded or abandoned since its execution.
/s/ Richard R. Rowley
----------------------------
RICHARD R. ROWLEY
Sworn to this
18th day of July, 1990.
/s/ David P. Melanda
- -------------------------
NOTARY PUBLIC
<PAGE>
CERTIFICATE OF AMENDMENT OF THE CERTIFICATE
OF INCORPORATION OF ALBANY LADDER COMPANY INC.
UNDER SECTION 805 OF THE BUSINESS CORPORATION LAW
We, undersigned, the President and Secretary respectively of ALBANY LADDER
COMPANY INC. hereby certify:
FIRST, that the name of the Corporation is and henceforth shall be ALBANY LADDER
COMPANY INC.
SECOND, that the Certificate of Incorporation was filed with the Department of
State on December 31, 1947 and thereafter amended by Certificates of Amendment
filed with the Department of State on March 21, 1957, February 26, 1987 and on
October 4, 1990.
THIRD, the Certificate of Incorporation is amended to effect the following
changes authorized by the business Corporation Law, to wit: to delete the
provisions of Articles 3 and 4 thereof as heretofore amended and to change the
number of its authorized shares and to increase the amount of the capital stock
of the corporation in conformity therewith, and (1) to eliminate 150 shares of
preferred stock authorized by the amendment filed March 21, 1956, all of which
have been redeemed and none of which are issued or outstanding; (2) to increase
the number of Class A shares from 200 to 1,200; (3) to increase the number of
Class B shares from 1,000 to 2,000; and (4) to amend the indemnification
provided by the amendment filed October 4, 1990, in conformity therewith.
FOURTH, to accomplish the elimination of the preferred shares and to increase
the number of shares of this corporation and the increase in its capital stock.
Articles 3 and 4 of the Certificate of Incorporation as previously filed are
amended to read as follows, to wit:
3. The total number of shares that may be issued is Three Thousand Two
Hundred (3,200) shares, of which Three Thousand Two Hundred (3,200)
shares are to be known as common shares and are to have a par value of
One Hundred Dollars ($100.00) each and be divided into two classes
consisting of Twelve Hundred (1,200) shares Class A voting stock and
Two Thousand (2,000) shares Class stock.
4. The designations, preferences, privileges and voting powers and the
restrictions or qualifications of the shares are:
The surplus or net earnings applicable to the payment of dividends
shall be distributed as dividends among the holders of the common as
and when the Board shall determine, each share of Class A sharing
equally with each share of Class B.
In case of liquidation or dissolution or distribution of assets of the
corporation, the balance of the assets and funds of the corporation
shall be distributed wholly among the holders of the common stock,
each share of Class A sharing equally with each share of Class B.
<PAGE>
FIFTH, the provisions of the amendment added to the Certificate of Incorporation
by Amendment filed with the Secretary of State on June 9, 1990 are hereby
deleted and the following is added in their place and stead:
"To the maximum extent now or hereafter permitted by the laws of the
State of New York including but not limited to Article 7 of the
Business Corporation Law or its successor statutes, and without
further action by the stockholders or directors of the Corporation, or
any Court, the Corporation will indemnify its officers, directors and
stockholders who are made, or threatened to be made a party to any
action or proceeding whatsoever whether administrative, civil or
criminal, in any Court, agency or forum whatsoever, brought by or on
behalf of any party whomsoever by reason of the fact that such person
was an officer, director or stockholder of the Corporation, or of a
corporation in which the stockholders of this corporation were also
stockholders and which is hereafter merged into this corporation,
against judgments, fines, amounts paid in settlements and reasonable
expenses, including attorneys' fees actually and necessarily incurred
as a result of such actual or threatened action or proceeding, or any
appeal therein and so far as permitted by law, stockholders, officers
and directors of the Corporation shall not be personally liable to the
Corporation or its stockholders for monetary damages for breach of
fiduciary duty, except for liability fixed by judgment or other final
adjudication which establishes that such acts were acts committed in
bad faith or were the result of actual and deliberate dishonesty and
were material to the cause of action so adjudicated, or for any
transaction from which the stockholder, officer or director derived a
financial profit or other advantage to which he was not legally if
entitled. If the laws of the State of New York are amended after
approval of permitting corporate action further eliminating or
limiting the personal liability of stockholders, officers and
directors, then the liability of a stockholder, officer or director of
the Corporation shall be eliminated or limited to the fullest extent
permitted by the New York State Law, as so amended.
Any repeal or modification of the foregoing paragraph by the
Corporation shall not adversely affect any right or protection of a
director of the Corporation existing at the time of such repeal or
modification."
SIXTH, that this amendment was authorized and approved by the unanimous written
consent of the Board of Directors and all the holders of issued and outstanding
shares of the Corporation entitled to vote thereon.
<PAGE>
IN WITNESS WHEREOF, we have executed this Certificate this 12th day of
December, 1995.
/s/ Lester J. Heath III
------------------------------------------------
President, Lester J. Heath III
/s/ Richard R. Rowley
------------------------------------------------
Secretary, Richard R. Rowley
STATE OF NEW YORK )
) Ss.:
COUNTY OF ALBANY )
RICHARD R. ROWLEY, being duly sworn deposes and says that he is the
Secretary of Albany Ladder Company, Inc. and one of the persons who signed the
foregoing Certificate of Amendment, that he has read the Certificate of
Amendment and knows the contents thereof, and that the same is true to his
knowledge.
/s/ Richard R. Rowley
------------------------------------------------
RICHARD R. ROWLEY
Sworn to before me this
12th day of December, 1995.
/s/ Marcia N. Abrams
- -----------------------------------
NOTARY PUBLIC
<PAGE>
- ---------------------------------------------
In Re: CERTIFICATE OF AMENDMENT OF THE :
CERTIFICATE OF INCORPORATION OF : AFFIDAVIT
ALBANY LADDER COMPANY, INC. :
:
- ---------------------------------------------
STATE OF NEW YORK )
) SS.:
COUNTY OF ALBANY )
RICHARD R. ROWLEY, being duly sworn, deposes and says:
1. I am the Secretary of Albany Ladder Company, Inc. (hereinafter
referred to as "the Corporation"), which is a domestic corporation duly
organized and incorporated under the laws of the State of New York.
2. The Certificate of Incorporation of the Corporation was filed
with the Department of State on December 31, 1947. The Certificate of
Incorporation was amended by the Certificates of Amendment of the Certificate of
Incorporation, filed with the Department of State on March 21, 1957, February
26, 1967 and October 4, 1990.
3. Said Certification of incorporation of the corporation was
amended by Certificate of Amendment dated December 12, 1995 which is annexed
hereto and incorporated herein and has not been rescinded or abandoned since its
execution.
/s/ Richard R. Rowley
-------------------------------
RICHARD R. ROWLEY
Sworn to before me this
13th day of December 1995.
/s/ Mary V. Wagner
- ------------------------------
<PAGE>
CERTIFICATE OF AMENDMENT OF THE CERTIFICATE OF INCORPORATION
OF ALBANY LADDER COMPANY, INC. UNDER SECTION 805 OF
THE BUSINESS CORPORATION LAW
We, the undersigned the President and Secretary respectively of ALBANY
LADDER COMPANY, INC. hereby certify:
FIRST, that the name of the Corporation is and henceforth shall be ALBANY LADDER
COMPANY, INC.
SECOND, that the Certificate of Incorporation was filed with the Department of
State on December 31, 1947 and thereafter amended by Certificates of Amendment
filed with the Department of State on March 21, 1957, February 26, 1987, October
4, 1990 and December 14, 1995.
THIRD, that a Certificate of Merger of Syracuse Ladder and Scaffolding Co., Inc.
and South Central Scaffolding, Inc. and Rochester Scaffolding & Equipment Co.,
Inc. into ALBANY LADDER COMPANY, INC. (the surviving corporation), under Section
904 and all other applicable provisions of the Business Corporation Law of the
State of New York was filed with the Department of State on December 21, 1995.
FOURTH, that the Certificate of Incorporation of ALBANY LADDER COMPANY, INC. as
amended previously, is hereby amended to effect the following change authorized
by the Business Corporation Law, to wit: to delete the provisions of paragraph
numbered 7 thereof and to replace said paragraph numbered 7 with the following
new paragraph numbered 7, to Wit:
7. The number of directors shall be not less than three (3) and shall
be designated at the annual meeting of Shareholders.
FIFTH, that this amendment was authorized and approved by the unanimous written
consent of the Board of Directors and all the holders of issued and outstanding
shares of the Corporation entitled to vote thereon.
<PAGE>
IN WITNESS WHEREOF, we have executed this Certificate this 20th day of
September 1996.
/s/ Anthony Groat
--------------------------------------------------
President, Anthony Groat
/s/ Richard R. Rowley
------------------------------------------------
Secretary, Richard R. Rowley
STATE OF NEW YORK :
: SS.:
COUNTY OF ALBANY :
RICHARD R. ROWLEY, being duly sworn, deposes and says that he is the Secretary
of Albany Ladder Company, Inc. and one of the persons who signed the foregoing
Certificate of Amendment, that he has read the Certificate of Amendment and
knows the contents thereof, and that the same is true to his knowledge.
/s/ Richard R. Rowley
--------------------------------------------
RICHARD R. ROWLEY
Sworn to before me this
20th day of September, 1996.
/s/ Linda L. Richards
- -------------------------------------------------
NOTARY PUBLIC
<PAGE>
- ---------------------------------------------
In Re: CERTIFICATE OF AMENDMENT OF THE :
CERTIFICATE OF INCORPORATION OF : AFFIDAVIT
ALBANY LADDER COMPANY, INC. :
:
- ----------------------------------------------
STATE OF NEW YORK )
) SS.:
COUNTY OF ALBANY )
RICHARD R. ROWLEY, being duly sworn, deposes and says:
1. I am the Secretary of Albany Ladder Company, Inc. (hereinafter
referred to as "the Corporation"), which is a domestic corporation duly
organized and incorporated under the laws of the State of New York.
2. The Certificate of Incorporation of the Corporation was filed with
the Department of State on December 31, 1947. The Certificate of Incorporation
was amended by the Certificates of Amendment of the Certificate of Incorporation
filed with the Department of State on March 21, 1957, February 26, 1987, October
4, 1990 and December 14, 1995.
3. Said Certificate of Incorporation of the Corporation was amended by
Certificate of Amendment dated September 20, 1996 which is annexed hereto and
incorporated herein and has not been rescinded or abandoned since its execution.
/s/ Richard R. Rowley
-----------------------------------------
RICHARD R. ROWLEY
Sworn to before me this 20th
day of September, 1996.
/s/ Linda L. Richards
- ----------------------
NOTARY PUBLIC
<PAGE>
CERTIFICATE OF MERGER OF SYRACUSE LADDER AND SCAFFOLDING CO., INC.
AND SOUTH CENTRAL SCAFFOLDING, INC. AND ROCHESTER SCAFFOLDING &
EQUIPMENT CO., INC. INTO ALBANY LADDER COMPANY, INC. (THE SURVIVING
CORPORATION), UNDER (S)904 AND ALL OTHER APPLICABLE PROVISIONS OF THE
BUSINESS CORPORATION LAW OF THE STATE OF NEW YORK
WE, Lester J. Heath, III and Richard R. Rowley, being respectively the
president and secretary of Syracuse Ladder and Scaffolding Co., Inc. and South
Central Scaffolding, Inc. and Rochester Scaffolding & Equipment Co., Inc. and
Albany Ladder Co., Inc., do hereby certify that effective December 31, 1995,
said corporations have mutually agreed to, and hereby do, unite and merge into a
single corporation under the name of Albany Ladder Co. , Inc., pursuant to (S)
904 and all other applicable provisions of the New York Business Corporation
Law.
The certificate of incorporation of Albany Ladder Co. , Inc. was filed by
the Department of State of New York on December 31, 1947, and said certificate
of incorporation was thereafter amended by certificates of amendment filed by
the Department of State of New York on March 21, 1957, and on February 26, 1987,
and on October 4, 1990 and on December 14, 1995.
STATE OF NEW YORK )
) SS.:
COUNTY OF ALBANY )
I hereby certify that I have compared the annexed copy of the original document
filed by the Department of State and that the same is a correct transcript of
said original.
Witness my hand and seal of the Department of State on Dec. 21, 1995
<PAGE>
CERTIFICATE OF MERGER OF SYRACUSE LADDER AND SCAFFOLDING CO., INC.
AND SOUTH CENTRAL SCAFFOLDING, INC. AND ROCHESTER SCAFFOLDING &
EQUIPMENT CO., INC. INTO ALBANY LADDER COMPANY, INC. (THE SURVIVING
CORPORATION), UNDER (S)904 AND ALL OTHER APPLICABLE PROVISIONS OF THE
BUSINESS CORPORATION LAW OF THE STATE OF NEW YORK
WE, Lester J. Heath, III and Richard R. Rowley, being respectively the
president and secretary of Syracuse Ladder and Scaffolding Co., Inc. and South
Central Scaffolding, Inc. and Rochester Scaffolding & Equipment Co., Inc. and
Albany Ladder Co., Inc., do hereby certify that effective December 31, 1995,
said corporations have mutually agreed to, and hereby do, unite and merge into a
single corporation under the name of Albany Ladder Co., Inc. pursuant to (S)
904 and all other applicable provisions of the New York Business Corporation
Law.
The certificate of incorporation of Albany Ladder Co., Inc. was filed by
the Department of State of New York on December 31, 1947, and said certificate
of incorporation was thereafter amended by certificates of amendment filed by
the Department of State of New York on March 21, 1957, and on February 26, 1987,
and on October 4, 1990 and on December 14, 1995.
The certificate of incorporation of Syracuse Ladder and Scaffolding Co.,
Inc. was filed by the Department of State of New York on November 3, 1950, and
said certificate of incorporation was thereafter amended by certificates of
amendment filed by the Department of State of New York on March 21, 1957, and on
February 26, 1987, and on October 4, 1990.
The certificate of incorporation of South Central Scaffolding, Inc. was
filed by the Department of State of New York on June 12, 1963, and said
certificate of incorporation was thereafter amended by certificates of amendment
filed by the Department of State of New York on February 26, 1987, and on
October 4, 1990.
The certificate of incorporation of Rochester Scaffolding & Equipment Co.,
Inc. was filed by the Department of State of New York on May 22, 1986, and said
certificate of incorporation was thereafter amended by certificate of amendment
filed by the Department of State of New York on October 4, 1990.
As to each constituent corporation, the designation and number of
outstanding shares of each class and series and the voting rights are as
follows:
<PAGE>
ALBANY LADDER CO., INC.
-----------------------
SHARES ISSUED AND OUTSTANDING
-----------------------------
<TABLE>
<CAPTION>
TYPE OF SHARES AND VOTING RIGHTS NUMBER OF SHARES
- -------------------------------- ----------------
<S> <C>
Class A Common Stock (Voting Shares) 100
Class B Common Stock (Non-voting shares) 517
SYRACUSE LADDER AND SCAFFOLDING CO., INC.
-----------------------------------------
SHARES ISSUED AND OUTSTANDING
-----------------------------
TYPE OF SHARES AND VOTING RIGHTS NUMBER OF SHARES
- -------------------------------- ----------------
Class A Common Stock (Voting Shares) 100
Class B Common Stock (Non-voting shares) 1,752.5
SOUTH CENTRAL SCAFFOLDING INC.
------------------------------
TYPE OF SHARES AND VOTING RIGHTS NUMBER OF SHARES
- -------------------------------- ----------------
Class A Common Stock (Voting Shares) 250
Class B Common Stock (Non-voting shares) 350
ROCHESTER SCAFFOLDING & EQUIPMENT CO., INC.
-------------------------------------------
TYPE OF SHARES AND VOTING RIGHTS NUMBER OF SHARES
- -------------------------------- ----------------
Class A Common Stock (Voting Shares) 100
Class B Common Stock (Non-voting shares) -0-
</TABLE>
The terms of this merger were initially duly agreed upon between the
officers and directors of the above-named constituent corporations and were duly
authorized and thereafter duly approved by unanimous written consent of the
holders of all outstanding shares of both classes of stock of each constituent
corporation, all in accordance with all applicable provisions of the Business
Corporation Law of the State of New York.
The terms of this merger as authorized and adopted are as follows:
Class A shares of the common stock of Syracuse Ladder and Scaffolding Co .,
Inc. and South Central Scaffolding, Inc. and South Central Scaffolding &
Equipment Co. , Inc. shall be exchanged for Class A shares of Albany Ladder Co.,
Inc.
All Class B shares of Syracuse Ladder and Scaffolding co., Inc. and South
Central Scaffolding, Inc. and Rochester Scaffolding & Equipment Co. , Inc. shall
be exchanged for Class B shares of Albany Ladder Co., Inc.
<PAGE>
Class A shares and Class B shares within each respective constituent
corporation will have the same value. The fair value of the shares of each
respective company shall be determined from the books and records of the
respective corporations maintained in the regular course of their business in
accordance with Generally Accepted Accounting Principles, as of 12:00 PM
midnight December 31, 1995 and the computations of fair value for the exchange
of shares will be determined by dividing shareholder equity of each constituent
corporation by the total number of shares of all classes of stock outstanding.
Upon the effective date of this merger, the existence of Syracuse Ladder
and Scaffolding Co., Inc. and South Central Scaffolding, Inc. and Rochester
Scaffolding & Equipment Co., Inc. will, in all respects, be extinguished and
merge into Albany Ladder Co., Inc., the surviving corporation, and Albany Ladder
shall, in all respects, assume ownership of all assets of any type or form of
Syracuse Ladder and Scaffolding Co., Inc. and South Central Scaffolding, Inc.
and Rochester Scaffolding & Equipment Co., Inc., and shall assume and be
responsible for all obligations and liabilities of Syracuse Ladder and
Scaffolding Co., Inc. and South Central Scaffolding, Inc. and Rochester
Scaffolding & Equipment Co., Inc.
Albany Ladder Co., Inc., is the surviving corporation. The certificate of
incorporation of said Albany Ladder Co., Inc., is accordingly, pursuant to (S)
906 of the Business Corporation Law, amended to such extent, if any, as changes
in its certificate of incorporation are set forth in the above terms of merger.
Such terms and such changes in the certificate of incorporation of Albany
Ladder Co., Inc., are effective December 31, 1995, and the surviving corporation
shall have, thereupon and thereafter, such additional rights, powers, and
liabilities, as are conferred or imposed by (S) 906 of the Business Corporation
Law and by the terms and conditions of said merger as set forth above.
<PAGE>
STATE OF NEW YORK )
) SS.:
COUNTY OF ALBANY )
RICHARD R. ROWLEY, being duly sworn, deposes and says that he is the
Secretary of Albany Ladder Co., Inc., Syracuse Ladder and Scaffolding Co., Inc.,
South Central Scaffolding, Inc. and Rochester Scaffolding & Equipment Co., Inc.
and one of the persons who signed the foregoing certificate of merger, that he
has read the said certificate of merger and knows the contents thereof, and that
the same is true to his knowledge.
/s/ Richard R. Rowley
-----------------------------------
RICHARD R. ROWLEY
Sworn to before me this
19th day of December, 1995.
/s/ Marcia N. Abrams
- -------------------------------------
NOTARY PUBLIC
<PAGE>
AFFIDAVIT
STATE OF NEW YORK )
) SS.:
COUNTY OF ALBANY )
RICHARD R. ROWLEY, being duly sworn, deposes and says:
1. I am the Secretary of Albany Ladder Co., Inc., Syracuse Ladder and
Scaffolding Co., Inc., South Central Scaffolding, Inc. and Rochester Scaffolding
& Equipment Co., Inc. (hereinafter referred to as "the corporations"), all of
which are domestic corporations duly organized and incorporated under the laws
of the State of New York.
2. The certificate of incorporation of Albany Ladder Co., Inc. was filed
with the Department of State on December 31, 1947 and duly amended by
certificates of amendment thereto filed with the Department of State on March
21, 1957, February 26, 1987 and October 4, 1990 and December 14, 1995.
3. The certificate of incorporation of Syracuse Ladder & Scaffolding Co.,
Inc. was filed with the Department of State on November 3, 1950 and duly amended
by certificates of amendment thereto filed with the Department of State on March
21, 1957, February 26, 1987 and October 4, 1990.
4. The certificate of incorporation of South Central Scaffolding Inc. was
filed with the Department of State on June 12, 1963 and duly amended by
certificates of amendment thereto filed with the Department of State on February
26, 1987 and October 4, 1990.
5. The certificate of incorporation of Rochester Scaffolding & Equipment
Co., Inc. was filed with the Department of State on May 22, 1986 and duly
amended by certificate of amendment thereto filed with the Department of State
on and October 4, 1990.
<PAGE>
6. The attached certificate of merger was duly adopted and approved in
accordance with law by each of the constituent corporations above named,
including unanimous approval by all of the holders of all classes of stock of
all constituent corporations, and the same has not been rescinded or abandoned
since its adoption, approval and execution.
/s/ Richard R. Rowley
------------------------------------
RICHARD R. ROWLEY
Sworn to before me this
19th day of December, 1995.
/s/ Marcia N. Abrams
- ---------------------------
NOTARY PUBLIC
<PAGE>
EXHIBIT 3.12
BY-LAWS
OF
ALBANY LADDER COMPANY, INC.
DATED DECEMBER 31, 1947
WITH AMENDMENTS DATED
5/27/86, 9/23/92, 1/l8/96 AND 9/20/96
<PAGE>
BY-LAWS
of
ALBANY LADDER COMPANY INC.
Article I.
MEETING OF STOCKHOLDERS
Sec. 1. ANNUAL MEETING. The annual meeting of Stockholders shall be
held at the principal office of the Corporation, in the Town of Colonie, County
of Albany and State of New York on the 2 day of January of each year, at 2
o'clock in the afternoon of that day. If the day so designated falls upon a
Sunday or a legal holiday then the meeting shall be held upon the first business
day thereafter. The Secretary shall serve personally, or by mail a written,
notice thereof, addressed to each stockholder at his address as it appears on
the stock book; but at any meeting at which all stockholders shall be present,
or of which all stockholders not present have waived notice in writing, the
giving of notice as above required may be dispensed with.
Sec. 2. QUORUM. The presence, in person or by proxy of the holders of
a majority of the outstanding stock entitled to vote shall be necessary to
constitute a quorum for the transaction of business, but a lesser number may
adjourn to some future time not less than six nor more than twenty days later,
and the secretary shall thereupon give at least three days' notice by mail to
each stockholder entitled to vote who was absent from such meeting.
1
<PAGE>
Sec. 3. SPECIAL MEETINGS. Special Meetings of Stockholders other than
those regulated by statute, may be called at any time by a majority of the
Directors. Notice of such meeting stating the purpose for which it is called
shall be served personally or by mail, not less than 5 days before the date set
for such meeting. If mailed, it shall be directed to a stockholder at his
address as it appears on the stock book; but at any meeting at which all
stockholders shall be present, or of which stockholders not present have waived
notice in writing, the giving of notice as above described may be dispensed
with. The Board of Directors shall also, in like manner, call a special meeting
of Stockholders, when ever so requested in writing by stockholders representing
not less than one-half of the capital stock of the company. No business other
than that specified in the call for the meeting, shall be transacted at any
meeting of the stockholders, except. Upon the unanimous consent of all the
stockholders entitled to notice thereof.
Sec. 4. VOTING. At all meetings of the Stockholders all questions, the
manner of deciding which is not specifically regulated by statute, shall be
determined by a majority vote of the Stockholders present in person or by proxy;
provided, however, that any qualified voter may demand a stock vote, in which
case each Stockholder present, in person or by proxy, shall be entitled to cast
one vote for each share of stock owned or represented by him. All voting shall
be vica voce, except, that a stock vote shall be ballot, each of which shall
state the name of the Stockholder voting and the number of shares owned by him,
and in addition if such
2
<PAGE>
ballot be cast by proxy, the name of the proxy shall be stated. The casting of
all votes at special meetings of Stockholders shall be governed by the
provisions of the Stock Corporation Laws of this State.
Sec. 5. ORDER OF BUSINESS. The order of business at all meetings of
the stockholders, shall be a follows:
1. Roll Call.
2. Proof of notice of meeting or waiver of notice.
3. Reading of minutes of preceding meeting.
4. Reports of Officers.
5. Reports of Committees.
6. Election of Inspectors of Election.
7. Election of Directors.
8. Unfinished Business.
9. New Business.
3
<PAGE>
Article II.
DIRECTORS
Sec. 1. NUMBER. The affairs and business of this Corporation shall
be managed by a Board of Directors composed of 3 member who need not be
stockholders of record, and at least one of such Directors shall be a resident
of the State of New York and a citizen of the United States.
Sec. 2. HOW ELECTED. At the annual meeting of Stockholders, the 3
persons receiving a plurality of the votes cast shall be directors and shall
constitute the Board of Directors for the ensuing year.
Sec. 3. TERM OF OFFICE. The term of office of each of the Directors
shall be one year and thereafter until his successor has been elected.
Sec. 4. DUTIES. The Board of Directors shall have the control and
general management of the affairs and business of the corporation. Such
Directors shall in all cases act as a Board, regularly convened, by a majority,
and they may adopt such rules and regulations for the conduct of their meetings
and the management of the Company, as they may deem proper, not inconsistent
with these By-Laws and the Laws of the State of New York.
Sec. 5. DIRECTORS' MEETINGS. Regular meetings of the Board of
Directors shall be held immediately following the annual meeting of the
Stockholders, and at such other times as the Board of Directors may determine.
Special meetings of the Board of Directors may be called by the President at any
time,
4
<PAGE>
and shall be called by the President or the Secretary upon the written request
of 2 directors.
Sec. 6. NOTICE OF MEETINGS. Notice of meetings, other than the
regular annual meeting shall be given by service upon each Director in person,
or by mailing to him at his last known post office address, at least 5 days
before the date therein designated for such meeting, including the day of
mailing, of a written or printed notice thereof specifying the time and place of
such meeting, and the business to be brought before the meeting and no business
other than that specified in such notice shall be transacted at any special
meeting. At any meeting at, which every member of the Board of Directors shall
be present, although held without notice, any business may be transacted which
might have been transacted if the meeting had been duly called.
Sec. 7. QUORUM. At any meeting of the Board of Directors, a
majority of the Board shall constitute a quorum for the transaction of business;
but in the event of a quorum not being present, a less number may adjourn the
meeting to some future time, not more than 10 days later.
Sec. 8. VOTING. At all meetings of the Board of Directors, each
Director is to have one vote, irrespective the number of shares of stock that he
may hold. The act of a Majority of the directors present at a meeting at which
a quorum is present shall be the act of the Board of Directors.
5
<PAGE>
Sec. 9. VACANCIES. Vacancies in the Board occurring between annual
meetings shall be filled for the unexpired portion of the term by a majority of
the remaining Directors.
Sec. 10. REMOVAL OF DIRECTORS. Any one or more of the Directors may
be removed either with or without cause, at any time by a vote of the
stockholders holding a majority of the stock, at any special meeting called for
the purpose.
Article III.
OFFICERS.
Sec. 1. NUMBER. The officers of this Corporation shall be:
1. President.
2. Vice-President.
3. Secretary.
4. Treasurer.
5.
Sec. 2. ELECTION. All officers of the Corporation shall be elected
annually by the Board of Directors at its meeting held immediately after the
meeting of stockholders, and shall hold office for the term of one year or until
their successors are duly elected.
Sec. 3. DUTIES OF OFFICERS. The duties and powers of the officers
of the Company shall be as follows:
6
<PAGE>
PRESIDENT
The President shall preside at all meetings of the Board of Directors
and Stockholders.
He shall present at each annual meeting of the Stockholders and
Directors a report of the condition of the business of the Company.
He shall cause to be called regular and special meetings of the
Stockholders and Directors in accordance with these ByLaws.
He shall appoint and remove, employ and discharge, and fix the
compensation of all servants, agents, employees, clerks of the Corporation other
than the duly appointed officers, subject to the approval of the Board of
Directors.
He shall sign and make all contracts and agreements in the name of the
Corporation.
He shall see that the books, reports, statements and certificates
required by the statutes are properly kept, made and filed according to law.
He shall sign all certificates of stock, notes, drafts or bills of
exchange, warrants, or other orders for the payment of money duly drawn by the
Treasurer.
He shall enforce these ByLaws and perform all the duties incident to
the position and office, and which are required by Law.
VICE-PRESIDENT.
During the absence and inability of the President to render and
perform his duties or exercise his powers, as set forth in these By-Laws or in
the acts under
7
<PAGE>
which this Corporation is organized, the same shall be performed and exercised
by the Vice-president; and when so acting, he shall have all the powers and be
subject to all the responsibilities hereby given to or imposed upon such
President.
SECRETARY.
The Secretary shall keep the minutes of the meetings of the Board of
Directors and of the Stockholders in appropriate books.
He shall give and serve all notices of the Corporation.
He shall be custodian of the records and of the seal, and affix the
latter when required.
He shall keep the stock and transfer books in the manner prescribed by
law, so as to show at all times the amount of capital stock, the manner and the
time the same was paid in, the names of the owners thereof, alphabetically
arranged, their respective places of residence their post office addresses, the
number of shares owned by each, the time at which each person became such owner,
and the amount paid thereon; and keep such stock and transfer books open daily
during business hours at the office of the Corporation, subject to the
inspection of any Stockholder of the Corporation, and permit such Stockholder to
make extracts from said books to the extent and, as prescribed by law.
He shall sign all certificates of stock.
8
<PAGE>
He shall present to the Board of Directors at their stated meetings
all communications addressed to him officially by the President or any officer
or shareholder of the Corporation.
He shall attend to all correspondence and perform all the office of
Secretary.
TREASURER.
The Treasurer shall have the care and custody of and be responsible
for all the funds and securities of the Corporation, and deposit all such funds
in the name of the Corporation in such bank or banks, trust company or trust
companies or safe deposit vaults as the Board of Directors may designate.
He shall along with other designated officers sign, make, and endorse
in the name of the Corporation, all checks, drafts, warrants and orders for the
payment of money, and pay out and dispose of same and receipt therefor, under
the direction of the President or the Board of Directors.
He shall exhibit at all reasonable times his books and accounts to any
director or stockholder of the Company upon application at the office of the
Corporation during business hours.
He shall render a statement of the conditions of the finances of the
Corporation at each regular meeting of the Board of Directors, and at such other
times as shall be required of him, and a full financial report at the annual
meeting of the stockholders.
9
<PAGE>
He shall keep at the office of the Corporation, correct books of
account of all its business and transactions and such other books of account as
the Board of Directors may require.
He shall do and perform all duties appertaining to the office of
Treasurer.
Sec. 4. BOND. Treasurer shall, if required by the Board of Directors,
give to the Corporation such security for the faithful discharge of his duties
as the Board may direct.
Sec. 5. VACANCIES, HOW FILLED. All vacancies in any office, shall be
filled by the Board of Directors without undue delay, at its regular meeting, or
at a meeting specially called for that purpose.
Sec. 6. COMPENSATION OF OFFICERS. The officers shall receive such
salary or compensation as may be determined by the Board of Directors.
Sec. 7. REMOVAL OF OFFICERS. The Board of Directors may remove any
officer, by a majority vote, at any time with or without cause.
Article IV.
Sec. 1. SEAL. The seal of the corporation shall be as follows:
Article V.
CERTIFICATES OF STOCK.
Sec. 1. DESCRIPTION OF STOCK CERTIFICATES. The certificates of stock
shall be numbered and registered in the order in which they are issued. They
shall be bound in a book and shall be issued in consecutive order
10
<PAGE>
therefrom, and in the margin thereof shall be entered the name of the person
owning the shares therein represented, with the number of shares and the date
thereof. Such certificates shall exhibit the holder's name and the number of
shares. They shall be signed by the President or Vice-President, and
countersigned by the Secretary or Treasurer and sealed with the seal of the
Corporation.
Sec. 2. TRANSFER OF STOCK. The stock of the Corporation shall be
assignable and transferable on the books of the Corporation only by the person
in whose name it appears on said books, his legal representatives or by his duly
authorized agent. In case of transfer by attorney, the power of attorney, duly
executed and acknowledged, shall be deposited with the Secretary. In all cases
of transfer, the former certificate must be surrendered up and canceled before a
new certificate be issued. No transfer shall be made upon the books of the
Corporation within ten days next preceding the annual meeting of the
shareholders.
Article VI.
D I V I D E N D S
Sec. 1. WHEN DECLARED. The Board of Directors shall by vote declare
dividends from the surplus profits of the Corporation whenever, in their
opinion, the conditions of the Corporation's affairs will render it expedient
for such dividends to be declared.
Article VII.
BILLS, NOTES, ETC.
11
<PAGE>
Sec. 1. HOW MADE. All bills payable, notes, checks, drafts, warrants
or other negotiable instruments of the Corporation shall be made in the name of
the Corporation, and shall be signed by the Secretary or Treasurer or by the
President or Vice-President. No officer or agent of the Corporation, either
singly or jointly with others, shall have the power to make any bill payable,
note check, draft or warrant or other negotiable instrument, or endorse the same
in the name of the Corporation, or contract' or cause to be contracted any debt
or liability in the name or in behalf of the Corporation, except as herein
expressly prescribed and provided.
Article VIII.
AMENDMENTS.
Sec. 1. HOW AMENDED. These By-Laws may be altered, mended, repealed
or added to by an affirmative vote of the stockholders representing 51% of the
entire outstanding capital stock having voting power at an annual meeting or at
a special meeting called for that purpose, provided that a written notice shall
have been sent to each stockholder of record, which notice shall state the
alterations amendments or changes which are proposed to be made in such By-Laws.
Only such changes as have been specified in the notice shall be made. If,
however, all the stockholders shall be present at any regular or special
meeting, these By-Laws may be amended by a unanimous vote, without any previous
notice.
12
<PAGE>
ATTACHMENT TO RESOLUTION OF STOCKHOLDERS
DATED MAY 27, 1986
BE IT HEREBY RESOLVED that Article III, Sections 1 and 2 and Article
III, Section 3, subheading PRESIDENT are hereby repealed and rescinded and in
the place and stead thereof, the following is enacted:
ARTICLE III
OFFICERS
Sec. 1. Number. The officers of the Corporation shall be:
1. Chairman of the Board.
2. President.
3. Vice President.
4. Secretary.
5. Treasurer.
Sec. 2. Election. The Board of Directors, immediately after the
annual meeting of the stockholders, shall elect from their number a Chairman of
the Board, a President, such Vice Presidents as may be appropriate from time to
time, a Secretary and a Treasurer. The positions of Chairman of the Board,
President and Treasurer may be united in one person and the positions of
Secretary and Treasurer may also be united in one person. The directors may
also, from time to time, elect an Assistant Treasurer and Such other officers of
the corporation need be either directors or stockholders except that the
Chairman of the Board, and the President must be
13
<PAGE>
directors or stockholders all officers shall serve for one (1) year or until the
next annual election of directors, provided however that in the event that
annual elections are not held, duly elected officers shall continue to serve
until elections are held, and provided further that all officers are subject to
the power of the stockholders to remove any officer, at pleasure, by majority
vote.
Sec. 3. Duties of Officers. The duties and powers of the officers
of the Company shall be as follows:
Chairman of the Board
The Chairman of the Board shall be the Chief Executive Officer of the
corporation. He or she shall preside at all meetings of the Board of Directors
and shall act as temporary Chairman at, and shall call to order, all meetings of
the stockholders. He or she shall have overall supervision and authority over
all matters of policy and finance of the corporation, and he or she shall
exercise such other powers and perform such other duties as the Board of
Directors may from time to time assign to him or her or as may be prescribed by
these By-Laws. The Chairman of the Board shall devote such portions of his or
her time to the affairs of the corporation as he or she deems appropriate in his
or her sole and uncontrolled discretion.
President
Subject to the powers and duties of the Chairman of the Board, the
President shall be the Chief Operating Officer of the corporation and he or she
shall supervise and control generally all of the business and affairs of the
corporation. In the absence of the Chairman of the Board, the President shall
preside at the meetings
14
<PAGE>
of the Board of Directors at which he or she is present. He or she shall sign
the certificates of stock, sign and execute contracts in the name of the
corporation (except contracts to which he or she is individually a party) and in
the performance of all of the foregoing duties which are intended to constitute
general supervision of the affairs of the corporation, he or she shall be
subject to the approval of the Board of Directors.
The President shall devote his or her best energies and abilities to
the performance of the foregoing duties and such other duties as may be assigned
to him or her by the corporation, and shall use his or her utmost endeavors to
promote the interests of the corporation. The duties of the President shall be
rendered at the places of business of the corporation and at such other place or
places as may be reasonably required in the interests, needs, business and
opportunity of the employer.
Sec. 8. Other Officers. Other officers shall perform such duties and
have such powers as may be assigned to them from time to time by the Board of
Directors.
15
<PAGE>
RESOLUTION OF THE STOCKHOLDER
OF ALBANY LADDER COMPANY INC.
Adopted without a Meeting
The undersigned stockholder, being the holder of all outstanding
voting shares of the Albany Ladder and acting pursuant to Section 615 of the
Business Corporation Law, does hereby unanimously approve and adopt without a
meeting of the stockholders the following resolution.
BE IT HEREBY RESOLVED that the bylaws of Article III of the
corporation is hereby amended to read as follows:
Vice Presidents
The Board of Directors shall elect and designate such Vice Presidents
as in its discretion are necessary to provide for the effective
conduct of the affairs of the corporation and said Vice Presidents
shall have such authority and duties as are assigned to them by the
Board of Directors, the Chairman of the Board or the President.
DATED: September 23, 1992 /s/ Lester J. Heath III
-------------------------------------
Stockholder Lester J. Heath III
16
<PAGE>
ATTACHMENT TO
THE RESOLUTION OF
STOCKHOLDERS DATED
JANUARY 18, 1996
BE IT HEREBY RESOLVED, that Article III of the By-Laws of the
Corporation is amended to include the following provision:
REGIONAL VICE PRESIDENT
The Board of Directors may, from time to time, in their discretion,
elect one or more Regional Vice Presidents. Regional Vice Presidents shall
perform such duties and have such power as may be assigned to them by the
corporation's Chief Executive Officer.
17
<PAGE>
ARTICLE II
BOARD OF DIRECTORS
Sec. 1. Number. The affairs and business of this Corporation shall
be managed by a Board of Directors composed of such number, not less than three
(3), as shall be designated at the annual meeting, of Shareholders.
Notwithstanding the provisions of this section, where all of the voting shares
of the Corporation are owned beneficially and of record by less than three (3)
Shareholders, the number of Directors may be less than three (3), but not less
than the number of Shareholders. The Directors need not be shareholders of
record, and at least one (1) of such Directors shall be a resident of the State
of New York and a citizen of the United States.
Sec. 2. How Elected. At the annual meeting of Shareholders, the
persons receiving a plurality of the votes cast shall be Directors and shall
constitute the Board of Directors for the ensuing year.
Sec. 3. Term of Office. The term of office of each of the Directors
shall be one (1) year, and thereafter until his or her successor has been
elected and qualified.
All other Articles and Sections of the ByLaws of the Corporation as
amended to and including September 20, 1996 are in all respects hereby ratified
and reaffirmed.
18
<PAGE>
Exhibit 4.1(ii)
SUPPLEMENTAL INDENTURE
Supplemental Indenture (this "Supplemental Indenture"), dated as of April
1, 1998 between Subsidiary Guarantor (the "New Subsidiary Guarantor"), a
subsidiary of National Equipment Services, Inc., a Delaware corporation (the
"Company"), and Harris Trust and Savings Bank, as trustee under the indenture
referred to below (the "Trustee"). Capitalized terms used herein and not defined
herein shall have the meaning ascribed to them in the Indenture (as defined
below).
W I T N E S S E T H
WHEREAS, the Company has heretofore executed and delivered to the Trustee
an indenture (the "Indenture"), dated as of November 25, 1997, providing for the
issuance of an aggregate principal amount of $100,000,000 of 10% Senior
Subordinated Notes due 2004 (the "Senior Subordinated Notes");
WHEREAS, Sections 4.16 and 11.03 of the Indenture provide that under
certain circumstances the Company is required to cause certain of its
Subsidiaries to execute and deliver to the Trustee a supplemental indenture
pursuant to which such Subsidiaries shall unconditionally guarantee all of the
Company's Obligations under the Senior Subordinated Notes pursuant to a
Subsidiary Guarantee on the terms and conditions set forth herein; and
WHEREAS, pursuant to Section 9.01 of the Indenture, the Trustee is
authorized to execute and deliver this Supplemental Indenture.
NOW THEREFORE, in consideration of the foregoing and for other good and
valuable consideration, the receipt of which is hereby acknowledged, the New
Subsidiary Guarantor and the Trustee mutually covenant and agree for the equal
and ratable benefit of the Holders of the Senior Subordinated Notes as follows:
1. Capitalized Terms. Capitalized terms used herein without definition
shall have the meanings assigned to them in the Indenture.
2. Agreement to Subsidiary Guarantee. The New Subsidiary Guarantor hereby
agrees, jointly and severally with all other Subsidiary Guarantors, to guarantee
the Company's Obligations under the Senior Subordinated Notes and the Indenture
on the terms and subject to the conditions set forth in Article 11 of the
Indenture and to be bound by all other applicable provisions of the Indenture.
3. No Recourse Against Others. No past, present or future director,
officer, employee, incorporator, shareholder or agent of any Subsidiary
Guarantor, as such, shall have any liability for any obligations of the Company
or any Subsidiary Guarantor under the Senior Subordinated Notes, any Subsidiary
Guarantees, the Indenture or this Supplemental Indenture or for any claim based
on, in respect of, or by reason of, such obligations or their creation. Each
Holder by accepting a Senior Subordinated Note waives and releases all such
liability. The waiver and release are part of the consideration for issuance of
the Senior Subordinated Notes.
4. New York Law to Govern. The internal law of the State of New York
shall govern and be used to construe this Supplemental Indenture.
<PAGE>
5. Counterparts The parties may sign any number of copies of this
Supplemental Indenture. Each signed copy shall be an original, but all of them
together represent the same agreement.
6. Effect of Headings. The Section headings herein are for convenience
only and shall not affect the construction hereof.
7. The Trustee. The Trustee shall not be responsible in any manner
whatsoever for or in respect of the validity or sufficiency of this Supplemental
Indenture or for or in respect of the correctness of the recitals of fact
contained herein, all of which recitals are made solely by the New Subsidiary
Guarantor.
* * *
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Supplemental Indenture
to be duly executed, all as of the date first above written.
Dated: April 1, 1998
NES EAST ACQUISITION CORP
By: /s/ Paul R. Ingersoll
-------------------------------
Name: Paul R. Ingersoll
Title: Vice President
NES MICHIGAN ACQUISITION CORP
By: /s/ Paul R. Ingersoll
-------------------------------
Name: Paul R. Ingersoll
Title: Vice President
ALBANY LADDER COMPANY, INC.
By: /s/ Paul R. Ingersoll
-------------------------------
Name: Paul R. Ingersoll
Title: Vice President
Dated: April 1, 1998 HARRIS TRUST AND SAVINGS BANK,
AS TRUSTEE
By: /s/ C. Potter
-------------------------------
Name: C. Potter
Title: A.V.P.
<PAGE>
EXHIBIT 4.6(V)
THIRD AMENDMENT TO CREDIT AGREEMENT
AND CONSENT
THIS AMENDMENT AND CONSENT, dated as of April 7, 1998 (the "Amendment")
---------
relating to the Credit Agreement referenced below, by and among NATIONAL
EQUIPMENT SERVICES, INC., a Delaware corporation (the "Company"), NES
-------
ACQUISITION CORP., a Delaware corporation and BAT ACQUISITION CORP., a Delaware
corporation, (collectively referred to as the "Existing Subsidiary Borrowers" or
-----------------------------
individually referred to as an "Existing Subsidiary Borrower"), NES EAST
----------------------------
ACQUISITION CORP., a Delaware corporation (and successor to AERIAL PLATFORMS,
INC., a Georgia corporation and MST ENTERPRISES, INC., a Virginia corporation),
NES MICHIGAN ACQUISITION CORP., a Delaware corporation, and ALBANY LADDER
COMPANY, INC., a New York corporation (collectively referred to as the
"Applicant Subsidiary Borrowers" or individually referred to as an "Applicant
------------------------------ ---------
Subsidiary Borrower" (hereinafter, the Company, the Existing Subsidiary
- -------------------
Borrowers and the Applicant Subsidiary Borrowers collectively referred to as the
"Borrowers" or individually referred to as a "Borrower"), each of those
--------- --------
financial institutions identified as Lenders on the signature pages hereto
(together with each of their successors and assigns, referred to individually as
a "Lender" and, collectively, as the "Lenders"), and FIRST UNION COMMERCIAL
------ -------
CORPORATION ("FUCC"), acting in the manner and to the extent described in
----
Article XIII of the Credit Agreement (in such capacity, the "Agent"). Terms
- ------------ -----
used herein but not otherwise defined herein shall have the meanings provided in
the Credit Agreement.
W I T N E S S E T H
WHEREAS, a $115,000,000 credit facility has been extended to the Borrowers
pursuant to the terms of that certain Credit Agreement dated as of July 1, 1997
(as amended, modified or otherwise supplemented, the "Credit Agreement") among
----------------
the Borrowers, the Lenders and the Agent;
WHEREAS, the Borrowers have requested that the Credit Agreement be amended
as described herein;
WHEREAS, BankBoston, N.A. (the "Withdrawing Lender") desires to withdraw
------------------
from the Credit Agreement;
WHEREAS, the Applicant Borrowers desire to become Borrowers under the Credit
Agreement; and
WHEREAS, the Lenders other than the Withdrawing Lender (collectively, the
"Non-Withdrawing Lenders") are willing to furnish such consent and
-----------------------
acknowledgment and make such amendments;
NOW, THEREFORE, IN CONSIDERATION of these premises and other good and valuable
consideration, the receipt and sufficiency of which is hereby acknowledged, the
parties hereto agree as follows:
(A) Amendments.
----------
<PAGE>
1. (a) The definitions of Consolidated EBITDAR, Consolidated
Rental Expense, Excess Cash Flow, Interest/Rental Expense Coverage
Ratio and Leverage Ratio are deleted from Section 1.1 in their
entireties.
(b) The definition of Applicable Percentage appearing in
Section 1.1 of the Credit Agreement is amended in its entirety to read
as follows:
"Applicable Percentage" shall mean for Eurodollar Loans, Base
Rate Loans and Unused Line Fees, the appropriate applicable
percentages corresponding to the Total Debt Leverage Ratio in
effect as of the most recent Calculation Date as shown below:
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------
Total Debt Applicable Applicable Applicable
Leverage Percentage for Percentage for Percentage for
Tier Level Ratio Eurodollar Loans Base Rate Loans Unused Line Fee
s
-----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
-----------------------------------------------------------------------------------------------------------------------
1 greater than or equal to 4.5 to 1.0 2.25% 0.75% 0.375%
-----------------------------------------------------------------------------------------------------------------------
2 greater than or equal to 3.5 to 1.0 2.00% 0.50% 0.375%
but less 4.5 to 1.0
-----------------------------------------------------------------------------------------------------------------------
3 greater than or equal to 2.5 to 1.0 1.75% 0.25% 0.375%
but less than 3.5 to 1.0
------------------------------------------------------------------------------------------------------------------------
4 less than 2.5 to 1.0 1.50% 0% 0.30%
------------------------------------------------------------------------------------------------------------------------
</TABLE>
The Applicable Percentages shall be determined and adjusted
quarterly on the date (each a "Calculation Date") five Business
Days after the date on which the Company provides the quarterly
officer's certificate in accordance with the provisions of
Section 7.1(c); provided, however, that (i) the initial
-------------- -------- -------
Applicable Percentages shall be based on Tier Level 1 (as shown
above) and shall remain at Tier Level 1 until the first
Calculation Date subsequent to September 30, 1997, (ii) on and
after March 31, 1998, the Applicable Percentages shall be based
on Tier Level 3 until the first Calculation Date following such
date, and thereafter, the Tier Level shall be determined by the
then current Total Debt Leverage Ratio, and (iii) if the Company
fails to provide the officer's certificate to the Agent for any
fiscal quarter as required by and within the time limits set
forth in Section 7.1(c), the Applicable Percentages from the
--------------
applicable date of such failure shall be based on
2
<PAGE>
Tier Level 1 until five Business Days after an appropriate
officer's certificate is provided, whereupon the Tier Level shall
be determined by the Total Debt Leverage Ratio set forth in such
certificate. Except as set forth above, each Applicable
Percentage shall be effective from one Calculation Date until the
next Calculation Date.
(c) The definition of Consolidated Fixed Charges appearing
in Section 1.1 of the Credit Agreement is amended in its entirety to
read as follows:
"Consolidated Fixed Charges" shall mean, for any period of
--------------------------
computation, the sum of (i) Consolidated Interest Expense for the
applicable period minus (ii) capitalized costs incurred in
connection with the issuance of the Senior Subordinated Notes
which are amortized during the applicable period (to the extent
any such capitalized costs amortized during such period were
included in the calculation of Consolidated Interest Expense)
plus (iii) Consolidated Funded Debt Payments for the applicable
period.
(d) Section 1.1 of the Credit Agreement is hereby amended
by adding the following new definition:
"Consolidated Senior Debt" shall mean, as of the date of
------------------------
determination, Consolidated Funded Indebtedness excluding
Subordinated Debt.
(e) Clause (iii) of the definition of Permitted Acquisition
appearing in Section 1.1 of the Credit Agreement is amended in its
entirety to read as follows:
(iii) the ratio of the purchase price for the Acquired Company
to the net income of the Acquired Company before interest, taxes,
depreciation and amortization (computed for the most recently
ended 12-month period) shall not exceed 5.0 to 1.0 or such
greater ratio as approved by the Required Lenders,
(f) The definition of Revolving Committed Amount appearing in
Section 1.1 of the Credit Agreement is amended in its entirety to read
as follows:
"Revolving Credit Committed Amount" shall mean the aggregate
---------------------------------
revolving credit line extended by the Lenders to the Borrowers
for Revolving Loans and Letters of Credit pursuant to and in
accordance with the terms of this Credit Agreement, in an amount
up to $140,000,000, as such revolving credit line may be reduced
from time to time in accordance with Section 2.3(d).
--------------
3
<PAGE>
(g) Section 1.1 of the Credit Agreement is hereby amended
by adding the following new definition:
"Senior Debt Leverage Ratio" shall mean (i) as of March 31, 1998,
the ratio of Consolidated Senior Debt (computed as of the last
day of such fiscal quarter) to Consolidated EBITDA multiplied by
one and one-third (1-1/3) (computed for the three fiscal quarters
then ending) and (ii) as of June 30, 1998 and as of the last day
of each fiscal quarter ending thereafter, the ratio of
Consolidated Senior Debt (computed as of the last day of each
such fiscal quarter) to Consolidated EBITDA (computed for the
four fiscal quarters then ending).
(h) The definition of Subordinated Debt appearing in
Section 1.1 of the Credit Agreement is amended in its entirety to read
as follows:
"Subordinated Debt" shall mean (a) the indebtedness evidenced by
-----------------
the Existing Subordinated Notes, (b) $100,000,000 10% Senior
Subordinated Notes of the Company due 2004 and (c) any other
unsecured Indebtedness incurred by any Borrower, which, in each
case, is expressly subordinated and made junior to the payment
and performance in full of the Obligations and contains terms and
conditions reasonably satisfactory to the Required Lenders,
provided that the Lenders acknowledge that subordination and
other terms and conditions substantially identical, in the sole
judgment of the Agent, to those contained in the form of
Subordinated Note attached hereto as Exhibit N are satisfactory.
---------
(i) Section 1.1 of the Credit Agreement is hereby amended
by adding the following new definition:
"Total Debt Leverage Ratio" shall mean (i) as of March 31, 1998,
-------------------------
the ratio of Consolidated Funded Indebtedness minus proceeds of
the Senior Subordinated Notes held in cash by the Company or
invested by the Company in Cash Equivalents (computed as of the
last day of such fiscal quarter) to Consolidated EBITDA
multiplied by one and one-third (1-1/3) (computed for the three
fiscal quarters then ending) and (ii) as of June 30, 1998 and as
of the last day of each fiscal quarter ending thereafter, the
ratio of Consolidated Funded Indebtedness minus proceeds of the
Senior Subordinated Notes held in cash by the Company or invested
by the Company in Cash Equivalents (computed as of the last day
of each such fiscal quarter) to Consolidated EBITDA (computed for
the four fiscal quarters then ending).
4
<PAGE>
2. Section 2.3(b)(ii) of the Credit Agreement is deleted in its
entirety.
3. The first sentence of Section 3.1 of the Credit Agreement is
amended to read as follows:
Subject to the terms and conditions hereof and of the Letter of Credit
Documents, if any, and any other terms and conditions which the
Issuing Bank may reasonably require, the Lenders will participate in
the issuance by the Issuing Bank from time to time of such Letters of
Credit in Dollars from the Closing Date until the Maturity Date as the
Borrowers may request, in a form acceptable to the Issuing Bank;
provided, however, that (i) the Letter of Credit Obligations
-------- -------
outstanding shall not at any time exceed ONE MILLION DOLLARS
($1,000,000) (the "Letter of Credit Committed Amount") and
----------------------------------
(ii) the sum of the aggregate principal amount of outstanding
Revolving Loans plus Letter of Credit Obligations outstanding shall
----
not at any time exceed the lesser of the Revolving Credit Committed
Amount or the Borrowing Base.
4. The requirement in Section 7.1(c) of the Credit Agreement to
deliver the annual calculation of Excess Cash Flow is deleted in its
entirety.
5. Section 8.2 of the Credit Agreement is amended in its entirety to
read as follows:
8.2 Total Debt Leverage Ratio.
-------------------------
The Borrowers shall maintain a Total Debt Leverage Ratio of not
greater than 5.0 to 1.0 as of the last day of each fiscal quarter.
6. Section 8.4 of the Credit Agreement is replaced with a new
Section 8.4 to read as follows:
8.4 Senior Debt Leverage Ratio.
--------------------------
The Borrowers shall maintain a Senior Debt Leverage Ratio of not
greater than 3.5 to 1.0 as of the last day of each fiscal quarter.
7. Section 8.5 of the Credit Agreement is deleted in its entirety.
8. Schedule 1.1A of the Credit Agreement is deleted in its entirety
and replaced with new Schedule 1.1A attached hereto.
(B) Reallocation/Termination of Commitments; Repayment to Withdrawing
-----------------------------------------------------------------
Lender.
- ------
The Commitment of the Withdrawing Lender shall be terminated and
reallocated among the Non-Withdrawing Lenders as provided in Schedule 1.1A
attached hereto. On the
5
<PAGE>
effective date of this Amendment the Non-Withdrawing Lenders shall each pay to
the Agent, for the benefit of the Withdrawing Lender, its pro rata share of the
amount of outstanding Loans made by the Withdrawing Lender to reflect the
reallocation and termination of the Withdrawing Lender's Commitment effected
hereby. The Agent shall notify the Non-Withdrawing Lenders of their respective
pro rata shares of the amount to be repaid to the Withdrawing Lender and shall
promptly repay the amount so received from the Non-Withdrawing Lenders to the
Withdrawing Lender. The Withdrawing Lender joins in the execution of this
Amendment for purposes of acknowledging and consenting to the termination of its
Commitment under the Credit Agreement.
(C) Releases.
--------
The Non-Withdrawing Lenders and the Borrowers hereby agree to release the
Withdrawing Lender from its obligations and liabilities under the Credit
Agreement and other Credit Documents and the Withdrawing Lender hereby agrees to
relinquish and forego any claims it has or may have against the Agent and the
Borrowers under the Credit Agreement or any other Credit Document. From and
after the date hereof, the Withdrawing Lender shall no longer be considered a
"Lender" for purposes of the Credit Agreement and the other Credit Documents.
The Withdrawing Lender agrees to return any Notes from the Borrowers in its
possession upon payment in full of the Withdrawing Lender's pro rata share of
all outstanding Loans and of any other fees and amounts owed by the Borrowers to
the Withdrawing Lender.
(D) Joinder Provisions.
------------------
1. Each Applicant Borrower hereby acknowledges, agrees and confirms
that, by its execution of this Amendment, such Applicant Borrower will be
deemed to be a party to the Credit Agreement and a "Borrower" for all
purposes of the Credit Agreement and the other Credit Documents, and shall
have all of the obligations of a Borrower thereunder as if it has executed
the Credit Agreement and the other Credit Documents. Each Applicant
Borrower hereby ratifies, as of the date hereof, and agrees to be bound by,
all of the terms, provisions and conditions contained in the Credit
Agreement and in the Credit Documents, including without limitation (i) all
of the representations and warranties of the Credit Parties set forth in
Section 6 of the Credit Agreement, as supplemented from time to time in
accordance with the term thereof, and (ii) all of the affirmative and
negative covenants set forth in Sections 7, 8, and 9 of the Credit
Agreement.
2. Each Applicant Borrower hereby acknowledges, agrees and confirms
that, by its execution of this Amendment, such Applicant Borrower will be
deemed to be a party to the Security Agreement, and shall have all the
obligations of an "Obligor" (as such term is defined in the Security
Agreement) thereunder as if it had executed the Security Agreement. Each
Applicant Borrower hereby ratifies, as of the date hereof, and agrees to be
bound by, all of the terms, provisions and conditions
6
<PAGE>
contained in the Security Agreement. Without limiting the generality of the
foregoing terms of this paragraph, each Applicant Borrower hereby grants to
the Agent, for the benefit of the Lenders, a continuing security interest
in, and a right of set off against any and all right, title and interest of
such Applicant Borrower in and to the Collateral (as such term is defined
in Section 2 of the Security Agreement) of such Applicant Borrower.
3. Each Applicant Borrower hereby acknowledges, agrees and confirms
that, by its execution of this Amendment, such Applicant Borrower will be
deemed to be a party to the Pledge Agreement, and shall have all the
obligations of a "Pledgor" thereunder as if it had executed the Pledge
Agreement. Each Applicant Borrower hereby ratifies, as of the date hereof,
and agrees to be bound by, all the terms, provisions and conditions
contained in the Pledge Agreement. Without limiting the generality of the
foregoing terms of this paragraph, each Applicant Borrower hereby pledges
and assigns to the Agent, for the benefit of the Lenders, and grants to the
Agent, for the benefit of the Lenders, a continuing security interest in
any and all right, title and interest of such Applicant Borrower in and to
Pledged Stock (as such term is defined in Section 1 of the Pledge
Agreement) and the other Collateral (as such term is defined in Section 1
of the Pledge Agreement).
4. Each Applicant Borrower acknowledges and confirms that it has
received a copy of the Credit Agreement and the schedules and exhibits
thereto, the Pledge Agreement and the schedules and exhibits thereto and
the Security Agreement and the schedules and exhibits relating thereto. The
Schedules to the Credit Agreement, the Pledge Agreement and the Security
Agreement are amended and restated in their entirety and attached hereto.
5. The Company confirms that all of its and its Subsidiaries'
obligations under the Credit Agreement are, and upon each Applicant
Borrower becoming a Borrower shall continue to be, in full force and
effect. The Company further confirms that immediately upon each Applicant
Borrower becoming a Borrower the term "Obligations", as used in the Credit
Agreement, shall include all Obligations of such Applicant Borrower under
the Credit Agreement and under each other Credit Document.
6. Each Applicant Borrower hereby agrees that upon becoming a
Borrower it will assume all Obligations of a Borrower as set forth in the
Credit Agreement. By its execution of this Amendment, each Applicant
Borrower appoints each of Paul Ingersoll, Vice President and Secretary and
Dennis O'Connor, Chief Financial Officer, of National Equipment Services,
Inc., to be its attorneys ("its Attorneys") and in its name and on its
behalf and as its act and deed or otherwise to sign all documents and carry
out all such acts as are necessary or appropriate in connection with
executing any Notice of Borrowing, Notice of Extension/Conversion or any
Borrowing Base Certificate or any security documents (the "Documents") in
connection with the Credit Agreement, provided that such Documents are in
substantially the form provided
7
<PAGE>
therefor in the applicable exhibits thereto. This Power of Attorney shall
be valid for the duration of the term of the Credit Agreement. The
Applicant Borrower hereby undertakes to ratify everything which either of
its Attorneys shall do in order to execute the Documents mentioned
herein.
(B) Waiver.
------
Compliance with Section 8.4 of the Credit Agreement as in effect immediately
prior to the effectiveness of this amendment is hereby forever waived.
(E) Representations and Warranties.
------------------------------
Each Borrower hereby represents and warrants that (i) the representations
and warranties contained in Section 6 of the Credit Agreement are correct on and
as of the date hereof as though made on and as of such date (except for those
representations and warranties which by their terms relate solely to an earlier
date) and after giving effect to the amendments contained herein and the amended
and restated Schedules to the Credit Documents attached hereto, (ii) no Default
or Event of Default exists under the Credit Agreement on and as of the date
hereof and after giving effect to the amendments contained herein, (iii) it has
the corporate power and authority to execute and deliver this Amendment and to
perform its obligations hereunder and has taken all necessary corporate action
to authorize the execution, delivery and performance by it of this Amendment and
(iv) it has duly executed and delivered this Amendment, and this Amendment
constitutes its legal, valid and binding obligation enforceable in accordance
with its terms except as the enforceability thereof may be limited by
bankruptcy, insolvency or other similar laws affecting the rights of creditors
generally or by general principles of equity.
(F) Conditions to Effectiveness. This Amendment shall become effective
---------------------------
upon satisfaction of the following conditions precedent:
1. Receipt by the Agent of executed replacement Revolving Notes
substantially in the form attached to the Credit Agreement.
2. Receipt by the Agent of the following:
(a) Copies of the articles or certificates of incorporation
or other charter documents of each Applicant Borrower certified to
be true and complete as of a recent date by the appropriate
Governmental Authority of the state or other jurisdiction of its
incorporation and certified by a secretary or assistant secretary
of such Applicant Borrower to be true and correct as of the date
hereof.
8
<PAGE>
(b) A copy of the bylaws of each Applicant Borrower
certified by a secretary or assistant secretary of such Applicant
Borrower to be true and correct as of the date hereof.
(c) Copies of resolutions of the Board of Directors of each
Borrower approving and adopting the Credit Documents to which it
is a party, the transactions contemplated therein and authorizing
execution and delivery thereof, certified by a secretary or
assistant secretary of such Borrower to be true and correct and
in force and effect as of the date hereof.
(d) Copies of (i) certificates of good standing, existence
or its equivalent with respect to each Applicant Borrower
certified as of a recent date by the appropriate governmental
authorities of the state or other jurisdiction of incorporation
and each other jurisdiction in which the failure to so qualify
and be in good standing could reasonably be expected to have a
Material Adverse Effect and (ii) to the extent available, a
certificate indicating payment of all corporate franchise taxes
certified as of a recent date by the appropriate governmental
taxing authorities.
(e) An incumbency certificate of each Applicant Borrower
certified by a secretary or assistant secretary to be true and
correct as of the date hereof.
(f) New and/or amended UCC-1 financing statements for the
Borrowers, as appropriate.
(g) UCC search reports for the Acquired Companies acquired
since the acquisition of MST Enterprises, Inc. (the "New Acquired
------------
Companies").
---------
(h) Stock certificates of the Applicant Borrowers and
undated stock powers executed in blank.
(i) Acknowledgment Agreements with respect to all leased
and mortgaged properties of the Applicant Borrowers.
(j) Copies of final executed Acquisition Documents.
3. Receipt by the Agent of an opinion, or opinions (which shall
cover, among other things, authority, legality, validity, binding
effect, enforceability of this Amendment and, in the case of the
Applicant Borrowers, attachment and perfection of liens), satisfactory
to the Agent, addressed to the Agent and the Lenders and dated the
Closing Date, from legal counsel to the Borrowers.
(G) Except as modified hereby, all of the terms and provisions of the
Credit Agreement (and Exhibits and Schedules thereto) shall remain in full force
and effect.
9
<PAGE>
(H) The Borrowers shall, on the effective date hereof, pay to the Agent,
for the benefit of the Non-Withdrawing Lenders, an amendment fee equal to 0.125%
of the aggregate Commitments in effect as of the date hereof to be shared among
the Non-Withdrawing Lenders pro rata based on their respective Revolving Credit
Commitment Percentages.
(I) The Borrowers agree to pay all reasonable costs and expenses of the
Agent in connection with the preparation, execution and delivery of this
Amendment, including without limitation the reasonable fees and expenses of
Moore & Van Allen, PLLC.
(J) Execution and delivery of this Amendment by the Borrowers shall
constitute compliance with and satisfaction of the terms and conditions of
Section 7.16 of the Credit Agreement as such section applies to the New Acquired
Companies.
(K) This Amendment may be executed in any number of counterparts, each of
which when so executed and delivered shall be deemed an original and it shall
not be necessary in making proof of this Amendment to produce or account for
more than one such counterpart.
(L) This Amendment and the Credit Agreement as amended hereby shall be
governed by and construed and interpreted in accordance with the laws of the
State of New York.
[Remainder of Page Intentionally Left Blank]
10
<PAGE>
IN WITNESS WHEREOF, each of the parties hereto has caused a counterpart of
this Amendment to be duly executed and delivered as of the date first above
written.
BORROWER: NATIONAL EQUIPMENT SERVICES, INC.
By: /s/ Paul R. Ingersoll
------------------------------
Name: Paul R. Ingersoll
Title: Vice President
NES ACQUISITION CORP.
By: /s/ Paul R. Ingersoll
------------------------------
Name: Paul R. Ingersoll
Title: Vice President
BAT ACQUISITION CORP.
By: /s/ Paul R. Ingersoll
------------------------------
Name: Paul R. Ingersoll
Title: Vice President
NES EAST ACQUISITION CORP.
By: /s/ Paul R. Ingersoll
------------------------------
Name: Paul R. Ingersoll
Title: Vice President
NES MICHIGAN ACQUISITION CORP.
By: /s/ Paul R. Ingersoll
------------------------------
Name: Paul R. Ingersoll
Title: Vice President
ALBANY LADDER COMPANY, INC.
By: /s/ Paul R. Ingersoll
------------------------------
Name: Paul R. Ingersoll
Title: Vice President
<PAGE>
Name:
Title:
AGENT: FIRST UNION COMMERCIAL CORPORATION,
as Agent and a Lender
By: /s/ Eric M. Butler
--------------------
Name: Eric M. Butler
Title: Senior Vice President
12
<PAGE>
LENDERS:
AMERICAN NATIONAL BANK AND TRUST
COMPANY OF CHICAGO, as a Lender
By: /s/ David Weislogel
-------------------
Name: David Weislogel
Title:
COMERICA BANK,
as a Lender
By: /s/ Gregory N. Block
--------------------
Name: Gregory N. Block
Title: Vice President
THE CIT GROUP/BUSINESS CREDIT, INC.,
as a Lender
By: /s/ Mary Jones
---------------------
Name: Mary Jones
Title: Vice President
BANKERS TRUST COMPANY,
as a Lender
By: /s/ Robert R. Telesca
---------------------
Name: Robert R. Telesca
Title: Assistant Vice President
HARRIS TRUST AND SAVINGS BANK,
as a Lender
By: /s/ John M. Dillon
---------------------
Name: John M. Dillon
Title: Vice President
<PAGE>
HELLER FINANCIAL, INC.,
as a Lender
By: /s/ Tara Hopkins
--------------------
Name: Tara Hopkins
Title: Vice President
MERCANTILE BUSINESS CREDIT, INC.,
as a Lender
By: /s/ Carolyn M. Rooney
----------------------
Name: Carolyn M. Rooney
Title: Vice President
BANKBOSTON, N.A.
By: /s/ Gregory R.D. Clark
----------------------
Name: Gregory R.D. Clark
Title: Managing Director
14
<PAGE>
SCHEDULE 1.1A
-------------
LENDERS AND COMMITMENTS
<TABLE>
<CAPTION>
REVOLVING
REVOLVING CREDIT
CREDIT COMMITMENT
LENDER COMMITMENT PERCENTAGE
- ------ ---------- -----------
<S> <C> <C>
First Union Commercial
Corporation $ 25,000,000 17.85714%
American National Bank
and Trust Company of Chicago $ 25,000,000 17.85714%
Comerica Bank $ 23,000,000 16.42857%
The CIT Group/
Business Credit, Inc. $ 18,000,000 12.85714%
Harris Trust and Savings Bank $ 18,000,000 12.85714%
Mercantile Business Credit, Inc. $ 13,000,000 9.28571%
Heller Financial, Inc. $ 10,000,000 7.14286%
Bankers Trust Company $ 8,000,000 5.71429%
TOTAL $140,000,000 100.0%
</TABLE>
<PAGE>
To Call Writer Direct:
312 861-2000
Exhibit 5.1
[Kirkland & Ellis Letterhead]
April 15, 1998
National Equipment Services, Inc.
1800 Sherman Avenue
Suite 100
Evanston, IL 60201
Re: 10% Senior Subordinated Notes due 2004, Series B
------------------------------------------------
Ladies and Gentlemen:
We are acting as special counsel to National Equipment Services, Inc., a
Delaware corporation (the "Company"), in connection with the proposed
registration by the Company of up to $100,000,000 in aggregate principal amount
of the Company's 10% Senior Subordinated Notes due 2004, Series B (the "Exchange
Notes"), pursuant to a Registration Statement on Form S-4 (File No. 333-43553)
filed with the Securities and Exchange Commission (the "Commission") on December
31, 1997 under the Securities Act of 1933, as amended (the "Securities Act")
(such Registration Statement, as amended or supplemented, is hereinafter
referred to as the "Registration Statement"), for the purpose of effecting an
exchange offer (the "Exchange Offer") for the Company's 10% Senior Subordinated
Notes due 2004 (the "Old Notes"). We are also acting as special counsel to NES
Acquisition Corp. ("NES Acquisition"), BAT Acquisition Corp. ("BAT"), NES East
Acquisition Corp. ("NES East"), Albany Ladder Company, Inc. ("Albany"), and NES
Michigan Acquisition Corp. ("NES Michigan," and together with NES Acquisition,
BAT, Albany and NES East, the "Subsidiary Guarantors") as issuers of guarantees
(collectively, the "Guarantees") of the obligations of the Company under the
Exchange Notes. The Exchange Notes and the Guarantees are to be issued pursuant
to the Indenture (the "Indenture"), dated as of November 25, 1997, among the
Company, the Subsidiary Guarantors and Harris Trust and Savings Bank, as
Trustee, in exchange for and in replacement of the Company's outstanding Old
Notes, of which $100,000,000 in aggregate principal amount is outstanding.
<PAGE>
National Equipment Services, Inc.
April 15, 1998
Page 2
In that connection, we have examined originals, or copies certified or
otherwise identified to our satisfaction, of such documents, corporate records
and other instruments as we have deemed necessary for the purposes of this
opinion, including (i) the corporate and organizational documents of the Company
and each Subsidiary Guarantor, (ii) minutes and records of the corporate
proceedings of the Company and each Subsidiary Guarantor with respect to the
issuance of the Exchange Notes and the Guarantees, respectively, (iii) the
Registration Statement and exhibits thereto and (iv) the Registration Rights
Agreement, dated as of November 25, 1997, among the Company, the Subsidiary
Guarantors, Smith Barney Inc., First Union Capital Markets Corp. and Salomon
Brothers Inc.
For purposes of this opinion, we have assumed the authenticity of all
documents submitted to us as originals, the conformity to the originals of all
documents submitted to us as copies and the authenticity of the originals of all
documents submitted to us as copies. We have also assumed the genuineness of
the signatures of persons signing all documents in connection with which this
opinion is rendered, the authority of such persons signing on behalf of the
parties thereto other than the Company and the Subsidiary Guarantors, and the
due authorization, execution and delivery of all documents by the parties
thereto other than the Company and the Subsidiary Guarantors. As to any facts
material to the opinions expressed herein which we have not independently
established or verified, we have relied upon statements and representations of
officers and other representatives of the Company and others.
Based upon and subject to the foregoing qualifications, assumptions and
limitations and the further limitations set forth below, we are of the opinion
that:
(1) Each of the Company, NES Acquisition, BAT, NES East and NES Michigan is
a corporation existing and in good standing under the General Corporation Law of
the State of Delaware. Albany is a corporation existing and in good standing
under the Business Corporation Law of the State of New York.
(2) The sale and issuance of the Exchange Notes has been validly authorized
by the Company.
(3) The Guarantees have been validly authorized by each of the Subsidiary
Guarantors.
<PAGE>
National Equipment Services, Inc.
April 15, 1998
Page 3
(4) When, as and if (i) the Registration Statement shall have become
effective pursuant to the provisions of the Securities Act, (ii) the Indenture
shall have been qualified pursuant to the provisions of the Trust Indenture Act
of 1939, as amended, (iii) the Old Notes shall have been validly tendered to the
Company, (iv) the Exchange Notes shall have been issued in the form and
containing the terms described in the Registration Statement, the Indenture, the
resolutions of the Company's and each Subsidiary Guarantor's Board of Directors
(or authorized committee thereof) authorizing the foregoing and any legally
required consents, approvals, authorizations and other order of the Commission
and any other regulatory authorities to be obtained, and (v) the Exchange Notes
have been authenticated by the Trustee, the Exchange Notes when issued pursuant
to the Exchange Offer will be legally issued, fully paid and nonassessable and
will constitute valid and binding obligations of the Company and each Guarantee
will constitute the valid and binding obligation of the respective Subsidiary
Guarantor.
Our opinions expressed above are subject to the qualifications that we
express no opinion as to the applicability of, compliance with, or effect of (i)
any bankruptcy, insolvency, reorganization, fraudulent transfer, fraudulent
conveyance, moratorium or other similar law affecting the enforcement of
creditors' rights generally, (ii) general principles of equity (regardless of
whether enforcement is considered in a proceeding in equity or at law), (iii)
public policy considerations which may limit the rights of parties to obtain
certain remedies and (iv) any laws except the laws of the State of New York and
the General Corporation Law of the State of Delaware. We advise you that issues
addressed by this letter may be governed in whole or in part by other laws, but
we express no opinion as to whether any relevant difference exists between the
laws upon which our opinions are based and any other laws which may actually
govern. For purposes of the opinions in paragraph 1, we have relied exclusively
upon recent certificates issued by the Delaware Secretary of State and the New
York Secretary of State and such opinions are not intended to provide any
conclusion or assurance beyond that conveyed by such certificates. We have
assumed without investigation that there has been no relevant change or
development between the respective dates of such certificates and the date of
this letter.
We hereby consent to the filing of this opinion as Exhibit 5.1 to the
Registration Statement. We also consent to the reference to our firm under the
heading "Legal Matters" in the Registration Statement. In giving this consent,
we do not thereby admit that we are in the category of persons whose consent is
required under Section 7 of the Securities Act of the rules and regulations of
the Commission.
<PAGE>
National Equipment Services, Inc.
April 15, 1998
Page 4
We do not find it necessary for the purposes of this opinion, and
accordingly we do not purport to cover herein, the application of the securities
or "Blue Sky" laws of the various states to the issuance of the Exchange Notes.
This opinion is limited to the specific issues addressed herein, and no
opinion may be inferred or implied beyond that expressly stated herein. We
assume no obligation to revise or supplement this opinion should the present
laws of the State of New York or the General Corporation Law of the State of
Delaware be changed by legislative action, judicial decision or otherwise.
This opinion is furnished to you in connection with the filing of the
Registration Statement, and is not to be used, circulated, quoted or otherwise
relied upon for any other purposes.
Yours very truly,
/s/ Kirkland & Ellis
KIRKLAND & ELLIS
<PAGE>
Exhibit 10.15
ASSET PURCHASE AGREEMENT
BY AND AMONG
NES ACQUISITION CORP.
(THE "PURCHASER"),
INDUSTRIAL CRANE MAINTENANCE SYSTEMS, INC.,
BRAZOS RENTAL & TOOL, INC.
AND
SAFE WORK LOAD PRODUCTS, INC.
(THE "SELLERS")
AND
THE STOCKHOLDERS OF THE SELLERS
(THE "STOCKHOLDERS")
Dated as of January 6, 1997
1
<PAGE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS
Page
ARTICLE 1
<S> <C>
DEFINITIONS...................................................................................... 1
1.1 Definitions............................................................................... 1
1.2 Other Definitional Provisions............................................................. 5
1.3 Cross Reference of Other Definitions...................................................... 5
ARTICLE 2
PURCHASE AND SALE; ASSUMPTION OF CERTAIN LIABILITIES; CLOSING.................................... 7
2.1 Purchase and Sale of ICMS Assets........................................................... 7
2.2 Purchase and Sale of BRTI Assets........................................................... 10
2.3 Purchase and Sale of SWLP Assets........................................................... 11
2.4 The Closing................................................................................ 14
2.5 Post Closing Purchase Price Adjustment..................................................... 15
2.6 Distribution of Holdback................................................................... 16
ARTICLE 3
TRANSITIONAL ARRANGEMENTS........................................................................ 17
3.1 Sellers' Name Change....................................................................... 17
ARTICLE 4
CONFIDENTIALITY.................................................................................. 17
4.1 Confidential Treatment..................................................................... 17
4.2 Forced Disclosure.......................................................................... 17
ARTICLE 5
REPRESENTATIONS AND WARRANTIES OF THE PURCHASER.................................................. 18
5.1 Organization of the Purchaser.............................................................. 18
5.2 Authorization; Binding Effect; No Breach................................................... 18
5.3 Brokerage.................................................................................. 18
5.4 Disclosure................................................................................. 18
ARTICLE 6
REPRESENTATIONS AND WARRANTIES OF THE SELLERS AND STOCKHOLDERS.................................... 18
6.1 Organization and Corporate Power............................................................ 19
6.2 Capital Stock and Related Matters........................................................... 19
6.3 Authorization; Binding Effect; No Breach.................................................... 19
6.4 Subsidiaries; Investments................................................................... 20
6.5 Financial Statements and Related Matters.................................................... 20
6.6 Absence of Undisclosed Liabilities.......................................................... 21
6.7 Acquired Assets............................................................................. 21
6.8 Absence of Certain Developments............................................................. 21
6.9 Tax Matters................................................................................. 23
6.10 Contracts and Commitments................................................................... 24
6.11 Proprietary Rights.......................................................................... 26
6.12 Certain Litigation.......................................................................... 27
6.13 Brokerage................................................................................... 27
6.14 Insurance................................................................................... 27
6.15 Employees................................................................................... 27
6.16 ERISA....................................................................................... 28
6.17 Real Estate................................................................................. 29
6.18 Compliance with Laws........................................................................ 30
6.19 Product Warranty............................................................................ 31
6.20 Disclosure.................................................................................. 31
ARTICLE 7
ACCESS TO RECORDS................................................................................. 32
7.1 Access to Records........................................................................... 32
</TABLE>
2
<PAGE>
<TABLE>
<CAPTION>
ARTICLE 8
<S> <C>
SURVIVAL AND INDEMNIFICATION 32
8.1 Survival........................................................................................................ 32
8.2 Indemnification Obligations of the Sellers and the Stockholders................................................. 33
8.3 Indemnification Obligations of the Purchaser.................................................................... 34
8.4 Indemnification Procedures...................................................................................... 34
8.5 Limitation...................................................................................................... 35
8.6 Treatment of Indemnification Payments........................................................................... 35
8.7 Payment......................................................................................................... 35
ARTICLE 9
OTHER COVENANTS....................................................................................................... 36
9.1 Transaction Expenses............................................................................................ 36
9.2 Special Leasing Arrangement..................................................................................... 36
9.3 Employment Agreement............................................................................................ 36
9.4 Prepayment of Certain Indebtedness.............................................................................. 36
9.5 Noncompetition and Nonsolicitation.............................................................................. 36
9.6 Further Assurances.............................................................................................. 37
9.7 Announcements................................................................................................... 37
9.8 Employees....................................................................................................... 37
9.9 Employee Benefit Plans.......................................................................................... 38
9.10 Necessary Third Party Consents.................................................................................. 38
ARTICLE 10
OTHER AGREEMENTS...................................................................................................... 39
10.1 Remedies........................................................................................................ 39
10.2 Consent to Amendments........................................................................................... 39
10.3 Successors and Assigns.......................................................................................... 39
10.4 Governing Law................................................................................................... 39
10.5 Notices......................................................................................................... 39
10.6 Severability of Provisions...................................................................................... 40
10.7 Schedules and Exhibits.......................................................................................... 41
10.8 Counterparts.................................................................................................... 41
10.9 No Third-Party Beneficiaries.................................................................................... 41
10.10 Headings........................................................................................................ 41
10.11 Merger and Integration.......................................................................................... 41
10.12 Allocation of Purchase Price.................................................................................... 41
10.13 Bulk Sales Law.................................................................................................. 41
</TABLE>
3
<PAGE>
EXHIBITS
Exhibit A - Form of Opinion of Seller's Counsel
Exhibit B - Form of Real Estate Lease
Exhibit C - Form of Employment Agreement
DISCLOSURE SCHEDULES
Affiliated Transactions Schedule
Assets Schedule
BRTI Acquired Assets Schedule
BRTI Contracts Schedule
Brokerage Schedule
Capitalization Schedule
Compliance Schedule
Consents Schedule
Developments Schedule
Employee Benefits Schedule
Environmental Matters Schedule
ICMS Contracts Schedule
Insurance Schedule
Liabilities Schedule
Litigation Schedule
Noncompete Allocation Schedule
Organization Schedule
Permits Schedule
Proprietary Rights Schedule
Real Estate Schedule
SWLP Contracts Schedule
Taxes Schedule
Transaction Expenses Schedule
Warranties Schedule
4
<PAGE>
ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT is made as of January 6, 1997, by and among NES
ACQUISITION CORP., a Delaware corporation (the "Purchaser"), INDUSTRIAL CRANE
MAINTENANCE SYSTEMS, INC., a Texas corporation ("ICMS"), BRAZOS RENTAL & TOOL,
INC., a Texas corporation ("BRTI"), SAFE WORK LOAD PRODUCTS, INC., a Texas
corporation ("SWLP," and together with ICMS and BRTI, the "Sellers"), and James
G. Kowalik and Jerry M. Wolverton, the sole stockholders of the Sellers (the
"Stockholders"). The Purchaser, the Sellers and the Stockholders are
collectively referred to herein as the "Parties."
WHEREAS, upon the terms and subject to the conditions set forth in this
Agreement, (i) the Purchaser desires to acquire from ICMS, and ICMS desires to
sell to the Purchaser, substantially all of ICMS's assets, (ii) the Purchaser
desires to acquire from BRTI, and BRTI desires to sell to the Purchaser,
substantially all of BRTI's assets which relate to BRTI's hoist rental business
(subject to certain of BRTI's liabilities as specifically provided herein) and
(iii) the Purchaser desires to acquire from SWLP, and SWLP desires to sell to
the Purchaser, substantially all of SWLP's assets.
NOW, THEREFORE, the Parties agree as follows:
ARTICLE 1
DEFINITIONS
1.1 DEFINITIONS. For purposes hereof, the following terms, when used herein
with initial capital letters, shall have the respective meanings set forth
herein:
"Affiliate" of any Person means any other Person controlling, controlled by or
under common control with such first Person.
"Agreement" means this Asset Purchase Agreement, including all Exhibits and
Schedules hereto, as it may be amended from time to time in accordance with its
terms.
"Books and Records" means all lists, records and other information pertaining
to accounts, personnel and referral sources of any of the Sellers, all lists and
records pertaining to suppliers and customers of any of the Sellers, and all
other books, ledgers, files and business records of every kind relating or
pertaining to the ICMS Business, the BRTI Business or the SWLP Business, in each
case whether evidenced in writing, electronically (including by computer) or
otherwise.
"BRTI Business" means the hoist rental business of BRTI as now conducted.
"Code" means the United States Internal Revenue Code of 1986, as amended.
"Environmental Affiliates" of any Person means, with respect to any particular
matter, all other Persons whose liabilities or obligations with respect to that
particular matter have been assumed by, or are otherwise deemed by law to be
those of, such first Person.
"Environmental and Safety Requirements" means all federal, state, local and
foreign statutes, regulations, ordinances and similar provisions having the
force or effect of law, all judicial and administrative orders and
determinations, all contractual obligations and all common law concerning public
health and safety, worker health and safety and pollution or protection of the
environment, including all such standards of conduct and bases of obligations
relating to the presence, use, production, generation, handling, transport,
treatment, storage, disposal, distribution, labeling, testing, processing,
discharge, release, threatened release, control, or cleanup of any hazardous
materials, substances or wastes, chemical substances or mixtures, pesticides,
pollutants, contaminants, toxic chemicals, petroleum products or by-products,
asbestos, polychlorinated biphenyls (or PCBs), noise or radiation.
5
<PAGE>
"Environmental Lien" means any Lien, whether recorded or unrecorded, in favor
of any Government Entity relating to any liability of any Seller or any
Environmental Affiliate of any Seller arising under any Environmental and Safety
Requirement.
"ERISA" means the Employee Retirement Income Security Act of 1974, as amended.
"Estimated Recently Acquired Assets Amount" means $80,202.00.
"GAAP" means, at a given time, United States generally accepted accounting
principles, consistently applied.
"Government Entity" means the United States of America or any other nation,
any state or other political subdivision thereof, or any entity exercising
executive, legislative, judicial, regulatory or administrative functions of
government.
"ICMS Business" means the business of ICMS as now conducted.
"Indebtedness" of any Person means, without duplication: (a) indebtedness for
borrowed money or for the deferred purchase price of property or services in
respect of which such Person is liable, contingently or otherwise, as obligor or
otherwise (other than trade payables and other current liabilities incurred in
the ordinary course of business) and any commitment by which such Person assures
a creditor against loss, including contingent reimbursement obligations with
respect to letters of credit; (b) indebtedness guaranteed in any manner by such
Person, including a guarantee in the form of an agreement to repurchase or
reimburse; (c) obligations under capitalized leases in respect of which such
Person is liable, contingently or otherwise, as obligor, guarantor or otherwise,
or in respect of which obligations such Person assures a creditor against loss;
and (d) any unsatisfied obligation of such Person for "withdrawal liability" to
a "multiemployer plan," as such terms are defined under ERISA.
"Investment" means, with respect to any Person, any direct or indirect
purchase or other acquisition by such Person of any notes, obligations,
instruments, stock, securities or other ownership or beneficial interest
(including partnership interests and joint venture interests) of any other
Person, and any capital contribution by such Person to any other Person.
"Knowledge" means, with respect to a Person, (a) the actual knowledge of such
Person (which includes the actual knowledge of all officers, directors and
executive employees of such Person) and (b) the knowledge which a prudent
business person would have obtained in the conduct of his or her business after
making reasonable inquiry and exercising reasonable diligence with respect to
the particular matter in question.
"Legal Requirement" means any requirement arising under any action, law,
treaty, rule or regulation, determination or direction of an arbitrator or
Government Entity, including any Environmental and Safety Requirement.
"Lien" means any mortgage, pledge, security interest, encumbrance, easement,
restriction, charge, or other lien.
"Loss" means, with respect to any Person, any diminution in value,
consequential or other damage, liability, demand, claim, action, cause of
action, cost, damage, deficiency, Tax, penalty, fine or other loss or expense,
whether or not arising out of a third party claim, including all interest,
penalties, reasonable attorneys' fees and expenses and all amounts paid or
incurred in connection with any action, demand, proceeding, investigation or
claim by any third party (including any Government Entity) against or affecting
such Person or which, if determined adversely to such Person, would give rise
to, evidence the existence of, or relate to, any other Loss and the
investigation, defense or settlement of any of the foregoing, together with
interest thereon from the date on which such Person provides the written notice
of the related claim as described in Section 8.4 through and including the date
on which the total amount of the claim, including such interest, is recovered or
recouped pursuant to Article 8.
6
<PAGE>
"Person" means an individual, a partnership, a corporation, an association, a
limited liability company, a joint stock company, a trust, a joint venture, an
unincorporated organization, a governmental entity or any department, agency or
political subdivision thereof and any other entity.
"Proprietary Rights" means (i) with respect to BRTI, all of the following
owned by, issued to or licensed to BRTI and which relate to the BRTI Business,
(ii) with respect to ICMS, all of the following owned by, issued to or licensed
to ICMS, and (iii) with respect to SWLP, all of the following owned by, issued
to or licensed to SWLP and which relate to the SWLP Business: (a) all inventions
(whether patentable or unpatentable and whether or not reduced to practice), all
improvements thereto, and all patents, patent applications, and patent
disclosures, together with all reissuances, continuations, continuations-in-
part, revisions, extensions, and reexaminations thereof; (b) all trademarks,
service marks, trade dress, logos, trade names, and corporate names, together
with all translations, adaptations, derivations, and combinations thereof and
including all goodwill associated therewith, and all applications,
registrations, and renewals in connection therewith; (c) all copyrightable works
(including, without limitation, all software developed by the Seller for use in
the Business), all copyrights, and all applications, registrations, and renewals
in connection therewith; (d) all mask works and all applications, registrations,
and renewals in connection therewith; (e) all trade secrets and confidential
business information (including ideas, research and development, know-how,
formulas, compositions, manufacturing and production processes and techniques,
technical data, designs, drawings, specifications, customer and supplier lists,
pricing and cost information, and business and marketing plans and proposals);
(f) all computer software (including data and related documentation); (g) all
other proprietary rights; and (h) all copies and tangible embodiments thereof
(in whatever form or medium).
"Recently Acquired Assets Amount" means (i) the amounts actually paid by ICMS
or BRTI for any assets purchased by ICMS or BRTI in connection with the ICMS
Business or BRTI Business after September 30, 1996 and prior to the Closing Date
in the ordinary course of business, minus (ii) the amounts actually received by
ICMS or BRTI for any assets sold by ICMS or BRTI in connection with the ICMS
Business or BRTI Business after September 30, 1996 and prior to the Closing
Date.
"Subsidiary" means, with respect to any Person, any corporation a majority of
the total voting power of shares of stock of which is entitled (without regard
to the occurrence of any contingency) to vote in the election of directors,
managers or trustees thereof is at the time owned or controlled, directly or
indirectly, by that Person or one or more of the other Subsidiaries of that
Person or a combination thereof, or any partnership, association or other
business entity a majority of the partnership or other similar ownership
interest of which is at the time owned or controlled, directly or indirectly, by
that Person or one or more Subsidiaries of that Person or a combination thereof.
For purposes of this definition, a Person is deemed to have a majority ownership
interest in a partnership, association or other business entity if such Person
is allocated a majority of the gains or losses of such partnership, association
or other business entity or is or controls the managing director or general
partner of such partnership, association or other business entity.
"SWLP Business" means the business of SWLP as now conducted.
"Taxes" means any federal, state, local, or foreign income, gross receipts,
license, payroll, employment, excise, severance, stamp, occupation, premium,
windfall profits, environmental (including taxes imposed pursuant to Section 59A
of the Code), customs duties, capital stock, franchise, profits, withholding,
social security, unemployment, disability, real property, personal property,
sales, use, transfer, registration, value added, alternative or add-on minimum,
or other tax, fee, assessment or charge of any kind whatsoever, including any
interest, penalty, or addition thereto, whether disputed or not.
"Transaction Documents" means this Agreement, and all other agreements,
instruments, certificates and other documents to be entered into or delivered by
any Party in connection with the transactions contemplated to be consummated
pursuant to any of the foregoing.
"Treasury Regulations" means the United States Treasury Regulations
promulgated pursuant to the Code.
7
<PAGE>
1.2 OTHER DEFINITIONAL PROVISIONS.
(a) Accounting Terms. Accounting terms which are not otherwise defined in
this Agreement have the meanings given to them under GAAP. To the extent that
the definition of accounting term that is defined in this Agreement is
inconsistent with the meaning of such term under GAAP, the definition set forth
in this Agreement will control.
(b) "Hereof," etc. The terms "hereof," "herein" and "hereunder" and terms of
similar import are references to this Agreement as a whole and not to any
particular provision of this Agreement. Section, clause, Schedule and Exhibit
references contained in this Agreement are references to Sections, clauses,
Schedules and Exhibits in or to this Agreement, unless otherwise specified.
(c) Successor Laws. Any reference to any particular Code section or any other
law or regulation will be interpreted to include any revision of or successor to
that section regardless of how it is numbered or classified.
8
<PAGE>
1.3 CROSS REFERENCE OF OTHER DEFINITIONS. Each capitalized term listed below
is defined in the corresponding Section of this Agreement:
<TABLE>
<CAPTION>
Term Section
<S> <C>
Actual Recently Acquired Assets Amount....................................................................... 2.5(a)
Actual Specified Current Liabilities......................................................................... 2.5(a)
Assumption................................................................................................... 2.4(a)
BRTI......................................................................................................... Preface
BRTI Acquired Assets......................................................................................... 2.2(a)
BRTI Assumed Liabilities..................................................................................... 2.2(c)
BRTI Cash Purchase Price..................................................................................... 2.2(e)(i)(A)
BRTI Excluded Assets......................................................................................... 2.2(b)
BRTI Excluded Liabilities.................................................................................... 2.2(d)
BRTI Purchase Price.......................................................................................... 2.2(e)(i)
Closing...................................................................................................... 2.4
Closing Date................................................................................................. 2.4
Closing Date Adjustment...................................................................................... 2.4(a)
Closing Review............................................................................................... 2.5(a)
Confidential Information..................................................................................... 4.1
Continuing Employees......................................................................................... 9.8(b)
Contracts.................................................................................................... 6.10(b)
Controlled Group............................................................................................. 6.16(h)
Draft Computation............................................................................................ 2.5(a)
Employee Pension Plans....................................................................................... 6.16(b)
Employee Welfare Plans....................................................................................... 6.16(a)
Financial Statements......................................................................................... 6.5(a)
Firm......................................................................................................... 2.5(a)
Holdback..................................................................................................... 2.2(e)(i)(B)
ICMS......................................................................................................... Preface
ICMS Acquired Assets......................................................................................... 2.1(a)
ICMS Assumed Liabilities..................................................................................... 2.1(c)
ICMS Cash Purchase Price..................................................................................... 2.1(e)
ICMS Excluded Assets......................................................................................... 2.1(b)
ICMS Excluded Liabilities.................................................................................... 2.1(d)
ICMS Purchase Price.......................................................................................... 2.1(e)
ICMS Real Estate............................................................................................. 2.1(a)(vi)
Indemnification Claim Notice................................................................................. 8.4(a)
Indemnified Party............................................................................................ 8.4(a)
Indemnifying Party........................................................................................... 8.4(a)
Latest Balance Sheet......................................................................................... 6.5(a)
Leased Real Property......................................................................................... 6.17(b)
Leases....................................................................................................... 6.17(b)
Multiemployer Plan........................................................................................... 6.16(c)
Noncompetition Period........................................................................................ 9.5(a)
Objection Notice............................................................................................. 2.5(a)
Other Plans.................................................................................................. 6.16(a)
Parties...................................................................................................... Preface
PBGC......................................................................................................... 6.16(h)
Pending Claim................................................................................................ 2.6
Plans........................................................................................................ 6.16
Prime Rate................................................................................................... 2.2(e)(i)
Proceeding................................................................................................... 8.4(a)
Purchaser.................................................................................................... Preface
Purchaser Indemnitees........................................................................................ 8.2
Remaining Holdback........................................................................................... 2.6
Sale......................................................................................................... 2.4(d)
Sellers...................................................................................................... Preface
Seller Employees............................................................................................. 6.16(a)
Seller Indemnitees........................................................................................... 8.3
Specified Current Liabilities................................................................................ 2.2(c)(i)
Specified Current Liabilities Excess......................................................................... 2.5(b)(i)
Stockholders................................................................................................. Preface
SWLP......................................................................................................... Preface
SWLP Acquired Assets......................................................................................... 2.3(a)
SWLP Assumed Liabilities..................................................................................... 2.3(c)
SWLP Cash Purchase Price..................................................................................... 2.3(e)
SWLP Excluded Assets......................................................................................... 2.3(b)
SWLP Excluded Liabilities.................................................................................... 2.3(d)
SWLP Purchase Price.......................................................................................... 2.3(e)
SWLP Real Estate............................................................................................. 2.3(a)(vi)
Unassignable Contracts....................................................................................... 9.10
</TABLE>
9
<PAGE>
ARTICLE 2
PURCHASE AND SALE; ASSUMPTION OF CERTAIN LIABILITIES; CLOSING
2.1 PURCHASE AND SALE OF ICMS ASSETS.
(a) ICMS Acquired Assets. Upon the terms and subject to the conditions set
forth in this Agreement, ICMS hereby sells, assigns, transfers and delivers to
the Purchaser, and the Purchaser hereby purchases, all properties, assets,
rights and interests of every kind and nature, whether tangible or intangible,
and wherever located and by whomever possessed, owned by ICMS as of the date
hereof, except as set forth in Section 2.1(b) below (collectively, the "ICMS
Acquired Assets"), including, without limitation:
(i) all cash and cash equivalents (including, without limitation, all money
market accounts, mutual fund accounts and repurchase agreements);
(ii) all accounts and notes receivables (whether current or noncurrent);
(iii) all securities and other Investments;
(iv) all of ICMS's Proprietary Rights, along with all income, royalties,
damages and payments due or payable as of the date hereof or hereafter,
including, without limitation, damages and payments for past, present or
future infringements or misappropriations thereof, the right to sue and
recover for past infringements or misappropriations thereof and any and all
corresponding rights that, now or hereafter, may be secured throughout the
world;
(v) all of ICMS's rights existing under leases, contracts, licenses,
permits, distribution arrangements, sales and purchase agreements, accounts
receivable, other agreements and business arrangements, including, without
limitation, all contracts and agreements described on the ICMS Contracts
Schedule attached hereto;
(vi) all real property leased by ICMS, and all plants, buildings and other
improvements located on such leased property, and all easements, licenses,
rights of way, permits and all appurtenances to such leased property,
including, without limitation, all appurtenant rights in and to public
streets, whether or not vacated (collectively, the "ICMS Real Estate");
(vii) all leasehold improvements and all machinery, equipment (including all
transportation and office equipment), fixtures, trade fixtures, tools, dyes
and furniture owned by ICMS wherever located, including, without limitation,
all such items which are located in any building, warehouse, office or other
space leased or occupied by ICMS or used in connection with the ICMS Real
Estate;
(viii) all rental equipment of any kind, wherever located, rented by ICMS to
any Person;
(ix) all inventories of work in process, semi-finished and finished goods,
stores, replacement and spare parts, packaging materials, operating supplies,
and fuels, owned by ICMS wherever located;
(x) all office supplies, production supplies, spare parts, other
miscellaneous supplies, and other tangible property of any kind wherever
located, including, without limitation, all property of any kind located in
any building, office or other space leased, owned or occupied by ICMS or in
any warehouse where any of ICMS's properties and assets may be situated;
(xi) all prepayments and prepaid expenses (except for the refund of the
workmen's compensation insurance deposit);
10
<PAGE>
(xii) all of ICMS's claims, causes of action, choses in action, rights of
recovery and rights of set-off of any kind;
(xiii) the right to receive and retain mail, accounts receivable payments
and other communications relating to ICMS;
(xiv) the right to bill and receive payment for products shipped or
delivered and services performed but unbilled or unpaid as of the date hereof;
(xv) all lists, records and other information pertaining to accounts,
personnel and referral sources, all lists and records pertaining to suppliers
and customers, and all books, ledgers, files and business records of every
kind, whether evidenced in writing, electronically (including, without
limitation, by computer) or otherwise;
(xvi) all advertising, marketing and promotional materials and all other
printed or written materials;
(xvii) all permits, licenses, certifications and approvals from all
permitting, licensing, accrediting and certifying agencies, and the rights to
all data and records held by such permitting, licensing and certifying
agencies;
(xviii) all goodwill as a going concern and all other intangible properties;
(xix) all telephone numbers (e.g. "800" numbers) used by ICMS;
(xx) the legal names "Industrial Crane Maintenance Systems, Inc." and
"Industrial Crane Rentals & Maintenance"; and
(xxi) except as specified in Section 2.1(b) below, all other property owned
by ICMS, or in which it has an interest on the date hereof, including, without
limitation, all fixed assets relating to ICMS included on the Latest Balance
Sheet and any and all subsequent improvements or additions thereon through the
date hereof.
(b) ICMS Excluded Assets. Notwithstanding Section 2.1(a) above, the following
assets are expressly excluded from the purchase and sale contemplated hereby
and, as such, are not ICMS Acquired Assets (collectively, the "ICMS Excluded
Assets"):
(i) all monies to be received by ICMS from the Purchaser;
(ii) all rights of ICMS under this Agreement;
(iii) all deferred compensation agreements, insurance policies which provide
health, disability, life, accidental death and dismemberment or dental
insurance coverage and all Plans, including, but not limited to, the
Industrial Crane Maintenance Systems, Inc. 401(k) Plan;
(iv) all qualifications to do business as a foreign corporation;
(v) all arrangements with registered agents relating to foreign
qualifications;
(vi) all taxpayer and other identification numbers; and
(vii) all seals, minute books, stock transfer books, blank stock
certificates, and other documents relating to the organization, maintenance,
and existence of ICMS as a corporation.
(c) ICMS Assumed Liabilities. Subject to Section 2.1(d) below, as additional
consideration for the ICMS Acquired Assets, the Purchaser hereby assumes the
following liabilities and obligations of ICMS (the "ICMS Assumed Liabilities"):
11
<PAGE>
(i) all liabilities and obligations of ICMS pursuant to executory contracts,
orders and commitments covering the purchase of inventory and/or supplies or
the sale of merchandise or services which are described on the attached ICMS
Contracts Schedule.
(d) ICMS Excluded Liabilities. Except as set forth in Section 2.1(c) above,
the Purchaser shall not assume or become liable for, and shall not be deemed to
have assumed or have become liable for, any of ICMS's liabilities and
obligations not expressly assumed by the Purchaser pursuant to Section 2.1(c)
above, whether accrued, absolute or contingent, whether known or unknown,
whether disclosed or undisclosed, whether due or to become due and whether
related to the ICMS Acquired Assets or otherwise, and regardless of when
asserted (the "ICMS Excluded Liabilities"). ICMS hereby acknowledges that it is
retaining the ICMS Excluded Liabilities and ICMS and the Stockholders jointly
and severally agree to promptly pay and discharge all such liabilities and
obligations when due.
(e) Purchase Price for ICMS Acquired Assets. The purchase price for the ICMS
Acquired Assets (the "ICMS Purchase Price") consists of the assumption by the
Purchaser of the ICMS Assumed Liabilities and the payment of an aggregate of
$460,000, which shall be paid in cash (the "ICMS Cash Purchase Price").
2.2 PURCHASE AND SALE OF BRTI ASSETS.
(a) BRTI Acquired Assets. Upon the terms and subject to the conditions set
forth in this Agreement, BRTI hereby sells, assigns, transfers and delivers to
the Purchaser, and the Purchaser hereby purchases, all of the assets set forth
on the attached BRTI Acquired Assets Schedule (collectively, the "BRTI Acquired
Assets").
(b) BRTI Excluded Assets. Except for the BRTI Acquired Assets, all of the
other assets relating to the BRTI Business are expressly excluded from the
purchase and sale contemplated hereby and, as such, are not BRTI Acquired Assets
(collectively, the "BRTI Excluded Assets").
(c) BRTI Assumed Liabilities. Subject to Section 2.2(d) below, as additional
consideration for the BRTI Acquired Assets, the Purchaser hereby assumes the
following liabilities and obligations of BRTI (the "BRTI Assumed Liabilities"):
(i) liabilities of BRTI for accrued expenses and non-interest bearing
accounts payable relating to the ongoing operation of BRTI which are set forth
on the face of the Latest Balance Sheet or which have been incurred by BRTI in
the ordinary course of business since the date of the Latest Balance Sheet
(the "Specified Current Liabilities"); and
(ii) all liabilities and obligations of BRTI pursuant to executory
contracts, orders and commitments covering the purchase of inventory and/or
supplies or the sale of merchandise or services which are described on the
attached BRTI Contracts Schedule.
(d) BRTI Excluded Liabilities. Except as set forth in Section 2.2(c) above,
the Purchaser shall not assume or become liable for, and shall not be deemed to
have assumed or have become liable for, any of BRTI's liabilities and
obligations not expressly assumed by the Purchaser pursuant to Section 2.2(c)
above, whether accrued, absolute or contingent, whether known or unknown,
whether disclosed or undisclosed, whether due or to become due and whether
related to the BRTI Acquired Assets or otherwise, and regardless of when
asserted (the "BRTI Excluded Liabilities"). BRTI hereby acknowledges that it is
retaining the BRTI Excluded Liabilities and BRTI and the Stockholders jointly
and severally agree to promptly pay and discharge all such liabilities and
obligations when due.
(e) Purchase Price for BRTI Acquired Assets.
(i) The purchase price for the BRTI Acquired Assets (the "BRTI Purchase
Price") consists of the assumption by the Purchaser of the BRTI Assumed
Liabilities and the payment of an aggregate of $4,490,000 (as adjusted
pursuant to Section 2.2(e)(ii) below), which shall be paid as follows: (A) the
Purchaser shall deliver $3,990,000 (as adjusted pursuant to Section 2.2(e)(ii)
below) in cash (the "BRTI Cash Purchase Price"); and (B) the
12
<PAGE>
Purchaser shall maintain $500,000 in a book entry account of the Purchaser
(the "Holdback"). The Holdback shall be available to satisfy any amounts owing
to the Purchaser pursuant to Section 2.5 (Post Closing Purchase Price
Adjustment) and/or Section 8.2 (Indemnification). Interest shall accrue at the
Prime Rate (as defined below) on the undistributed portion of the Holdback.
The interest on the Holdback shall also be available to satisfy any amounts
owing to the Purchaser pursuant to Section 2.5 (Post Closing Purchase Price
Adjustment) and/or Section 8.2 (Indemnification). For the purposes hereof, the
"Prime Rate" shall mean the rate of interest published as the "prime rate" in
the Wall Street Journal, Midwest Edition, on the Closing Date.
(ii) At the Closing, the BRTI Purchase Price and the BRTI Cash Purchase
Price will be (A) increased dollar-for-dollar by an amount equal to the
Estimated Recently Acquired Assets Amount, and (B) reduced dollar-for-dollar
by an amount equal to the sum of the amounts required to be set forth on the
Transaction Expense Schedule pursuant to Section 9.1 hereto which have been
paid between June 30, 1996 and the Closing.
2.3 PURCHASE AND SALE OF SWLP ASSETS.
(a) SWLP Acquired Assets. Upon the terms and subject to the conditions set
forth in this Agreement, SWLP hereby sells, assigns, transfers and delivers to
the Purchaser, and the Purchaser hereby purchases, all properties, assets,
rights and interests of every kind and nature, whether tangible or intangible,
and wherever located and by whomever possessed, owned by SWLP as of the date
hereof, except as set forth in Section 2.3(b) below (collectively, the "SWLP
Acquired Assets"), including, without limitation:
(i) All Cash And Cash Equivalents (Including, Without Limitation, All Money
Market Accounts, Mutual Fund Accounts And Repurchase Agreements);
(ii) all accounts and notes receivables (whether current or noncurrent);
(iii) all securities and other Investments;
(iv) all of SWLP's Proprietary Rights, along with all income, royalties,
damages and payments due or payable as of the date hereof or hereafter,
including, without limitation, damages and payments for past, present or
future infringements or misappropriations thereof, the right to sue and
recover for past infringements or misappropriations thereof and any and all
corresponding rights that, now or hereafter, may be secured throughout the
world;
(v) all of SWLP's rights existing under leases, contracts, licenses,
permits, distribution arrangements, sales and purchase agreements, accounts
receivable, other agreements and business arrangements, including, without
limitation, all contracts and agreements described on the SWLP Contracts
Schedule attached hereto;
(vi) all real property leased by SWLP, and all plants, buildings and other
improvements located on such leased property, and all easements, licenses,
rights of way, permits and all appurtenances to such leased property,
including, without limitation, all appurtenant rights in and to public
streets, whether or not vacated (collectively, the "SWLP Real Estate");
(vii) all leasehold improvements and all machinery, equipment (including all
transportation and office equipment), fixtures, trade fixtures, tools, dyes
and furniture owned by SWLP wherever located, including, without limitation,
all such items which are located in any building, warehouse, office or other
space leased or occupied by SWLP or used in connection with the SWLP Real
Estate;
(viii) all rental equipment of any kind, wherever located, rented by SWLP to
any Person;
(ix) all inventories of work in process, semi-finished and finished goods,
stores, replacement and spare parts, packaging materials, operating supplies,
and fuels, owned by SWLP wherever located;
13
<PAGE>
(x) all office supplies, production supplies, spare parts, other
miscellaneous supplies, and other tangible property of any kind wherever
located, including, without limitation, all property of any kind located in
any building, office or other space leased, owned or occupied by SWLP or in
any warehouse where any of SWLP's properties and assets may be situated;
(xi) all prepayments and prepaid expenses;
(xii) all of SWLP's claims, causes of action, choses in action, rights of
recovery and rights of set-off of any kind;
(xiii) the right to receive and retain mail, accounts receivable payments
and other communications relating to SWLP;
(xiv) the right to bill and receive payment for products shipped or
delivered and services performed but unbilled or unpaid as of the date hereof;
(xv) all lists, records and other information pertaining to accounts,
personnel and referral sources, all lists and records pertaining to suppliers
and customers, and all books, ledgers, files and business records of every
kind, whether evidenced in writing, electronically (including, without
limitation, by computer) or otherwise;
(xvi) all advertising, marketing and promotional materials and all other
printed or written materials;
(xvii) all permits, licenses, certifications and approvals from all
permitting, licensing, accrediting and certifying agencies, and the rights to
all data and records held by such permitting, licensing and certifying
agencies;
(xviii) all goodwill as a going concern and all other intangible properties;
(xix) all telephone numbers (e.g. "800" numbers) used by SWLP;
(xx) the legal names "Safe Work Load Products, Inc."; and
(xxi) except as specified in Section 2.3(b) below, all other property owned
by SWLP, or in which it has an interest on the date hereof.
(b) SWLP Excluded Assets. Notwithstanding Section 2.3(a) above, the following
assets are expressly excluded from the purchase and sale contemplated hereby
and, as such, are not SWLP Acquired Assets (collectively, the "SWLP Excluded
Assets"):
(i) all monies to be received by SWLP from the Purchaser;
(ii) all rights of SWLP under this Agreement;
(iii) all deferred compensation agreements, insurance policies which provide
health, disability, life, accidental death and dismemberment or dental
insurance coverage and all Plans;
(iv) all qualifications to do business as a foreign corporation;
(v) all arrangements with registered agents relating to foreign
qualifications;
(vi) all taxpayer and other identification numbers; and
(vii) all seals, minute books, stock transfer books, blank stock
certificates, and other documents relating to the organization, maintenance,
and existence of SWLP as a corporation.
14
<PAGE>
(c) SWLP Assumed Liabilities. Subject to Section 2.3(d) below, as additional
consideration for the SWLP Acquired Assets, the Purchaser hereby assumes the
following liabilities and obligations of SWLP (the "SWLP Assumed Liabilities"):
(i) all liabilities and obligations of SWLP pursuant to executory contracts,
orders and commitments covering the purchase of inventory and/or supplies or
the sale of merchandise or services which are described on the attached SWLP
Contracts Schedule.
(d) SWLP Excluded Liabilities. Except as set forth in Section 2.3(c) above,
the Purchaser shall not assume or become liable for, and shall not be deemed to
have assumed or have become liable for, any of SWLP's liabilities and
obligations not expressly assumed by the Purchaser pursuant to Section 2.3(c)
above, whether accrued, absolute or contingent, whether known or unknown,
whether disclosed or undisclosed, whether due or to become due and whether
related to the SWLP Acquired Assets or otherwise, and regardless of when
asserted (the "SWLP Excluded Liabilities"). SWLP hereby acknowledges that it is
retaining the SWLP Excluded Liabilities and SWLP and the Stockholders jointly
and severally agree to promptly pay and discharge all such liabilities and
obligations when due.
(e) Purchase Price for SWLP Acquired Assets. The purchase price for the SWLP
Acquired Assets (the "SWLP Purchase Price") consists of the assumption by the
Purchaser of the SWLP Assumed Liabilities and the payment of an aggregate of
$75,000, which shall be paid in cash (the "SWLP Cash Purchase Price").
2.4 THE CLOSING. The closing of the purchase and sale of the ICMS Acquired
Asset, the assumption of the ICMS Assumed Liabilities, the purchase and sale of
the BRTI Acquired Assets, the assumption of the BRTI Assumed Liabilities, the
purchase and sale of the SWLP Acquired Assets, the assumption of the SWLP
Assumed Liabilities and the transactions relating thereto are herein referred to
as the "Closing." The date and time of the Closing (the "Closing Date") shall be
10:00 a.m. on the date hereof. At the Closing the following deliveries shall be
made:
(a) the Purchaser will deliver to the Sellers such instruments of assumption
as are required in order for the Purchaser to assume the ICMS Assumed
Liabilities, the BRTI Assumed Liabilities and the SWLP Assumed Liabilities (the
"Assumption");
(b) the Purchaser will deliver to the Sellers (or, at the Sellers' direction,
to lenders or other third parties) the ICMS Cash Purchase Price, the BRTI Cash
Purchase Price and the SWLP Cash Purchase Price by wire transfer of immediately
available funds;
(c) the Purchaser will deliver to the Sellers the cash payment described in
Section 9.5 below;
(d) the Sellers will convey to the Purchaser good title to all of the ICMS
Acquired Assets and the BRTI Acquired Assets, free and clear of all Liens, and
deliver to the Purchaser warranty deeds, bills of sale, assignments of leases
and contracts and all other instruments of conveyance and consents which are
necessary or desirable to effect transfer of the ICMS Acquired Assets and the
BRTI Acquired Assets (the "Sale"), including documents acceptable for
recordation in the United States Patent and Trademark Office, the United States
Copyright Office and any other similar Government Entity;
(e) the Sellers will deliver to the Purchaser an opinion from Donisi & Lang,
legal counsel for the Sellers, with respect to the matters set forth in Exhibit
A attached hereto addressed to the Purchaser. Such opinion will be dated the
Closing Date and will be in form satisfactory to the Purchaser's special legal
counsel;
(f) the Sellers will deliver to the Purchaser evidence satisfactory to the
Purchaser that the Stockholders have prepaid all third party indebtedness for
borrowed money secured by any of the ICMS Acquired Assets, BRTI Acquired Assets
or SWLP Acquired Assets pursuant to Section 9.4 below, and the Sellers will
deliver to the Purchaser evidence satisfactory to the Purchaser of the release
of all security interest securing such indebtedness;
15
<PAGE>
(g) the Sellers will deliver to the Purchaser the following documents:
(i) a copy of the resolutions duly adopted by each Seller's board of
directors and stockholders authorizing such Seller's execution, delivery and
performance of the Transaction Documents to which such Seller is a party and
the consummation of the Sale and all other transactions contemplated by the
Transaction Documents, as in effect as of the Closing, certified by an officer
of such Seller;
(ii) a certificate (dated not earlier than five business days prior to the
Closing) of the Secretary of State of the state of incorporation of each
Seller as to the good standing of such Seller in such state;
(iii) a certificate (dated not earlier than five business days prior to the
Closing) of the Secretary of State of each state wherein each Seller has
qualified to do business as a foreign corporation as to the good standing of
such Seller in such state; and
(iv) the Books and Records of each Seller.
2.5 POST CLOSING PURCHASE PRICE ADJUSTMENT.
(a) Post-Closing Determination. Within 90 days after the Closing Date, the
Purchaser and its auditors will conduct a review (the "Closing Review") of the
Specified Current Liabilities and the Recently Acquired Assets Amount as of the
close of business on the day before the Closing Date and will prepare and
deliver to BRTI a computation of the amount of the Specified Current Liabilities
and the Recently Acquired Assets Amount as of the close of business on the day
before the Closing Date (the "Draft Computation"). The Purchaser and its
auditors will give BRTI and its auditors an opportunity to observe the Closing
Review and will make available to such Persons all records and work papers used
in preparing the Draft Computation. If BRTI disagrees with the computation of
the Specified Current Liabilities or the Recently Acquired Assets Amount
reflected on the Draft Computation, BRTI may, within thirty (30) days after
receipt of the Draft Computation, deliver a notice (an "Objection Notice") to
the Purchaser setting forth BRTI's calculation of the amount of the Specified
Current Liabilities and/or the Recently Acquired Assets Amount as of the close
of business on the day before the Closing Date. The Purchaser and BRTI will use
reasonable efforts to resolve any disagreements as to the computation of the
Specified Current Liabilities and/or the Recently Acquired Assets Amount, but if
they do not obtain a final resolution within 30 days after the Purchaser has
received the Objection Notice, the Purchaser and BRTI will jointly retain an
independent accounting firm of recognized national or regional standing (the
"Firm") to resolve any remaining disagreements. If the Purchaser and BRTI are
unable to agree on the choice of the Firm, the Firm will be a "big-six"
accounting firm selected by lot (after excluding one firm designated by each of
the Purchaser, on the one hand, and BRTI, on the other hand). The Purchaser and
BRTI will direct the Firm to render a determination within fifteen (15) days of
its retention and the Purchaser, BRTI and their respective employees will
cooperate with the Firm during its engagement. The Firm will consider only
those items and amounts in the Draft Computation set forth in the Objection
Notice which the Purchaser and BRTI are unable to resolve. The Firm's
determination will be based on the definition of the Specified Current
Liabilities and the Recently Acquired Assets Amount included herein. The
determination of the Firm will be conclusive and binding upon the Purchaser and
BRTI. The parties shall bear the costs and expenses of the Firm based on the
percentage which the portion of the contested amount not awarded to each party
bears to the amount actually contested by such party. The amount of the
Specified Current Liabilities, as finally determined pursuant to this Section
2.5(a), is referred to herein as the "Actual Specified Current Liabilities."
The amount of the Recently Acquired Assets Amount, as finally determined
pursuant to this Section 2.5(a), is referred to herein as the "Actual Recently
Acquired Assets Amount."
(b) Post-Closing Adjustment.
(i) If the Actual Specified Current Liabilities are greater than $500,000,
the Purchaser shall be entitled to receive from the Holdback, within two (2)
Business Days after the determination thereof, the amount of such excess (the
"Specified Current Liabilities Excess"); provided, however, that if the
Holdback is less than the amount of the Specified Current Liabilities Excess,
BRTI shall pay to the Purchaser, within two (2) Business Days after the
determination of the Actual Specified Current Liabilities, the amount by which
the Holdback is
16
<PAGE>
less than the Specified Current Liabilities Excess by wire transfer or
delivery of other immediately available funds.
(ii) If the Actual Recently Acquired Assets Amount is greater than the
Estimated Recently Acquired Assets Amount, the Purchaser shall pay to BRTI,
within two (2) Business Days after the determination of the Actual Recently
Acquired Assets Amount, an amount equal to such excess by wire transfer or
delivery of other immediately available funds. If the Actual Recently
Acquired Assets Amount is less than the Estimated Recently Acquired Assets
Amount, BRTI shall pay to the Purchaser, within two (2) Business Days after
the determination of the Actual Recently Acquired Assets Amount, the amount by
which the Actual Recently Acquired Assets Amount is less than the Estimated
Recently Acquired Assets Amount by wire transfer or delivery of other
immediately available funds.
2.6 DISTRIBUTION OF HOLDBACK. On the 90th day after the Closing Date, the
Purchaser shall pay to BRTI an amount equal to the amount of the Holdback
(together with all accrued but undistributed interest thereon), if any,
remaining after (i) all amounts owing to the Purchaser pursuant to Section 2.5
have been satisfied and (ii) all claims of the Purchaser under Section 8.2 which
have theretofore been finally resolved have been satisfied (the "Remaining
Holdback") less any amount for which the Purchaser claims, prior to such 90th
day, that it is entitled to receive indemnification pursuant to Section 8.2
(each, a "Pending Claim"). As soon as practicable following final resolution of
all Pending Claims, the Purchaser shall pay to BRTI an aggregate amount equal to
the portion, if any, of the Holdback (together with all accrued but
undistributed interest thereon) which remains after payment of the Remaining
Holdback and final resolution of all Pending Claims.
ARTICLE 3
TRANSITIONAL ARRANGEMENTS
3.1 SELLERS' NAME CHANGE. Within five days after the Closing, ICMS will
change its corporate name to a name which is not (and which is not confusingly
similar to) "Industrial Crane Maintenance Systems," BRTI will change its
corporate name to a name which is not (and which is not confusingly similar to)
"Brazos Rental & Tool, Inc.," and SWLP will change its corporate name to a name
which is not (and which is not confusingly similar to) "Safe Work Load Products,
Inc.,"it being the intent of the Parties that from and after the Closing the
Purchaser will have the sole right as against the Sellers and all other Persons
to conduct business under such names and that the Purchaser will commence doing
so at the time of the Closing.
ARTICLE 4
CONFIDENTIALITY
4.1 CONFIDENTIAL TREATMENT. The Sellers and the Stockholders will (and will
cause each of their Affiliates to) treat and hold as confidential all
information concerning the conduct or affairs of the ICMS Business, the BRTI
Business or the SWLP Business (the "Confidential Information"), refrain from
using any Confidential Information, and, at the Purchaser's request, deliver to
the Purchaser or destroy all tangible embodiments (and all copies) of any
Confidential Information which are in the Sellers', Stockholders' or any such
Affiliate's possession. This Section 4.1(a) will not apply to any Confidential
Information which is generally available to the public (other than by reason of
any disclosure by any Seller, Stockholder or Affiliate thereof which constitutes
or is the result of breach of this Section 4.1 or any disclosure by any such
Affiliate which would constitute a breach of this Section 4.1 if such Affiliate
were a Seller) immediately prior to the time of disclosure.
4.2 FORCED DISCLOSURE. If any Seller, Stockholder or any Affiliate thereof is
requested or required (by oral question or request for information or documents
in any legal proceeding, interrogatory, subpoena, civil investigative demand, or
similar process) to disclose any Confidential Information, such Person will
notify the Purchaser promptly of such request or requirement so that the
Purchaser may seek an appropriate protective order or waive compliance with the
provisions of this Article 4. If, in the absence of such a protective order or
waiver, such Seller, Stockholder or Affiliate thereof, on the advice of counsel,
is compelled to disclose any Confidential
17
<PAGE>
Information to any Government Entity, such Person will use his or its best
efforts to ensure that such disclosure is limited to Confidential Information
which is so required to be disclosed and obtain an order or other assurance that
confidential treatment will be accorded to any Confidential Information
disclosed.
ARTICLE 5
REPRESENTATIONS AND WARRANTIES OF THE PURCHASER
As a material inducement to the Sellers to enter into this Agreement, the
Purchaser hereby represents and warrants that:
5.1 ORGANIZATION OF THE PURCHASER. The Purchaser is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware. The Purchaser has the requisite corporate power and authority and all
licenses, permits and authorizations necessary to enter into, deliver and carry
out its obligations pursuant to the Transaction Documents to which it is a
party.
5.2 AUTHORIZATION; BINDING EFFECT; NO BREACH. The Purchaser's execution,
delivery and performance of each Transaction Document to which the Purchaser is
a party has been duly authorized by the Purchaser. Each Transaction Document to
which the Purchaser is a party constitutes a valid and binding obligation of the
Purchaser which is enforceable in accordance with its terms. The execution,
delivery and performance by the Purchaser of the Transaction Documents to which
the Purchaser is a party do not and will not (i) conflict with or result in a
breach of the terms, conditions or provisions of, (ii) constitute a default
under, (iii) result in a violation of, or (iv) require any authorization,
consent, approval, exemption or other action by or declaration or notice to any
Governmental Entity pursuant to, the charter or bylaws of the Purchaser or any
agreement, instrument, or other document, or any Legal Requirement, to which the
Purchaser or any of its assets is subject.
5.3 BROKERAGE. There is no claim for brokerage commissions, finders' fees or
similar compensation in connection with the transactions contemplated by the
Transaction Documents based on any arrangement or agreement which is binding
upon the Purchaser.
5.4 DISCLOSURE. Neither this Article 5 nor any certificate or other item
delivered to the Sellers by or on behalf of the Purchaser with respect to the
transactions contemplated by the Transaction Documents contains any untrue
statement of a material fact or omits a material fact which is necessary to make
any statement contained herein or therein not misleading.
ARTICLE 6
REPRESENTATIONS AND WARRANTIES OF THE SELLERS AND STOCKHOLDERS
As a material inducement to the Purchaser to enter into this Agreement, purchase
the ICMS Acquired Assets, the BRTI Acquired Assets and the SWLP Acquired Assets
and assume the ICMS Assumed Liabilities, the BRTI Assumed Liabilities and the
SWLP Assumed Liabilities, the Sellers and the Stockholders hereby jointly and
severally represent and warrant that:
6.1 ORGANIZATION AND CORPORATE POWER. Each of the Sellers is a corporation
duly organized, validly existing and in good standing under the laws of its
state of incorporation and is duly qualified to do business in each jurisdiction
in which its ownership of property or conduct of business requires it to so
qualify. The Organization Schedule attached hereto lists every jurisdiction
where such Seller is duly qualified to do business and its jurisdiction of
incorporation. Such Seller has the requisite corporate power necessary to own
and operate its properties, carry on the ICMS Business, BRTI Business or SWLP
Business, as applicable, and enter into, deliver and carry out the transactions
contemplated by the Transaction Documents. Each Stockholder has the requisite
capacity necessary to enter into, deliver and carry out its obligations pursuant
to the Transaction Documents to which it is a party.
18
<PAGE>
6.2 CAPITAL STOCK AND RELATED MATTERS. The authorized capital stock of ICMS
consists of 100 shares of Common Stock, no par value, of which 10 shares are
issued and outstanding. All of the issued and outstanding shares of ICMS have
been duly authorized, are validly issued, fully paid, and nonassessable, and are
held of record and beneficially by the Stockholders, free and clear of any Lien,
option or other right of any nature. No class of capital stock of ICMS is
entitled to contractual or other preemptive rights. The authorized capital
stock of BRTI consists of 100 shares of Common Stock, no par value, of which 10
shares are issued and outstanding. All of the issued and outstanding shares of
BRTI have been duly authorized, are validly issued, fully paid, and
nonassessable, and are held of record and beneficially by the Stockholders, free
and clear of any Lien, option or other right of any nature. No class of capital
stock of BRTI is entitled to contractual or other preemptive rights. The
authorized capital stock of SWLP 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 SWLP have been duly authorized, are validly issued,
fully paid, and nonassessable, and are held of record and beneficially by the
Stockholders, free and clear of any Lien, option or other right of any nature.
No class of capital stock of SWLP is entitled to contractual or other preemptive
rights. Except as set forth on the attached Capitalization Schedule:
(a) there are no outstanding or authorized options, warrants, purchase rights,
subscription rights, conversion rights, exchange rights, or other contracts or
commitments that could require any of the Sellers to issue, sell, or otherwise
cause to become outstanding any of their capital stock;
(b) there are no outstanding or authorized stock appreciation, phantom stock,
profit participation, or similar rights with respect to any of the Sellers; and
(c) there are no voting trusts, proxies, or other agreements or understandings
with respect to the voting of the capital stock of any of the Sellers.
To the extent any of the rights described in clauses (a) and (b) above are in
existence, the Capitalization Schedule sets forth a description of the nature of
such rights and the names of the Persons holding such rights and the amounts
thereof.
6.3 AUTHORIZATION; BINDING EFFECT; NO BREACH Each Seller's execution, delivery
and performance of each Transaction Document to which such Seller is a party
have been duly authorized by such Seller. Each Transaction Document to which
such Seller or any of the Stockholders is a party constitutes a valid and
binding obligation of such Person which is enforceable in accordance with its
terms. Except as set forth on the attached Consents Schedule, the execution,
delivery and performance of the Transaction Documents to which such Seller or
Stockholder is a party do not and will not (i) conflict with or result in a
breach of the terms, conditions or provisions of, (ii) constitute a default
under, (iii) result in the creation of any Lien upon any of the ICMS Acquired
Assets, BRTI Acquired Assets or SWLP Acquired Assets under, (iv) give any third
party the right to modify, terminate or accelerate any ICMS Assumed Liability,
BRTI Assumed Liability, SWLP Assumed Liability or other liability or obligation
of such Seller or Stockholder under, (v) result in a violation of, or (vi)
require any authorization, consent, approval, exemption or other action by or
declaration or notice to any Governmental Entity pursuant to, the charter or
bylaws of such Seller or any agreement, instrument or other document, or any
Legal Requirement, to which such Seller, Stockholder or any of such Seller's
assets is subject. Without limiting the generality of the foregoing, except as
set forth on the attached Consents Schedule, neither such Seller, Stockholder
nor any Affiliate of any of them has entered into any agreement, or is bound by
any obligation of any kind whatsoever, directly or indirectly to transfer or
dispose of (whether by sale of stock or assets, assignment, merger,
consolidation or otherwise) the ICMS Business, the BRTI Business, the SWLP
Business, the ICMS Acquired Assets, the BRTI Acquired Assets or the SWLP
Acquired Assets (or any substantial portion thereof) to any Person other than
the Purchaser, and neither such Seller nor Stockholder has entered into any
agreement, nor is it bound by any obligation of any kind whatsoever, to issue
any capital stock of the Sellers to any Person.
6.4 SUBSIDIARIES; INVESTMENTS. Each Seller does not own or hold any rights to
acquire any capital stock or any other security, interest or Investment in any
other Person other than investments which constitute cash or cash equivalents.
Each Seller does not have, and has never had, a Subsidiary.
19
<PAGE>
6.5 FINANCIAL STATEMENTS AND RELATED MATTERS.
(a) Financial Statements. Each of (i) the unaudited combined and combining
balance sheets of ICMS and BRTI as of June 30, 1993, June 30, 1994 and June 30,
1995 and the unaudited related combined and combining statements of income for
the respective 12-month periods then ended, and (ii) the unaudited combined and
combining balance sheet of ICMS and BRTI as of June 30, 1996 (the "Latest
Balance Sheet") and the related unaudited combined and combining statements of
income and cash flows for the 12-month period then ended (collectively, the
"Financial Statements") (including in all cases the notes thereto, if any) is
accurate and complete in all material respects, is consistent with the books and
records of ICMS and BRTI (which, in turn, are accurate and complete in all
material respects) and fairly and accurately present the financial condition of
ICMS and BRTI.
(b) Receivables. The notes and accounts receivable which are part of the ICMS
Acquired Assets, the BRTI Acquired Assets and the SWLP Acquired Assets are valid
receivables, current, and are subject to no valid counterclaims or setoffs, at
the aggregate amount recorded on the Sellers' books and records as of the
Closing, net of an amount of allowances for doubtful accounts which relate to
those receivables computed in a manner consistent with GAAP and the accounting
practices used in the preparation of the Latest Balance Sheet.
(c) Inventory. The inventory which is part of the ICMS Acquired Assets, the
BRTI Acquired Assets and the SWLP Acquired Assets, net of the reserves
applicable to such inventory, consists of a quantity and quality which, except
as reflected in such reserve, is usable and saleable in the ordinary course of
the ICMS Business, the BRTI Business or the SWLP Business, as applicable, and
the items of such inventory are not defective, slow-moving, obsolete or damaged
and are merchantable and fit for their particular use.
6.6 ABSENCE OF UNDISCLOSED LIABILITIES. Except as set forth on the attached
Liabilities Schedule, each of the Sellers does not have any liability (whether
accrued, absolute, contingent, unliquidated or otherwise, whether or not known
to the Sellers or the Stockholders, whether due or to become due, and regardless
of when asserted) other than: (a) the liabilities set forth on the face of the
Latest Balance Sheet, (b) current liabilities which have arisen after the date
of the Latest Balance Sheet in the ordinary course of the ICMS Business, the
BRTI Business or the SWLP Business, as applicable, and consistent with such
Seller's past practice (none of which is a liability resulting from breach of
contract, breach of warranty, tort, infringement, claim or lawsuit) and (c)
other liabilities and obligations expressly disclosed and quantified in the
other Schedules to this Agreement.
6.7 ACQUIRED ASSETS. Except as set forth on the attached Assets Schedule:
(a) the ICMS Acquired Assets constitute all of the assets and rights (other
than the ICMS Excluded Assets) which are necessary for the conduct of the ICMS
Business as currently conducted and presently proposed to be conducted, the BRTI
Acquired Assets constitute all of the assets and rights which are necessary for
the conduct of the BRTI Business as currently conducted and presently proposed
to be conducted and the SWLP Acquired Assets constitute all of the assets and
rights (other than the SWLP Excluded Assets) which are necessary for the conduct
of the SWLP Business as currently conducted and presently proposed to be
conducted;
(b) each Seller has good and marketable title to, or a valid leasehold
interest in, all properties and assets used by it, located on its premises,
shown on the Latest Balance Sheet, or acquired by it since the date of the
Latest Balance Sheet, in each case free and clear of all Liens, other than Liens
disclosed on the Latest Balance Sheet (including any notes thereto); and
(c) each Seller's equipment and other tangible assets are in good operating
condition and fit for use in the ordinary course of such Seller's business and
consistent with its past practice.
6.8 ABSENCE OF CERTAIN DEVELOPMENTS. Except as set forth on the attached
Developments Schedule, since June 30, 1996, there has been no adverse change in
the ICMS Acquired Assets, the ICMS Assumed Liabilities, the BRTI Acquired
Assets, the BRTI Assumed Liabilities, the SWLP Acquired Assets, the SWLP Assumed
Liabilities or the financial condition, operating results, assets, customer or
supplier relations, employee relations or business prospects of the ICMS
Business, the BRTI Business or the SWLP Business. Without limiting the
20
<PAGE>
generality of the preceding sentence, except as expressly contemplated by this
Agreement or as set forth on the attached Developments Schedule, since June 30,
1996, each Seller has not:
(a) engaged in any activity which has resulted in the acceleration or delay
of the collection of its accounts or notes receivable or any delay in the
payment in its accounts payable, in each case as compared with its custom and
practice in the conduct of the ICMS Business, the BRTI Business or the SWLP
Business, as applicable, immediately prior to June 30, 1996;
(b) discharged or satisfied any Lien or paid any obligation or liability
which would not constitute an ICMS Assumed Liability, BRTI Assumed Liability or
SWLP Assumed Liability, as applicable, if it were unpaid on the Closing Date,
other than current liabilities paid in the ordinary course of the ICMS Business,
the BRTI Business or the SWLP business, as applicable, and consistent with such
Seller's past practice;
(c) mortgaged or pledged any ICMS Acquired Asset, BRTI Acquired Asset or
SWLP Acquired Asset, as applicable, or subjected any ICMS Acquired Asset, BRTI
Acquired Asset or SWLP Acquired Asset, as applicable, to any Lien;
(d) declared, set aside, or paid any dividend or made any distribution with
respect to its capital stock (whether in cash or in kind) or redeemed,
purchased, or otherwise acquired any of its capital stock;
(e) sold, assigned, conveyed, transferred, canceled or waived any property,
tangible asset, Proprietary Right of such Seller or other intangible asset or
right which, if it were held by such Seller on the Closing Date, would
constitute an ICMS Acquired Asset, BRTI Acquired Asset or SWLP Acquired Asset,
as applicable, other than in the ordinary course of the ICMS Business, the BRTI
Business or the SWLP Business, as applicable, and consistent with such Seller's
past practice;
(f) disclosed any Confidential Information to any Person other than the
Purchaser and the Purchaser's representatives, agents, attorneys, accountants
and present and proposed financing sources;
(g) waived any right other than in the ordinary course of the ICMS Business,
the BRTI Business or the SWLP Business, as applicable, or consistent with such
Seller's past practice;
(h) made commitments for capital expenditures which, in the aggregate, would
exceed $25,000 other than in the ordinary course of the ICMS Business, the BRTI
Business or the SWLP Business, as applicable, and consistent with such Seller's
past practice;
(i) made any loan or advance to, or guarantee for the benefit of, or any
Investment (other than Investments which constitute ICMS Excluded Assets, BRTI
Excluded Assets or SWLP Excluded Assets, as applicable) in, any other Person;
(j) granted any bonus or any increase in wages, salary or other compensation
to any employee (other than any increase in wages or salaries granted in the
ordinary course of the ICMS Business, the BRTI Business or the SWLP Business, as
applicable, and consistent with such Seller's past practice granted to any
employee who is not affiliated with such Seller other than by reason of such
Person's employment by such Seller);
(k) made any charitable contributions;
(l) suffered damages, destruction or casualty losses which, in the
aggregate, exceed $10,000 (whether or not covered by insurance) to any ICMS
Acquired Asset, BRTI Acquired Asset or SWLP Acquired Asset, as applicable, or
any other property or asset which, if it existed and was held by such Seller on
the Closing Date, would constitute an ICMS Acquired Asset, BRTI Acquired Asset
or SWLP Acquired Asset, as applicable;
(m) received any indication from any material supplier of such Seller to the
effect that such supplier will stop, or materially decrease the rate of,
supplying materials, products or ervices to such Seller (or to the Purchaser, if
the
21
<PAGE>
Sale is consummated), or received any indication from any material customer of
such Seller to the effect that such customer will stop, or materially decrease
the rate of, buying materials, products or services from such Seller (or from
the Purchaser, if the Sale is consummated);
(n) entered into any transaction other than in the ordinary course of the
ICMS Business, the BRTI Business or the SWLP Business, as applicable, and
consistent with such Seller's past practice, or entered into any other material
transaction, whether or not in the ordinary course of the ICMS Business, the
BRTI Business or the SWLP Business, as applicable, which may adversely affect
the ICMS Business, the BRTI Business or the SWLP Business, as applicable, the
ICMS Acquired Assets, the BRTI Acquired Assets or the SWLP Acquired Assets, as
applicable, or the ICMS Assumed Liabilities, BRTI Assumed Liabilities or SWLP
Assumed Liabilities, as applicable; or
(o) agreed to do any act described in any of clauses 6.8(a) through (n)
above.
6.9 TAX MATTERS. Except as set forth in the attached Taxes Schedule:
(a) each Seller has filed all Tax returns and other reports which it was
required to file and each such return or other report was correct and complete
in all respects, and such Seller has paid all Taxes due and owing by it (whether
or not shown on any Tax return or other report) and has withheld and paid over
all Taxes which it is obligated to withhold from amounts paid or owing to any
employee, independent contractor, stockholder, creditor or other third party;
(b) no Tax audits are pending or being conducted with respect to any Seller;
(c) there are no Liens on any of the assets of any Seller that arose in
connection with any failure (or alleged failure) to pay any Tax;
(d) no information related to Tax matters has been requested by any Taxing
authority and no Seller has received notice indicating an intent to open an
audit or other review from any Taxing authority;
(e) there are no unresolved disputes or claims concerning any Seller's Tax
liability;
(f) no claim has ever been made by any jurisdiction in which any Seller does
not file Tax returns to the effect that such Seller is or may be subject to any
Tax imposed by that jurisdiction;
(g) a valid election to be an S Corporation (as defined in Section 1361(d)
of the Code and any corresponding provision of state, local or foreign law) has
been in effect with respect to BRTI at all times since April 20, 1990;
(h) a valid election to be an S Corporation (as defined in Section 1361(d)
of the Code and any corresponding provision of state, local or foreign law) has
been in effect with respect to SWLP at all times since July 2, 1996;
(i) no Seller has waived any statute of limitations in respect of Taxes or
agreed to an extension of time with respect to any Tax assessment or deficiency;
and
(j) no Seller is a party to any Tax sharing or allocation agreement, and no
Seller has any liability for the Taxes of any person under Section 1.1502-6 of
the Treasury Regulations (or any similar provision of state, local or foreign
law), as a transferee or successor, by contract, or otherwise.
6.10 CONTRACTS AND COMMITMENTS.
(a) Contracts Schedule. Other than this Agreement or as described on the
attached ICMS Contracts Schedule, on the attached BRTI Contracts Schedule or on
the attached SWLP Contracts Schedule, as applicable, each Seller is not a party
to any written or oral:
22
<PAGE>
(i) pension, profit sharing, stock option, employee stock purchase or other
plan or arrangement providing for deferred or other compensation to employees
or any other employee benefit, welfare or stock plan or arrangement which is
not described on the attached Employee Benefits Schedule, or any contract with
any labor union, or any severance agreement;
(ii) contract for the employment or engagement as an independent contractor
of any Person on a full-time, part-time, consulting or other basis;
(iii) contract pursuant to which such Seller has advanced or loaned funds,
or agreed to advance or loan funds, to any other Person;
(iv) contract or indenture relating to any Indebtedness or the mortgaging,
pledging or otherwise placing a Lien on any of the ICMS Acquired Assets, BRTI
Acquired Assets or SWLP Acquired Assets, as applicable;
(v) contract pursuant to which such Seller is the lessee of, or holds or
operates, any real or personal property owned by any other Person;
(vi) contract pursuant to which such Seller is the lessor of, or permits any
third party to hold or operate, any real or personal property owned by such
Seller or of which such Seller is a lessee;
(vii) assignment, license, indemnification or other contract with respect to
any intangible property (including any Proprietary Right of such Seller) which
is not described on the attached Proprietary Rights Schedule;
(viii) contract or agreement with respect to services rendered or goods sold
or leased to or from others, other than any customer purchase order accepted
in the ordinary course of business and in accordance with such Seller's past
practice which both (1) does not require delivery after the date which is six
months after to Closing Date and (2) does not involve a sale price by more
than $25,000;
(ix) contract prohibiting it from freely engaging in any business anywhere
in the world;
(x) independent sales representative or distributorship agreement with
respect to the ICMS Business, the BRTI Business or the SWLP Business, as
applicable; or
(xi) any other contract which is material to the ICMS Business, the BRTI
Business or the SWLP Business, as applicable, or involves a consideration in
excess of $25,000.
(b) Enforceability. Each item described on the attached ICMS Contracts
Schedule, the attached BRTI Contracts Schedule or the attached SWLP Contracts
Schedule (the "Contracts") is valid, binding and enforceable in accordance with
its terms, except as such enforceability may be limited by (a) applicable
insolvency, bankruptcy, reorganization, moratorium or other similar laws
affecting creditors' rights generally and (b) applicable equitable principles
(whether considered in a proceeding at law or in equity).
(c) Compliance. Each Seller has performed all obligations required to be
performed by it under each Contract to which it is a party, and, to the best of
such Seller's Knowledge, such Seller is not in default under or in breach in any
material respect of (nor is it in receipt of any claim of default or breach
under) any such obligation. No event has occurred which with the passage of
time or the giving of notice (or both) would result in a default, breach or
event of noncompliance in any material respect under any obligation of such
Seller pursuant to any Contract to which it is a party. Such Seller has no
present expectation or intention of not fully performing any obligation of such
Seller pursuant to any Contract to which it is a party, and such Seller has no
Knowledge of any breach or anticipated breach by any other party to any
Contract.
(d) Leases. With respect to each Contract which is a lease of personal
property, each Seller which is a party to such Contract holds a valid and
existing leasehold interest under such lease for the term set forth with respect
to
23
<PAGE>
such lease on the attached ICMS Contracts Schedule, the attached BRTI
Contracts Schedule or the attached SWLP Contracts Schedule, as applicable.
(e) Affiliated Transactions. Except as set forth on the attached Affiliated
Transactions Schedule, no officer, director, stockholder or Affiliate of any
Seller (and no individual related by blood or marriage to any such Person, and
no entity in which any such Person or individual owns any beneficial interest)
is a party to any agreement, contract, commitment or transaction with any Seller
(other than this Agreement) or has any material interest in any material
property used by any Seller.
(f) Copies. The Purchaser's special legal counsel has been supplied with a
true and correct copy of each written Contract, each as currently in effect.
6.11 PROPRIETARY RIGHTS.
(a) Schedule. The attached Proprietary Rights Schedule contains a complete
and accurate list of (a) all patented or registered Proprietary Rights owned by
each Seller or used in connection with the ICMS Business, the BRTI Business or
the SWLP Business, (b) all pending patent applications and applications for
registrations of other Proprietary Rights of each Seller filed by or on behalf
of such Seller, (c) all trade names, corporate names and unregistered trade
names and service marks owned by each Seller or used in connection with the ICMS
Business, the BRTI Business or the SWLP Business and (d) all unregistered
copyrights and computer software which are material to the ICMS Acquired Assets,
the BRTI Acquired Assets, the SWLP Acquired Assets, the ICMS Assumed
Liabilities, the BRTI Assumed Liabilities or the SWLP Assumed Liabilities, or
the financial condition, operating results, assets, customer or supplier
relations, employee relations or business prospects of the ICMS Business, the
BRTI Business or the SWLP Business. The attached Proprietary Rights Schedule
also contains a complete and accurate list of all licenses and other rights
granted by each Seller to any third party, and all licenses and other rights
granted by any third party to each Seller, with respect to any Proprietary
Rights. The Proprietary Rights comprise all intellectual property rights which
are necessary for the operation of the ICMS Business, the BRTI Business and the
SWLP Business.
(b) Ownership; Claims. Except as set forth on the attached Proprietary Rights
Schedule, each Seller owns and possesses all right, title and interest in and to
(or has the right to use pursuant to a valid and enforceable license) all
Proprietary Rights necessary for the operation of such Seller's business as
presently conducted and as presently proposed to be conducted, and such Seller
has taken all necessary actions to maintain and protect the Proprietary Rights
which it owns and uses. To the best of each Seller's Knowledge, the owners of
the Proprietary Rights licensed to such Seller have taken all necessary actions
to maintain and protect the Proprietary Rights which are subject to such
licenses. Except as indicated on the attached Proprietary Rights Schedule:
(i) each Seller owns all right, title, and interest in and to all of the
Proprietary Rights described on such Schedule and each other Proprietary Right
which is material to the conduct of the ICMS Business, the BRTI Business or
the SWLP Business, as applicable (in each case free and clear of all Liens),
(ii) there have been no claims made against any Seller asserting the
invalidity, misuse or unenforceability of any of such Proprietary Rights, and
there are no grounds for any such claim,
(iii) no Seller has received any notice of (nor is it aware of any facts
which indicate a likelihood of) any infringement or misappropriation by, or
conflict with, any Person with respect to the Proprietary Rights (including
any demand or request that such Seller license rights from any Person),
(iv) the conduct of the ICMS Business, the BRTI Business and the SWLP
Business has not infringed or misappropriated, and does not infringe or
misappropriate, any proprietary right of any other Person, nor would the
Purchaser's conduct of the ICMS Business, the BRTI Business or the SWLP
Business as presently conducted infringe or misappropriate any proprietary
right of any other Person,
24
<PAGE>
(v) to the best of the Sellers' Knowledge, the Proprietary Rights used in
connection with the ICMS Business, the BRTI Business and the SWLP Business, as
applicable, have not been infringed or misappropriated by any other Person,
and
(vi) the consummation of the transactions contemplated by this Agreement
will have no adverse effect on any Proprietary Right of any of the Sellers.
6.12 CERTAIN LITIGATION. Except as set forth on the attached Litigation
Schedule, there is no action, suit, proceeding, order, investigation or claim
pending (or, to the best of the Sellers' Knowledge, threatened) against or
affecting any of the Sellers, the ICMS Business, the BRTI Business or the SWLP
Business (or to the best of the Sellers' Knowledge, pending or threatened
against or affecting any officer, director or employee of any of the Sellers
with respect to the ICMS Business, the BRTI Business or the SWLP Business, as
applicable), at law or in equity, or before or by any Government Entity (a) with
respect to the transactions contemplated by the Transaction Documents, or (b)
concerning the design, manufacture, rendering or sale by any of the Sellers of
product or service in the course of the ICMS Business, the BRTI Business or the
SWLP Business or otherwise concerning the conduct of the ICMS Business, the BRTI
Business or the SWLP Business, and, to the best of the Sellers' Knowledge, there
is no basis for any of the foregoing.
6.13 BROKERAGE. Except as set forth on the attached Brokerage Schedule, there
is no claim for brokerage commissions, finders' fees or similar compensation in
connection with the transactions contemplated by the Transaction Documents based
on any arrangement or agreement which may be binding upon any of the Sellers or
to which any of the Sellers or any of the ICMS Acquired Assets, BRTI Acquired
Assets or SWLP Acquired Assets may be subject.
6.14 INSURANCE. The attached Insurance Schedule contains a description of
each insurance policy maintained by each Seller with respect to its properties,
assets or business, and each such policy is in full force and effect. No Seller
is in default on any obligation pursuant to any insurance policy maintained by
it.
6.15 EMPLOYEES.
(a) Continued Employment. To the best of the Sellers' Knowledge, no executive
or key employee of any of the Sellers or any group of employees of any of the
Sellers has any plans to terminate employment with any of the Sellers.
(b) Compliance and Restrictions. Each Seller has complied with all laws
relating to the employment of labor in connection with the ICMS Business, the
BRTI Business or the SWLP Business, as applicable, including provisions of such
laws relating to wages, hours, equal opportunity, collective bargaining and the
payment of social security and other taxes, and such Seller has no material
labor relations problem (including any union organization activities, threatened
or actual strikes or work stoppages or material grievances). Neither such Seller
nor any of its employees is subject to any noncompete, nondisclosure,
confidentiality, employment, consulting or similar agreement relating to,
affecting, or in conflict with, the ICMS Business, the BRTI Business or the SWLP
Business activities.
6.16 ERISA. Except as set forth on the attached Employee Benefits Schedule:
(a) with respect to all current employees (including those on lay-off,
disability or leave of absence), former employees, and retired employees of each
Seller (the "Seller Employees"), such Seller does not maintain or contribute to
any (a) employee welfare benefit plans (as defined in Section 3(1) of ERISA)
("Employee Welfare Plans"), or (b) any plan, policy or arrangement which
provides nonqualified deferred compensation, bonus or retirement benefits,
severance or "change of control" (as set forth in Code Section 280G) benefits,
or life, disability accident, vacation, tuition reimbursement or other material
fringe benefits ("Other Plans");
(b) each of the Sellers does not, and has not during the past six (6) years,
maintained, contributed to, or participated in any defined benefit plan or
defined contribution plan which are employee pension benefit plans (as defined
in Section 3(2) of ERISA) ("Employee Pension Plans");
25
<PAGE>
(c) each of the Sellers does not, and never has, contributed to or
participated in any multiemployer plan (as defined in Section 3(37) of ERISA) (a
"Multiemployer Plan");
(d) each of the Sellers does not maintain or have any obligation to contribute
to or provide any post-retirement health, accident or life insurance benefits to
any Seller Employee, other than limited medical benefits required to be provided
under Code Section 4980B;
(e) all Plans (and all related trusts and insurance contracts) comply in form
and in operation in all respects with the applicable requirements of ERISA and
the Code;
(f) all required reports and descriptions (including all Form 5500 Annual
Reports, Summary Annual Reports and Summary Plan Descriptions) with respect to
all Plans have been properly filed with the appropriate government agency or
distributed to participants, and each Seller has complied with the requirements
of Code Section 4980B;
(g) with respect to each Plan, all contributions, premiums or payments which
are due on or before the Closing Date have been paid to such Plan; and
(h) each of the Sellers has not incurred, and has no reason to believe that it
will incur, any liability to the Pension Benefit Guaranty Corporation (the
"PBGC"), the United States Internal Revenue Service, any multiemployer plan or
otherwise with respect to any employee pension benefit plan or with respect to
any employee pension benefit plan currently or previously maintained by members
of the controlled group of companies (as defined in Sections 414(b) and (c) of
the Code) that includes such Seller (the "Controlled Group") that has not been
satisfied in full, and no condition exists that presents a material risk to such
Seller or any member of the Controlled Group of incurring such a liability
(other than liability for premiums due the PBGC) which could reasonably be
expected to have any adverse effect on the Purchaser or any of the ICMS Acquired
Assets, BRTI Acquired Assets or SWLP Acquired Assets after the Closing.
The "Plans" means all Employee Pension Plans, Employee Welfare Plans, Other
Plans and Multiemployer Plans to which any of the Sellers contributes or is a
party.
6.17 REAL ESTATE.
(a) Owned Properties. Except as set forth on the attached Real Estate
Schedule, each Seller does not own, and has not owned in the past, any real
property.
(b) Leased Property. The attached Real Estate Schedule lists and describes
briefly all real property leased or subleased to each Seller and all other real
property which is used in the ICMS Business, the BRTI Business or the SWLP
Business (the "Leased Real Property"). Each Seller has delivered to the
Purchaser's special legal counsel correct and complete copies of the leases and
subleases listed on the Real Estate Schedule (collectively, the "Leases"). With
respect to the Leased Real Property and each of the Leases:
(i) such Lease is legal, valid, binding, enforceable, and in full force and
effect;
(ii) such Lease is fully assignable to the Purchaser and will continue to
be legal, valid, binding, enforceable, and in full force and effect on
identical terms following the consummation of the Sale and the Assumption and
the commencement of the operation of the ICMS Business, the BRTI Business and
the SWLP Business by the Purchaser;
(iii) no party to such Lease is in breach or default, and no event has
occurred which, with notice or lapse of time, would constitute a breach or
default or permit termination, modification, or acceleration of such lease or
sublease;
(iv) no party to such Lease has repudiated any provision thereof;
26
<PAGE>
(v) there are no disputes, oral agreements, or forbearance programs in
effect as to such Lease;
(vi) in the case of each Lease which is a sublease, the representations and
warranties set forth in clauses 6.17(b)(i) through (v) are true and correct
with respect to the underlying lease;
(vii) no Seller has assigned, transferred, conveyed, mortgaged, deeded in
trust, or encumbered any interest in the leasehold or subleasehold created
pursuant to such Lease;
(viii) none of the Leases has been modified in any respect, except to the
extent that such modifications are in writing and have been delivered or made
available to the Purchaser;
(ix) all buildings, improvements and other structures located upon the
Leased Real Property have received all approvals or governmental authorities,
including licenses and permits, required in connection with the operation of
the ICMS Business, the BRTI Business or the SWLP Business, as applicable,
thereon and have been operated and maintained in accordance with all
applicable Legal Requirements and the terms and conditions of the Leases; and
(x) all buildings, structures and other improvements located upon the
Leased Real Property, including, without limitation, all components thereof,
are in good operating condition subject to the provision of usual and
customary maintenance in the ordinary course of business with respect to
buildings, structures and improvements of like age and construction and all
water, gas, electrical, steam, compressed air, telecommunication, sanitary and
storm sewage and other utility lines and systems serving the Leased Real
Property are sufficient to enable the continued operation of the Leased Real
Property in the manner currently being used in connection with the operation
of the ICMS Business, the BRTI Business or the SWLP Business, as applicable.
6.18 COMPLIANCE WITH LAWS.
(a) Generally. Except as set forth on the attached Compliance Schedule, no
Seller has violated any Legal Requirement the violation of which could have an
adverse effect on the ICMS Acquired Assets, the BRTI Acquired Assets, the SWLP
Acquired Assets, the ICMS Assumed Liabilities, the BRTI Assumed Liabilities, the
SWLP Assumed Liabilities or the financial condition, operating results, assets,
customer or supplier relations, employee relations or business prospects of the
ICMS Business, the BRTI Business or the SWLP Business, and no Seller has
received notice alleging any such violation.
(b) Required Permits. Each Seller has complied with (and is in compliance
with) all permits, licenses and other authorizations required for the occupation
of such Seller's facilities and the operation of the ICMS Business, the BRTI
Business or the SWLP Business, as applicable. The items described on the
attached Permits Schedule constitute all of the permits, filings, notices,
licenses, consents, authorizations, accreditation, waivers, approvals and the
like of, to or with any Government Entity which are required for the
consummation of the Sale, the Assumption or any other transaction contemplated
by the Transaction Documents or the ownership of the ICMS Acquired Assets, the
BRTI Acquired Assets or the SWLP Acquired Assets or the Purchaser's conduct of
the ICMS Business, the BRTI Business or the SWLP Business (as such is presently
conducted by the Sellers) thereafter.
(c) Environmental and Safety Matters. Without limiting the generality of
Section 6.18(a) and (b) above, except as set forth on the attached Environmental
Matters Schedule, each Seller and all of such Seller's Environmental Affiliates
have complied (and are in compliance, in all respects) with all applicable
Environmental and Safety Requirements, and neither such Seller nor any of such
Seller's Environmental Affiliates has received any notice, report or information
regarding any liabilities (whether accrued, absolute, contingent, unliquidated
or otherwise), or any corrective, investigatory or remedial obligations, arising
under any Environmental and Safety Requirement. Without limiting the generality
of the preceding sentence, except as set forth on the attached Environmental
Matters Schedule:
27
<PAGE>
(i) no underground storage tank, asbestos-containing material in any
form or condition, or PCB-containing materials or equipment, exists at any
property owned or occupied by any of the Sellers or any of their
Environmental Affiliates;
(ii) the transactions contemplated to be consummated pursuant to the
Transaction Documents will not result in the imposition of any obligations
under Environmental and Safety Requirements for site investigation, cleanup
or notification to or consent of any government agency or third party;
(iii) no equipment, facts, events, conditions, conduct or methods
relating to the past or present facilities, properties or operations of any
of the Sellers or any of their Environmental Affiliates will prevent,
hinder or limit continued compliance with any Environmental and Safety
Requirement, give rise to or result in any corrective, investigatory or
remedial obligation pursuant to Environmental and Safety Requirements, or
give rise to or result in any other liability (including any liability
relating to onsite or offsite hazardous or non-hazardous substance
releases, personal injury, cleanup, remediation, property damage or natural
resources damage) pursuant to any Environmental and Safety Requirement; and
(iv) no Environmental Lien has attached to any property of any of the
Sellers or any of their Environmental Affiliates.
6.19 PRODUCT WARRANTY. Except as set forth on the attached Warranties
Schedule, all products leased, manufactured, serviced, distributed, sold or
delivered by each Seller in connection with the ICMS Business, the BRTI Business
or the SWLP Business, as applicable, have been manufactured, serviced,
distributed, sold and/or delivered in conformity with all applicable contractual
commitments and all express and implied warranties. No material liability of any
of the Sellers exists for replacement or other damages in connection with any
such product.
6.20 DISCLOSURE. Neither this Article 6 nor any schedule, attachment,
written statement, document, certificate or other item supplied to the Purchaser
by or on behalf of the Sellers with respect to the transactions contemplated by
the Transaction Documents contains any untrue statement of a material fact or
omits a material fact necessary to make each statement contained herein or
therein not misleading. There is no fact which the Sellers have not disclosed to
the Purchaser in writing and of which any officer, director or executive
employee of any of the Sellers is aware (other than matters of a general
economic nature) and which has had or could reasonably be expected to have a
material adverse effect upon the ICMS Acquired Assets, the BRTI Acquired Assets,
the SWLP Acquired Assets, the ICMS Assumed Liabilities, the BRTI Assumed
Liabilities, the SWLP Assumed Liabilities or the financial condition, operating
results, assets, customer or supplier relations, employee relations or business
prospects of the ICMS Business, the BRTI Business or the SWLP Business.
ARTICLE 7
ACCESS TO RECORDS
7.1 ACCESS TO RECORDS. To the extent reasonably required for any bona fide
business purpose, each Party will allow, and will use its best efforts to cause
its Affiliates to allow, the other Parties (and the other Parties' agents,
representatives and Affiliates) access to all business records and files
concerning the ICMS Business, the BRTI Business, the SWLP Business, the ICMS
Acquired Assets, the BRTI Acquired Assets, the SWLP Acquired Assets, the ICMS
Assumed Liabilities, the BRTI Assumed Liabilities or the SWLP Assumed
Liabilities which relate to the period prior to the Closing Date and will permit
such Persons to make copies of the same. Such access will be granted upon
reasonable advance notice, during normal business hours, and in such a manner so
as not to interfere unreasonably with the operations of the Person affording
such access. Without limiting the generality of the foregoing, if any Party or
any of its Affiliates actively is contesting or defending against any charge,
complaint, action, suit, proceeding, hearing, investigation, claim, or demand in
connection with (a) any transaction contemplated by the Transaction Documents,
or (b) any fact, situation, circumstance, status, condition, activity, practice,
plan, occurrence, event, incident, action, failure to act, or transaction on or
prior to the Closing relating to the ICMS Business, the BRTI Business or the
SWLP Business, then the other Parties will cooperate, and use their best efforts
to cause their Affiliates to cooperate, with the contesting or defending Person
and its counsel in such
28
<PAGE>
contest or defense, make available such other Parties' and their Affiliates'
personnel and provide such testimony and access to books and records as are
reasonably requested in connection with such contest or defense, all at the
contesting or defending Person's expense (unless the contesting or defending
Person is entitled to indemnification therefor pursuant to Section 8.2 or 8.3).
No provision of this Article 7 will be construed so as to limit the Sellers'
obligation to transfer to the Purchaser all Books and Records which are part of
the ICMS Acquired Assets, the BRTI Acquired Assets or the SWLP Acquired Assets.
ARTICLE 8
SURVIVAL AND INDEMNIFICATION
8.1 SURVIVAL. All representations, warranties, covenants and agreements of
the Parties contained herein or made in writing by any Party in connection
herewith shall survive the execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby as follows (regardless of
any investigation made by any Party or on its behalf):
(a) the representations and warranties contained in Section 6.4 through 6.6,
6.8, 6.10 through 6.17 and 6.19 through 6.20 of this Agreement shall terminate
on the second anniversary of the Closing Date;
(b) the representations and warranties contained in Sections 6.9 and 6.18 of
this Agreement shall terminate when the applicable statutes of limitations with
respect to the liabilities in question expire (giving effect to any extensions
or waivers thereof), plus 60 days; and
(c) the representations and warranties contained in Sections 6.1 through 6.3
and 6.7 of this Agreement, the covenants and agreements contained in this
Agreement, and all other representations, warranties, covenants and agreements
contained herein or made in writing by any Party in connection herewith and not
specifically mentioned in clauses (a) or (b) above shall survive indefinitely,
unless earlier terminated by their terms; provided that, in each case, any
representation or warranty in respect of which indemnification may be sought
under Section 8.2 or 8.3, and the indemnity with respect thereto, shall survive
the time at which it would otherwise terminate pursuant to this Section 8.1 if
notice of the inaccuracy or breach thereof giving rise to such right of
indemnity shall have been given to the party against whom such indemnity may be
sought prior to such time; provided further that neither a Party's participation
in the consummation of any transaction pursuant to any Transaction Document nor
any waiver of any condition to such participation will constitute a waiver by
such participating Party of any representation, warranty, covenant or agreement
of any Party or otherwise affect the survival of any such representation,
warranty, covenant or agreement.
8.2 INDEMNIFICATION OBLIGATIONS OF THE SELLERS AND THE STOCKHOLDERS. In
addition to any other right or remedy available to the Purchaser at law or in
equity, the Sellers and the Stockholders will jointly and severally indemnify
the Purchaser and its Affiliates, stockholders, officers, directors, employees,
agents, representatives and permitted successors and assigns (collectively, the
"Purchaser Indemnitees") in respect of, and save and hold each Purchaser
Indemnitee harmless against and pay on behalf of or reimburse each Purchaser
Indemnitee as and when incurred, any Loss which any Purchaser Indemnitee
suffers, sustains or becomes subject to as a result of, in connection with,
relating or incidental to or by virtue of, without duplication:
(a) any misrepresentation or breach of any representation or warranty by any
of the Sellers or the Stockholders set forth in this Agreement or any Schedule,
Exhibit, certificate or other instrument or document furnished to the Purchaser
by any of the Sellers or the Stockholders pursuant to any Transaction Document;
(b) any nonfulfillment or breach of any covenant or agreement of any of the
Sellers or the Stockholders set forth in any Transaction Document; or
29
<PAGE>
(c) any ICMS Excluded Liability, BRTI Excluded Liability or SWLP Excluded
Liability.
The Purchaser Indemnitees may proceed against any or all of the Sellers and/or
any or all of the Stockholders, at the Purchaser Indemnitees' option.
8.3 INDEMNIFICATION OBLIGATIONS OF THE PURCHASER. The Purchaser will
indemnify the Sellers and their Affiliates, stockholders, officers, directors,
employees, agents, representatives and permitted successors and assigns
(collectively, the "Seller Indemnitees") and hold each of them harmless against
any Loss which such Seller Indemnitee suffers, sustains or becomes subject to as
a result of, in connection with, relating to or by virtue of, without
duplication:
(a) any misrepresentation or breach of any representation or warranty by the
Purchaser set forth in this Agreement or any certificate delivered by the
Purchaser to the Sellers pursuant to any Transaction Document;
(b) any nonfulfillment or breach of any covenant or agreement of the Purchaser
set forth in any Transaction Document; or
(c) any ICMS Assumed Liability, BRTI Assumed Liability or SWLP Assumed
Liability.
8.4 INDEMNIFICATION PROCEDURES.
(a) Notice of Claim. Any Person making a claim for indemnification pursuant
to Section 8.2 or 8.3 above (an "Indemnified Party") must give the Party from
whom indemnification is sought (an "Indemnifying Party") written notice of such
claim (an "Indemnification Claim Notice") promptly after the Indemnified Party
receives any written notice of any action, lawsuit, proceeding, investigation or
other claim (a "Proceeding") against or involving the Indemnified Party by a
Government Entity or other third party or otherwise discovers the liability,
obligation or facts giving rise to such claim for indemnification; provided that
the failure to notify or delay in notifying an Indemnifying Party will not
relieve the Indemnifying Party of its obligations pursuant to Section 8.2 or
8.3, as applicable, except to the extent that such failure actually harms the
Indemnifying Party. Such notice must contain a description of the claim and the
nature and amount of such Loss (to the extent that the nature and amount of such
Loss is known at such time).
(b) Control of Defense: Conditions. With respect to the defense of any
Proceeding against or involving an Indemnified Party in which the Government
Entity or other third party in question seeks only the recovery of a sum of
money for which indemnification is provided in Section 8.2 or 8.3, at its option
an Indemnifying Party may appoint as lead counsel of such defense any legal
counsel selected by the Indemnified Party; provided that before the Indemnifying
Party assumes control of such defense it must first
(i) enter into an agreement with the Indemnified Party (in form and
substance satisfactory to the Indemnified Party) pursuant to which the
Indemnifying Party agrees to be fully responsible (with no reservation of any
rights other than the right to be subrogated to the rights of the Indemnified
Party) for all Losses relating to such Proceeding and unconditionally
guarantees the payment and performance of any liability or obligation which
may arise with respect to such Proceeding or the facts giving rise to such
claim for indemnification, and
(ii) furnish the Indemnified Party with evidence that the Indemnifying
Party, in the Indemnified Party's sole judgment, is and will be able to
satisfy any such liability.
(c) Control of Defense: Exceptions, etc. Notwithstanding Section 8.4(b), the
Indemnified Party will be entitled to participate in the defense of such claim
and to employ counsel of its choice for such purpose at its own expense;
provided that the Indemnifying Party will bear the reasonable fees and expenses
of such separate counsel incurred prior to the date upon which the Indemnifying
Party effectively assumes control of such defense. The Indemnifying Party will
not be entitled to assume control of the defense of such claim, and will pay the
reasonable fees and expenses of legal counsel retained by the Indemnified Party,
if
30
<PAGE>
(i) the Indemnified Party reasonably believes that an adverse
determination of such Proceeding could be detrimental to or injure the
Indemnified Party's reputation or future business prospects,
(ii) the Indemnified Party reasonably believes that there exists or could
arise a conflict of interest which, under applicable principles of legal
ethics, could prohibit a single legal counsel from representing both the
Indemnified Party and the Indemnifying Party in such Proceeding, or
(iii) a court of competent jurisdiction rules that the Indemnifying Party
has failed or is failing to prosecute or defend vigorously such claim; and
The Indemnifying Party must obtain the prior written consent of the Indemnified
Party (which the Indemnified Party will not unreasonably withhold) prior to
entering into any settlement of such claim or Proceeding or ceasing to defend
such claim or Proceeding.
8.5 LIMITATION. Notwithstanding anything to the contrary contained in this
Agreement, the aggregate amount of all payments made by the Sellers and the
Stockholders in satisfaction of claims for indemnification pursuant to Section
8.2(a) shall in no event exceed $2,600,000.
8.6 TREATMENT OF INDEMNIFICATION PAYMENTS. Amounts paid to or on behalf of
the Purchaser or any of the Sellers as indemnification hereunder shall be
treated as adjustments to the Purchase Price. If any Tax authority asserts that
an indemnification payment is not an adjustment to the Purchase Price, the
Indemnifying Party will indemnify the Indemnified Party against any Tax imposed
on the receipt of such indemnification payment pursuant to Section 8.2 or 8.3,
including any Tax imposed on any payment pursuant to this Section 8.6.
8.7 PAYMENT. Subject to Sections 2.6, the Indemnifying Party shall pay the
Indemnified Party to the extent the Indemnified Party is entitled to payment
hereunder in immediately available funds promptly after the Indemnified Party
provides the Indemnifying Party with notice of a claim hereunder and the parties
reasonably agree that there is a reasonable basis for such claim, or a final
result, determination, finding, judgment and/or award is made with respect to
such claim by any court of competent jurisdiction.
ARTICLE 9
OTHER COVENANTS
9.1 TRANSACTION EXPENSES. The Purchaser will bear its own costs and expenses
(including, without limitation, all Taxes and all legal, accounting, consulting
and other fees and expenses) incurred in connection with this Agreement and the
transactions contemplated hereby. Each Seller agrees that, except as set forth
on the attached Transaction Expenses Schedule, it has not paid any amount to any
third party, and will not pay any amount to any third party until after the
Closing, with respect to any of the costs and expenses of such Seller or any
Stockholder (including, without limitation, all Taxes and all legal, accounting,
brokerage, advisory, consulting and other fees and expenses) in connection with
this Agreement or any of the transactions contemplated hereby. In addition,
the Stockholders will pay (i) all transfer, sales, use and similar Taxes imposed
by reason of the transactions contemplated by this Agreement, (ii) all stamp and
recording taxes, fees and expenses, settlement fees, escrow fees and other
miscellaneous closing fees or costs associated therewith, and (iii) all costs
and expenses incurred by the Sellers or the Stockholders in connection with the
negotiation, preparation and entry into the Transaction Documents and the
consummation of the transactions to be consummated pursuant to the Transaction
Documents.
9.2 SPECIAL LEASING ARRANGEMENT. At the Closing, the Stockholders and the
Purchaser shall enter into a real estate lease substantially in the form of
Exhibit B attached hereto.
9.3 EMPLOYMENT AGREEMENT. At the Closing, the Purchaser and James G. Kowalik
shall enter into an employment agreement substantially in the form of Exhibit C
attached hereto.
31
<PAGE>
9.4 PREPAYMENT OF CERTAIN INDEBTEDNESS. At the Closing, the Stockholders will
prepay all third party indebtedness for borrowed money secured by any of the
ICMS Acquired Assets, BRTI Acquired Assets or SWLP Acquired Assets, and shall
secure complete releases of any security interest such third parties may have in
any of such ICMS Acquired Assets, BRTI Acquired Assets or SWLP Acquired Assets.
9.5 NONCOMPETITION AND NONSOLICITATION.
(a) Noncompetition. Each Stockholder acknowledges that in the course of his
affiliation with ICMS, BRTI and SWLP he has become familiar with ICMS's, BRTI's
and SWLP's trade secrets and with other Confidential Information. Therefore,
each Stockholder agrees that for the period commencing on the Closing Date and
ending on the third anniversary of the Closing Date (the "Noncompetition
Period"), such Stockholder shall not directly or indirectly own, manage,
control, participate in, consult with, render services for, or in any manner
engage in any business competing with the businesses of the Purchaser or its
Affiliates as such businesses exist or are in process or are contemplated on the
Closing Date, within the geographical area in which the Purchaser or any of its
Affiliates engages or plans to engage in such businesses. The Stockholders
agree that the provisions of this Section 9.5(a) are reasonable with respect to
their duration, geographical area and scope. As further consideration for the
obligations of the Stockholders pursuant to this Section 9.5, the Purchaser
shall pay to the Stockholders $250,000 on the Closing Date, allocated among the
Stockholders in accordance with Noncompete Allocation Schedule attached hereto.
(b) Nonsolicitation. During the Noncompetition Period, each Stockholder shall
not directly or indirectly through another entity (i) induce or attempt to
induce any employee of ICMS, BRTI, SWLP, the Purchaser or any of their
respective Affiliates to leave the employ of ICMS, BRTI, SWLP, the Purchaser or
such Affiliate, or in any way interfere with the relationship between ICMS,
BRTI, SWLP, the Purchaser or any such Affiliate and any employee thereof, (ii)
hire any person who was an employee of ICMS, BRTI, SWLP, the Purchaser or any of
their respective Affiliates at any time after the date which is one year prior
to the Closing Date, or (iii) induce or attempt to induce any customer,
supplier, licensee or other business relation of ICMS, BRTI, SWLP, the Purchaser
or any of their respective Affiliates to cease doing business with ICMS, BRTI,
SWLP, the Purchaser or such Affiliate, or in any way interfere with the
relationship between any such customer, supplier, licensee or business relation
and ICMS, BRTI, SWLP, the Purchaser or any of their respective Affiliates.
(c) Enforcement. If, at the time of enforcement of Section 9.5, a court holds
that the restrictions stated herein are unreasonable under circumstances then
existing, the Parties agree that the maximum duration, scope or geographical
area reasonable under such circumstances shall be substituted for the stated
period, scope or area and that the court shall be allowed to revise the
restrictions contained herein to cover the maximum duration, scope and area
permitted by law. Because the Stockholders have had access to Confidential
Information, the Parties agree that money damages would be an inadequate remedy
for any breach of this Section 9.5. Therefore, in the event of a breach or
threatened breach of this Section 9.5, the Purchaser or its respective
successors or assigns may, in addition to other rights and remedies existing in
their favor, apply to any court of competent jurisdiction for specific
performance and/or injunctive or other relief in order to enforce, or prevent
any violations of, the provisions of this Section 9.5 (without posting a bond or
other security).
9.6 FURTHER ASSURANCES. From and after the Closing, the Sellers will execute
all documents and take any other action which they are reasonably requested to
execute or take to further effectuate the transactions contemplated by the
Transaction Documents.
9.7 ANNOUNCEMENTS. Neither the Sellers nor the Stockholders will make any
public announcement of or regarding the transactions contemplated by this
Agreement without the prior approval of the Purchaser as to the timing and
content of such announcement (which approval the Purchaser may not unreasonably
withhold or delay).
9.8 EMPLOYEES.
(a) Each Seller has provided the Purchaser with a true, correct and complete
list of all of such Seller's employees indicating the rate of pay of each such
employee during the twelve months preceding the date hereof and the
32
<PAGE>
location of such employee. Each Seller shall pay all amounts of wages, bonuses
and other remuneration (including, without limitation, discretionary benefits
and bonuses) payable to such employees with respect to the period ending on the
day prior to the Closing Date, together with any worker's compensation claims or
amounts payable on an ongoing basis to such employees in connection with events
occurring prior to the Closing Date.
(b) The Purchaser will offer employment to all Persons employed as of the
Closing Date (the "Continuing Employees") on terms and conditions which are in
the aggregate substantially equivalent to those applicable to such Persons'
employment with the Sellers as of the Closing Date. Nothing in this Section 9.8
shall obligate the Purchaser to continue to employ any Continuing Employee for
any period of time.
(c) The Sellers will be responsible for and shall pay (i) to the Purchaser at
Closing an amount equal to all vacation pay, sick leave pay and floating holiday
pay earned or accrued by the Continuing Employees as of the close of business on
the Closing Date, including any related payroll burden (FICA and other
employment taxes) with respect thereto, whether or not such pay is vested or has
been accrued on the books of the Sellers at such close of business, based upon
the remuneration of such Continuing Employees, normally used in computing such
vacation pay, sick leave pay and floating holiday pay and (ii) to the
appropriate Continuing Employee, all severance payments (if any) due to
Continuing Employees as a result of the termination of their employment with the
Seller.
(d) Each Seller has provided the Purchaser with a true, correct and complete
list of all Continuing Employees employed by such Seller indicating the amount
of each such Continuing Employee's severance payments (if any) and earned or
accrued vacation pay, sick leave pay and floating holiday pay.
9.9 EMPLOYEE BENEFIT PLANS. The Sellers shall be responsible for and shall
pay, all obligations to employees as they come due under any and all Plans or
any fringe benefit arrangements at any time maintained by the Sellers.
9.10 NECESSARY THIRD PARTY CONSENTS. Anything contained in this Agreement to
the contrary notwithstanding, this Agreement shall not constitute an agreement
to transfer or assign any right, title or interest in, to or under any contract,
license, lease, commitment, sales order, purchase order or other agreement, nor
any claim or right or any benefit arising thereunder or resulting therefrom, if
(i) an attempted transfer or assignment thereof, without the consent of a third
party thereto, would constitute a breach thereof or in any way adversely affect
the rights of the Purchaser or the Sellers or any of their respective Affiliates
thereunder and (ii) such consent is not obtained (the "Unassignable Contracts").
Each of the Sellers shall use all reasonable efforts to obtain the consent of
all necessary third parties to the transfer or assignment to the Purchaser
pursuant to this Agreement of all Unassignable Contracts. With respect to each
Unassignable Contract, until consent to assign such contract is obtained, or in
the event such consent is never obtained, each of the Sellers and the Purchaser
shall cooperate in any reasonable arrangements designed to provide for the
Purchaser, to the maximum extent possible, the benefits thereunder, including,
without limitation, enforcement for the benefit of the Purchaser of any and all
rights of any of the Sellers against such third party arising out of
cancellation by such third party or otherwise.
ARTICLE 10
OTHER AGREEMENTS
10.1 REMEDIES. No failure to exercise, and no delay in exercising, any right,
remedy, power or privilege under this Agreement by any Party will operate as a
waiver of such right, remedy, power or privilege, nor will any single or partial
exercise of any right, remedy, power or privilege under this Agreement preclude
any other or further exercise of such right, remedy, power or privilege or the
exercise of any other right, remedy, power or privilege. The rights, remedies,
powers and privileges provided pursuant to this Agreement are cumulative and not
exhaustive of any other rights, remedies, powers and privileges which may be
provided by law.
10.2 CONSENT TO AMENDMENTS. No waiver, amendment, modification or supplement
of this Agreement will be binding upon any Party unless such waiver, amendment,
modification or supplement is set forth in writing
33
<PAGE>
and is executed by such Party. No other course of dealing between or among any
of the Parties or any delay in exercising any rights pursuant to this Agreement
will operate as a waiver of any rights of any Party.
10.3 SUCCESSORS AND ASSIGNS. Except as otherwise expressly provided in this
Agreement, all covenants and agreements set forth in this Agreement by or on
behalf of the Parties will bind and inure to the benefit of the respective
successors and assigns of the Parties, whether so expressed or not, except that
neither this Agreement nor any of the rights, interests or obligations hereunder
may be assigned by the Sellers without the Purchaser's prior written consent.
The Purchaser may (at any time prior to the Closing) at its sole discretion, in
whole or in part assign its rights and delegate its obligations pursuant to this
Agreement, including the right to purchase the ICMS Acquired Assets, the BRTI
Acquired Assets and the SWLP Acquired Assets and the obligation to assume the
ICMS Assumed Liabilities, the BRTI Assumed Liabilities and the SWLP Assumed
Liabilities to one or more of its Affiliates, and the Purchaser may, at its sole
discretion, direct the Sellers to convey the ICMS Acquired Assets, the BRTI
Acquired Assets or the SWLP Acquired Assets, in whole or in part, to one or more
of the Purchaser's Affiliates. Furthermore, the Purchaser may assign its rights
under this Agreement for collateral security purposes to any lenders providing
financing to the Purchaser or any of its Affiliates.
10.4 GOVERNING LAW. This Agreement will be governed by and construed in
accordance with the domestic laws of the State of Illinois, without giving
effect to any choice of law or conflict provision or rule (whether of the State
of Illinois or any other jurisdiction) that would cause the laws of any
jurisdiction other than the State of Illinois to be applied. In furtherance of
the foregoing, the internal law of the State of Illinois will control the
interpretation and construction of this Agreement, even if under such
jurisdiction's choice of law or conflict of law analysis, the substantive law of
some other jurisdiction would ordinarily apply.
10.5 NOTICES. All demands, notices, communications and reports provided for
in this Agreement will be in writing and will be either personally delivered,
mailed by first class mail (postage prepaid) or sent by reputable overnight
courier service (delivery charges prepaid) to any Party at the address specified
below, or at such address, to the attention of such other Person, and with such
other copy, as the recipient party has specified by prior written notice to the
sending Party pursuant to the provisions of this Section 10.5:
If to the Sellers or the Stockholders:
c/o James G. Kowalik
12 Circle Way
Lake Jackson, TX 77566
with a copy, which will not constitute notice to the Sellers or
the Stockholders, to:
Donisi & Lang
24 Greenway Plaza, Suite 1509
Houston, TX 77046
Attn: Philip A. Donisi
If to the Purchaser:
NES Acquisition Corp.
c/o National Equipment Services, Inc.
6100 Sears Tower
Chicago, IL 60606
Attn: Kevin P. Rodgers
34
<PAGE>
with a copy, which will not constitute notice to the Purchaser, to:
Kirkland & Ellis
200 East Randolph Drive
Chicago, Illinois 60601
Attn: Sanford E. Perl
Any such demand, notice, communication or report will be deemed to have been
given pursuant to this Agreement when delivered personally, on the third
business day after deposit in the U.S. mail or on the business day after deposit
with a reputable overnight courier service, as the case may be.
10.6 SEVERABILITY OF PROVISIONS. If any covenant, agreement, provision or
term of this Agreement is held to be invalid for any reason whatsoever, then
such covenant, agreement, provision or term will be deemed severable from the
remaining covenants, agreements, provisions and terms of this Agreement and will
in no way affect the validity or enforceability of any other provision of this
Agreement.
10.7 SCHEDULES AND EXHIBITS. The Schedules and Exhibits constitute a part of
this Agreement and are incorporated into this Agreement for all purposes.
10.8 COUNTERPARTS. The Parties may execute this Agreement in two or more
counterparts (no one of which need contain the signatures of all Parties), each
of which will be an original and all of which together will constitute one and
the same instrument.
10.9 NO THIRD-PARTY BENEFICIARIES. Except as otherwise expressly provided in
this Agreement, no Person which is not a Party will have any right or obligation
pursuant to this Agreement.
10.10 HEADINGS. The headings used in this Agreement are for the purpose of
reference only and will not affect the meaning or interpretation of any
provision of this Agreement.
10.11 MERGER AND INTEGRATION. Except as otherwise provided in this Agreement,
this Agreement sets forth the entire understanding of the Parties relating to
the subject matter hereof, and all prior understandings, whether written or oral
are superseded by this Agreement.
10.12 ALLOCATION OF PURCHASE PRICE. The allocation of the Purchase Price
among the acquired assets shall be made in accordance with Section 1060 of the
Code and applicable Treasury Regulations thereunder. The fair market value of
the acquired assets shall be determined jointly by the Purchaser and the Seller
reasonably and in good faith, and such determination shall be used by the
parties in allocating the Purchase Price and in preparing (a) Form 8594, Asset
Acquisition Statement, for each of the Purchaser and the Sellers, and (b) all
Tax Returns. Each of the Purchaser and the Sellers shall file Form 8594,
prepared in accordance with this Section, with its federal income Tax Return for
its Tax period including the Closing Date.
10.13 BULK SALES LAW. The Sellers will bear any loss, liability, obligation
or cost suffered by any of the Sellers or the Purchaser as a result of the
Sellers' noncompliance with any provision of any bulk sales law which is
applicable to the transfer of the ICMS Acquired Assets, the BRTI Acquired Assets
or the SWLP Acquired Assets pursuant to this Agreement.
35
<PAGE>
IN WITNESS WHEREOF, the Parties have executed this Asset Purchase Agreement as
of the date first written above.
PURCHASER:
NES ACQUISITION CORP.
By: /s/ Kevin Rodgers
-------------------------
Its: President
------------------------
SELLERS:
INDUSTRIAL CRANE MAINTENANCE SYSTEMS, INC.
By: /s/ Jerry M. Wolverton
-------------------------
Its: President
------------------------
BRAZOS RENTAL & TOOL, INC.
By: /s/ Jerry M. Wolverton
-------------------------
Its: President
------------------------
SAFE WORK LOAD PRODUCTS, INC.
By: /s/ Jerry M. Wolverton
--------------------------
Its: President
------------------------
STOCKHOLDERS:
/s/ James G. Kowalik
-----------------------------
JAMES G. KOWALIK
/s/ Jerry M. Wolverton
-----------------------------
JERRY M. WOLVERTON
36
<PAGE>
Exhibit 10.16
================================================================================
STOCK PURCHASE AGREEMENT
BY AND AMONG
AERIAL PLATFORMS, INC.,
CARTER B. WILSON,
AND
NATIONAL EQUIPMENT SERVICES, INC.
DATED AS OF FEBRUARY 18, 1997
================================================================================
1
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
ARTICLE I--DEFINITIONS
1.1 Definitions............................................................................................ 1
1.2 Other Definitional Provisions.......................................................................... 4
1.3 Cross Reference of Other Definitions................................................................... 5
ARTICLE II--PURCHASE AND SALE OF STOCK................................................................................ 6
2.1 Stock Purchase......................................................................................... 6
2.2 Purchase Price for Company Stock....................................................................... 6
2.3 Purchase Price Adjustments............................................................................. 6
2.4 Distribution of Holdback............................................................................... 8
2.5 Closing Transactions................................................................................... 8
ARTICLE III--CONDITIONS TO CLOSING.................................................................................... 9
3.1 Conditions to the Purchaser's Obligations.............................................................. 9
3.2 Conditions to the Sellers' Obligations................................................................. 11
ARTICLE IV--COVENANTS PRIOR TO CLOSING................................................................................ 12
4.1 Affirmative Covenants of the Company and the Seller.................................................... 13
4.2 Negative Covenants of the Company and the Seller...................................................... 14
4.3 Covenants of Purchaser................................................................................. 14
ARTICLE V--REPRESENTATIONS AND WARRANTIES CONCERNING THE COMPANY...................................................... 15
5.1 Organization and Corporate Power....................................................................... 15
5.2 Authorization of Transactions.......................................................................... 15
5.3 Capitalization......................................................................................... 15
5.4 Subsidiaries; Investments.............................................................................. 16
5.5 Absence of Conflicts................................................................................... 16
5.6 Financial Statements and Related Matters............................................................... 16
5.7 Absence of Undisclosed Liabilities..................................................................... 16
5.8 Absence of Certain Developments........................................................................ 17
5.9 Title to Properties.................................................................................... 18
5.10 Taxes.................................................................................................. 19
5.11 Contracts and Commitments.............................................................................. 20
5.12 Proprietary Rights..................................................................................... 21
5.13 Litigation; Proceedings................................................................................ 21
5.14 Brokerage.............................................................................................. 22
5.15 Governmental Licenses and Permits...................................................................... 22
5.16 Employees.............................................................................................. 22
5.17 Employee Benefit Plans................................................................................. 22
5.18 Insurance.............................................................................................. 23
5.19 Officers and Directors; Bank Accounts.................................................................. 23
5.20 Affiliate Transactions................................................................................. 23
5.21 Compliance with Laws................................................................................... 24
5.22 Environmental Matters.................................................................................. 24
5.23 Disclosure............................................................................................. 25
5.24 Closing Date........................................................................................... 25
ARTICLE VI--REPRESENTATIONS AND WARRANTIES CONCERNING THE SELLER..................................................... 25
6.1 Authorization of Transactions.......................................................................... 25
6.2 Absence of Conflicts................................................................................... 25
6.3 Brokerage.............................................................................................. 26
6.4 Shares................................................................................................. 26
6.5 Investment in Subordinated Notes and NES Common Stock.................................................. 26
6.6 Closing Date........................................................................................... 26
ARTICLE VI--REPRESENTATIONS AND WARRANTIES CONCERNING THE PURCHASER.................................................. 27
7.1 Organization and Corporate Power....................................................................... 27
7.2 Authorization.......................................................................................... 27
7.3 No Violation........................................................................................... 27
7.4 Governmental Authorities and Consents.................................................................. 27
7.5 Litigation............................................................................................. 27
7.6 Brokerage.............................................................................................. 27
7.7 Closing Date........................................................................................... 28
</TABLE>
2
<PAGE>
<TABLE>
<S> <C>
ARTICLE VIII--TERMINATION 28
8.1 Termination............................................................................................ 28
8.2 Effect of Termination.................................................................................. 28
ARTICLE IX--INDEMNIFICATION AND RELATED MATTERS....................................................................... 28
9.1 Survival............................................................................................... 28
9.2 Indemnification........................................................................................ 29
ARTICLE X--ADDITIONAL AGREEMENTS...................................................................................... 33
10.1 NES Securities......................................................................................... 33
10.2 Continuing Assistance.................................................................................. 33
10.3 Tax Matters............................................................................................ 34
10.4 Press Releases and Announcements....................................................................... 34
10.5 Further Transfers...................................................................................... 34
10.6 Specific Performance................................................................................... 34
10.7 Transition Assistance.................................................................................. 34
10.8 Expenses............................................................................................... 34
10.9 Exclusivity............................................................................................ 35
10.10 Books and Records...................................................................................... 35
10.11 Noncompetition, Nonsolicitation and Confidentiality.................................................... 35
ARTICLE XI--MISCELLANEOUS............................................................................................. 37
11.1 Amendment and Waiver................................................................................... 37
11.2 Notices................................................................................................ 37
11.3 Binding Agreement; Assignment.......................................................................... 38
11.4 Severability........................................................................................... 38
11.5 No Strict Construction................................................................................. 39
11.6 Captions............................................................................................... 39
11.7 Entire Agreement....................................................................................... 39
11.8 Counterparts........................................................................................... 39
11.9 Governing Law.......................................................................................... 39
11.10 Parties in Interest.................................................................................... 39
</TABLE>
INDEX OF EXHIBITS
Exhibit A - Form of Subordinated Promissory Note
Exhibit B - Form of Employment Agreement
Exhibit C - Form of Finder's Fee Agreement
Exhibit D - Form of Stock Transfer Agreement
Exhibit E - Form of Opinion of Counsel to the Company and the Seller
INDEX OF SCHEDULES
Specified Leased Equipment Schedule
Organization Schedule
Conflicts Schedule
Financial Statements Schedule
Developments Schedule
Leased Real Property Schedule
Taxes Schedule
Contracts Schedule
Proprietary Rights Schedule
Litigation Schedule
Brokerage Schedule
Permits Schedule
Employees Schedule
Benefit Plans Schedule
Insurance Schedule
Officers, Directors and Bank Accounts Schedule
Affiliated Transactions Schedule
Environmental Schedule
3
<PAGE>
STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT is made as of February 18, 1997, by and among
AERIAL PLATFORMS, INC., a Georgia corporation (the "Company"), Carter B. Wilson
(the "Seller"), and NATIONAL EQUIPMENT SERVICES, INC., a Delaware corporation
(the "Purchaser"). The Company, the Seller and the Purchaser are referred to
herein collectively as the "Parties" and individually as a "Party."
WHEREAS, the authorized capital stock of the Company consists of 10,000 shares
of Common Stock, par value $0.01 per share (the "Common Stock"), of which 500
shares are issued and outstanding;
WHEREAS, the Seller owns beneficially and of record 100% of the issued and
outstanding Common Stock; and
WHEREAS, the Purchaser desires to acquire from the Seller, and the Seller
desires to sell to the Purchaser, all of the Common Stock owned by the Seller
(collectively, the "Acquired Stock").
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Parties agree as follows:
ARTICLE I
DEFINITIONS
1.1 DEFINITIONS. For purposes hereof, the following terms, when used herein
with initial capital letters, shall have the respective meanings set forth
herein:
"Affiliate" of any Person means any other Person controlling, controlled by or
under common control with such first Person, where "control" means the
possession, directly or indirectly, of the power to direct the management and
policies of a Person whether through the ownership of voting securities or
otherwise.
"Affiliated Group" means an affiliated group as defined in Section 1504 of the
Code (or any similar combined, consolidated or unitary group defined under
state, local or foreign income Tax law).
"Agreement" means this Stock Purchase Agreement, including all Exhibits and
Schedules hereto, as it may be amended from time to time in accordance with its
terms.
"CERCLA" means the Comprehensive Environmental Response, Compensation and
Liability Act of 1980, as amended.
"Code" means the United States Internal Revenue Code of 1986, as amended.
"Environmental Affiliates" of any Person means, with respect to any particular
matter, all other Persons whose liabilities or obligations with respect to that
particular matter have been assumed by, or are otherwise deemed by law to be
those of, such first Person.
"Environmental and Safety Requirements" means all federal, state, local and
foreign statutes, regulations, ordinances and similar provisions having the
force or effect of law, all judicial and administrative orders and
determinations, all contractual obligations and all common law concerning public
health and safety, worker health and safety and pollution or protection of the
environment, including all such standards of conduct and bases of obligations
relating to the presence, use, production, generation, handling, transport,
treatment, storage, disposal, distribution, labeling, testing, processing,
discharge, release, threatened release, control, or cleanup of any hazardous
materials, substances or wastes, chemical substances or mixtures, pesticides,
pollutants, contaminants, toxic chemicals, petroleum products or by-products,
asbestos, polychlorinated biphenyls (or PCBs), noise or radiation.
4
<PAGE>
"Environmental Lien" means any Lien, whether recorded or unrecorded, in favor
of any governmental entity or any department, agency or political subdivision
thereof relating to any liability of the Company or the Seller or any
Environmental Affiliate of the Company or the Seller arising under any
Environmental and Safety Requirement.
"ERISA" means the Employee Retirement Income Security Act of 1974, as amended.
"GAAP" means, at a given time, United States generally accepted accounting
principles, consistently applied.
"Indebtedness" of any Person means, without duplication: (a) indebtedness for
borrowed money or for the deferred purchase price of property or services in
respect of which such Person is liable, contingently or otherwise, as obligor or
otherwise (other than trade payables and other current liabilities incurred in
the ordinary course of business) and any commitment by which such Person assures
a creditor against loss, including contingent reimbursement obligations with
respect to letters of credit; (b) indebtedness guaranteed in any manner by such
Person, including a guarantee in the form of an agreement to repurchase or
reimburse; (c) obligations under capitalized leases in respect of which such
Person is liable, contingently or otherwise, as obligor, guarantor or otherwise,
or in respect of which obligations such Person assures a creditor against loss;
and (d) any unsatisfied obligation of such Person for "withdrawal liability" to
a "multiemployer plan," as such terms are defined under ERISA.
"Insider" means, any officer, director, employee, stockholder, partner or
Affiliate, as applicable, of the Company or any individual related by marriage
or adoption to any such individual or any entity in which any such Person owns
any beneficial interest.
"Knowledge" means, with respect to a Person, (a) the actual knowledge of such
Person (which includes the actual knowledge of all officers, directors and
executive employees of such Person) and (b) the knowledge which a prudent
business person would have obtained in the conduct of his or her business after
making reasonable inquiry and exercising reasonable diligence with respect to
the particular matter in question.
"Licenses" means all permits, licenses, franchises, certificates, approvals
and other authorizations of foreign, federal, state and local governments or
other similar rights.
"Lien" means any mortgage, pledge, security interest, encumbrance, easement,
restriction, charge, or other lien.
"Loss" means, with respect to any Person, any diminution in value,
consequential or other damage, liability, demand, claim, action, cause of
action, cost, damage, deficiency, Tax, penalty, fine or other loss or expense,
whether or not arising out of a third party claim, including all interest,
penalties, reasonable attorneys' fees and expenses and all amounts paid or
incurred in connection with any action, demand, proceeding, investigation or
claim by any third party (including any governmental entity or any department,
agency or political subdivision thereof) against or affecting such Person or
which, if determined adversely to such Person, would give rise to, evidence the
existence of, or relate to, any other Loss and the investigation, defense or
settlement of any of the foregoing, together with interest thereon from the date
on which such Person provides the written notice of the related claim as
described in Section 9.2 through and including the date on which the total
amount of the claim, including such interest, is recovered or recouped pursuant
to Article IX.
"Material Adverse Effect" means any material adverse effect on the business,
financial condition, operations, results of operations, or future prospects of
the Company.
"Net Equity" means (i) the Company's assets minus (ii) the Company's
liabilities, determined on a consolidated basis in accordance with GAAP.
"Ordinary Course of Business" means the ordinary course of the Company's
business consistent with past practice (including, without limitation, with
respect to collection of accounts receivable, purchases of inventory and
5
<PAGE>
supplies, repairs and maintenance, payment of accounts payable and accrued
expenses, levels of capital expenditures and operation of cash management
practices generally).
"Person" means an individual, a partnership, a corporation, an association, a
limited liability company, a joint stock company, a trust, a joint venture, an
unincorporated organization, a governmental entity or any department, agency or
political subdivision thereof and any other entity.
"Proprietary Rights" means any and all patents, patent applications,
trademarks, service marks, trademark or service mark applications and
registrations, trade and corporate names, copyrights, copyright applications and
registrations, trade secrets, know-how, technology, computer software and
software systems, business and marketing plans, customer and supplier lists,
confidential information and all other proprietary property, rights and
interests.
"Release" shall have the meaning set forth in CERCLA.
"Subsidiary" means, with respect to any Person, any corporation a majority of
the total voting power of shares of stock of which is entitled (without regard
to the occurrence of any contingency) to vote in the election of directors,
managers or trustees thereof is at the time owned or controlled, directly or
indirectly, by that Person or one or more of the other Subsidiaries of that
Person or a combination thereof, or any partnership, association or other
business entity a majority of the partnership or other similar ownership
interest of which is at the time owned or controlled, directly or indirectly, by
that Person or one or more Subsidiaries of that Person or a combination thereof.
For purposes of this definition, a Person is deemed to have a majority ownership
interest in a partnership, association or other business entity if such Person
is allocated a majority of the gains or losses of such partnership, association
or other business entity or is or controls the managing director or general
partner of such partnership, association or other business entity.
"Tax Returns" means returns, declarations, reports, claims for refund,
information returns or other documents (including any related or supporting
schedules, statements or information) filed or required to be filed in
connection with the determination, assessment or collection of Taxes of any
party or the administration of any laws, regulations or administrative
requirements relating to any Taxes.
"Taxes" means any federal, state, local, or foreign income, gross receipts,
license, payroll, employment, excise, severance, stamp, occupation, premium,
windfall profits, environmental (including taxes imposed pursuant to Section 59A
of the Code), customs duties, capital stock, franchise, profits, withholding,
social security, unemployment, disability, real property, personal property,
sales, use, transfer, registration, value added, alternative or add-on minimum,
or other tax, fee, assessment or charge of any kind whatsoever, including any
interest, penalty, or addition thereto, whether disputed or not.
"Transaction Documents" means this Agreement, and all other agreements,
instruments, certificates and other documents to be entered into or delivered by
any Party in connection with the transactions contemplated to be consummated
pursuant to this Agreement.
"Treasury Regulations" means the United States Treasury Regulations
promulgated pursuant to the Code.
1.2 OTHER DEFINITIONAL PROVISIONS.
(a) Accounting Terms. Accounting terms which are not otherwise defined in
this Agreement have the meanings given to them under GAAP. To the extent that
the definition of accounting term that is defined in this Agreement is
inconsistent with the meaning of such term under GAAP, the definition set forth
in this Agreement will control.
(b) "Hereof," etc. The terms "hereof," "herein" and "hereunder" and terms of
similar import are references to this Agreement as a whole and not to any
particular provision of this Agreement. Section, clause, Schedule and Exhibit
references contained in this Agreement are references to Sections, clauses,
Schedules and Exhibits in or to this Agreement, unless otherwise specified.
6
<PAGE>
(c) Successor Laws. Any reference to any particular Code section or any other
law or regulation will be interpreted to include any revision of or successor to
that section regardless of how it is numbered or classified.
1.3 CROSS REFERENCE OF OTHER DEFINITIONS. Each capitalized term listed below
is defined in the corresponding Section of this Agreement:
<TABLE>
<CAPTION>
Term Section
---- -------
<S> <C>
Acquired Stock Recitals
Actual Net Equity 2.3(b)
Applicable Limitation Date 9.1
Cap 9.2(b)(ii)
Cash Portion 2.2
Closing 2.5(a)
Closing Date 2.5(a)
Closing Review 2.3(b)
Closing Transactions 2.5(b)
COBRA 5.17(a)
Common Stock Recitals
Company Preface
Confidential Information 10.11(c)
Draft Computation 2.3(b)
Employment Agreement 2.5(g)
ERISA 5.17(a)
Financial Statements 5.6(a)
Finder's Fee Agreement 2.5(h)
Firm 2.3(b)
Indemnified Party 9.2(e)
Indemnifying Party 9.2(e)
Holdback 2.2
Latest Balance Sheet 5.6(a)
Leased Properties 5.9(b)
NES Class A Common 2.2
NES Class B Common 2.2
NES Common Stock 2.2
NES Securities 6.5
Net Equity Shortfall 2.3(b)
Noncompete Period 10.11(a)
Noncompete Payment 10.11(a)
Objection Notice 2.3(b)
Party Preface
Pending Claim 2.4
Purchase Price 2.2
Purchased Equipment Item 2.3(c)
Purchaser Preface
Purchaser Parties 9.2(a)
Remaining Holdback 2.4
Seller Preface
Seller Parties 9.2(c)
Subordinated Notes 2.2
Transaction Expenses 10.8
</TABLE>
ARTICLE II
PURCHASE AND SALE OF STOCK
2.1 STOCK PURCHASE. On and subject to the terms and conditions set forth in
this Agreement, on the Closing Date, the Purchaser shall purchase from the
Seller, and the Seller shall sell and transfer to the Purchaser, all of the
shares of Common Stock owned by the Seller, free and clear of any Liens.
2.2 PURCHASE PRICE FOR COMPANY STOCK. The aggregate purchase price to be
paid to the Seller for the Acquired Stock (the "Purchase Price") is $4,350,000,
which amount shall be paid as follows: (a) the Purchaser shall deliver to the
Seller $3,750,000 (as adjusted pursuant to Section 2.3 below) in cash (as
adjusted, the "Cash Portion"); (b) the Purchaser shall issue to the Seller
$350,000 of Subordinated Promissory Notes in the form of Exhibit A attached
hereto (the "Subordinated Notes"); (c) the Purchaser shall issue to the Seller
97 shares of its
7
<PAGE>
Class A Common Stock, par value $.01 per share (the "NES Class A Common") which
NES Class A Common, for purposes of this Agreement, shall be deemed to have a
fair market value of $1,000 per share and $97,000 in the aggregate; (d) the
Purchaser shall issue to the Seller 300 shares of its Class B Common Stock, par
value $.01 per share (the "NES Class B Common" and, collectively with the NES
Class A Common, the "NES Common Stock") which NES Class B Common, for purposes
of this Agreement, shall be deemed to have a fair market value of $10 per share
and $3,000 in the aggregate; and (e) the Purchaser shall maintain $150,000 in a
book entry account of the Purchaser (the "Holdback"). The Holdback shall be
available to satisfy any amounts owing to the Purchaser pursuant to Section 2.3
and/or Section 9.2. The Cash Portion is subject to adjustment pursuant to
Section 2.3.
2.3 PURCHASE PRICE ADJUSTMENTS.
(a) Adjustment at Closing for Bonus Payment. Notwithstanding anything herein
to the contrary, and in addition to any other adjustments set forth in this
Agreement, the Cash Portion will be reduced dollar-for-dollar by an amount equal
to the aggregate amount of any bonuses or other cash compensation paid by the
Company to Carter Wilson between December 1, 1996 and the Closing (other than
Carter Wilson's base salary paid in the Ordinary Course of Business).
(b) Post-Closing Adjustment for Net Equity. Within 90 days after the Closing
Date, the Purchaser and its auditors will conduct a review (the "Closing
Review") of the Net Equity as of the close of business on the day before the
Closing Date and will prepare and deliver to the Seller a computation of the Net
Equity as of the close of business on the day before the Closing Date (the
"Draft Computation"). The Purchaser and its auditors will give the Seller and
his auditors an opportunity to observe the Closing Review and will make
available to such Persons all records and work papers used in preparing the
Draft Computation. If the Seller disagrees with the computation of the Net
Equity reflected on the Draft Computation, the Seller may, within thirty (30)
days after receipt of the Draft Computation, deliver a notice (an "Objection
Notice") to the Purchaser setting forth the Seller's calculation of the amount
of the Net Equity as of the close of business on the day before the Closing
Date. The Purchaser and the Seller will use reasonable efforts to resolve any
disagreements as to the computation of the Net Equity, but if they do not obtain
a final resolution within 30 days after the Purchaser has received the Objection
Notice, the Purchaser and the Seller will jointly retain an independent
accounting firm of recognized national or regional standing (the "Firm") to
resolve any remaining disagreements. If the Purchaser and the Seller are unable
to agree on the choice of the Firm, the Firm will be a "big-six" accounting firm
selected by lot (after excluding one firm designated by the Purchaser and one
firm designated by the Seller). The Purchaser and the Seller will direct the
Firm to render a determination within 15 days of its retention and the
Purchaser, the Seller and their respective agents will cooperate with the Firm
during its engagement. The Firm will consider only those items and amounts in
the Draft Computation set forth in the Objection Notice which the Purchaser and
the Seller are unable to resolve. The Firm's determination will be based on the
definition of Net Equity included herein. The determination of the Firm will be
conclusive and binding upon the Purchaser and the Seller. The Purchaser and the
Seller shall bear the costs and expenses of the Firm based on the percentage
which the portion of the contested amount not awarded to each Party bears to the
amount actually contested by such Party. The amount of the Net Equity, as
finally determined pursuant to this Section 2.3(a), is referred to herein as the
"Actual Net Equity." If the Actual Net Equity is less than $1,350,000, the
Purchaser shall be entitled to receive from the Holdback, within two (2)
Business Days after the determination thereof, the amount of such shortfall (the
"Net Equity Shortfall"); provided, however, that if the amount then left in the
Holdback is less than the amount of the Net Equity Shortfall, the Seller shall
pay to the Purchaser, within two (2) Business Days after the determination of
the Actual Net Equity, the amount by which the Holdback is less than Net Equity
Shortfall by wire transfer or delivery of other immediately available funds.
(c) Post-Closing Adjustment for Leased Rental Equipment. At the Closing, the
Company shall purchase all of the items of equipment set forth on the "Specified
Leased Equipment Schedule" attached hereto from the owners thereof (any such
item of equipment so purchased is hereinafter referred to as a "Purchased
Equipment Item"). With respect to any purchase by the Company of a Purchased
Equipment Item: (i) to the extent the purchase price actually paid by the
Company for such Purchased Equipment Item is less than the "Payoff Amount" set
forth on the Specified Leased Equipment Schedule for such Purchased Equipment
Item, the Purchaser shall pay to the Seller, on the date of purchase of such
Purchased Equipment Item, the amount of such deficit by wire transfer or
delivery of other immediately available funds, and (ii) to the extent the
purchase price actually paid by the Company for such
8
<PAGE>
Purchased Equipment Item is greater than the "Payoff Amount" set forth on the
Specified Leased Equipment Schedule for such Purchased Equipment Item, the
Purchaser shall be entitled to receive from the Holdback, on the date of
determination thereof, the amount of such excess; provided, however, that if the
amount then left in the Holdback is less than the amount of such excess, the
Seller shall pay to the Purchaser, on the date of determination of such excess,
the amount by which the Holdback is less than such excess by wire transfer or
delivery of other immediately available funds.
(d) Accounts Receivable Adjustment. Notwithstanding anything herein to the
contrary, and in addition to any other adjustments set forth in this Agreement,
the Purchase Price will be reduced dollar-for-dollar by the aggregate amount of
the notes and accounts receivable of the Company in existence as of the Closing
(net of the $22,000 reserve for doubtful accounts) (such net amount, the
"Accounts Receivable"), which are uncollected by the Company (the "Uncollected
Receivables Amount") as of the 120th day following the Closing Date (the
"Receivables Determination Date"). If there is an Uncollected Receivables
Amount, the Purchaser shall be entitled to receive the Uncollected Receivables
Amount from the Holdback within two (2) Business Days after the Receivables
Determination Date; provided, however, that if the amount then left in the
Holdback is less than the amount of the Uncollected Receivables Amount, the
Seller shall pay to the Purchaser, within two (2) Business Days after the
Receivables Determination Date, the amount by which the Holdback is less than
Uncollected Receivables Amount by wire transfer or delivery of other immediately
available funds. For the purpose of determining amounts collected by the
Company with respect to the Accounts Receivable, (i) in the absence of a bona
fide dispute between an account debtor and the Company regarding receivables of
such account debtor accrued prior to the Closing Date, all payments by an
account debtor shall first be applied to the oldest outstanding invoice due from
that account debtor, and (ii) in the case of a dispute between the Company and
an account debtor with respect to a particular invoice, all payments shall be
first applied to the next oldest invoice due from that account debtor. The
Company shall not be required to retain a collection agency, bring any suit, or
take any other action out of the ordinary course of business to collect any of
the Accounts Receivable. To the extent that the Company has not collected the
full amount of the Accounts Receivable and the Purchaser has been compensated
therefor in accordance with this Section, the Company shall assign any such
uncollected Accounts Receivable to the Seller.
2.4 DISTRIBUTION OF HOLDBACK. On the 130th day after the Closing Date, the
Purchaser shall pay to the Seller an amount equal to the amount of the Holdback,
if any, remaining after (i) all amounts owing to the Purchaser pursuant to
Section 2.3 have been satisfied and (ii) all claims of the Purchaser under
Section 9.2 which have theretofore been finally resolved have been satisfied
(the "Remaining Holdback") less any amount for which the Purchaser claims, prior
to such 130th day, that it is entitled to receive indemnification pursuant to
Section 9.2 (each, a "Pending Claim"). As soon as practicable following final
resolution of all Pending Claims, the Purchaser shall pay to the Seller an
aggregate amount equal to the portion, if any, of the Holdback which remains
after payment of the Remaining Holdback and final resolution of all Pending
Claims.
2.5 CLOSING TRANSACTIONS.
(a) Closing. The closing of the transactions contemplated by this Agreement
(the "Closing") shall take place at the offices of Kirkland & Ellis, 200 East
Randolph Drive, Chicago, Illinois 60601, commencing at 10:00 a.m. on February
18, 1997, or at such other place or on such other date as may be mutually
agreeable to the Purchaser and the Seller. The date and time of the Closing are
herein referred to as the "Closing Date."
(b) Closing Transactions. Subject to the conditions set forth in this
Agreement, the Parties shall consummate the following transactions (the "Closing
Transactions") on the Closing Date:
(i) the Seller shall deliver to the Purchaser certificates representing
the Acquired Stock owned by the Seller, duly endorsed for transfer or
accompanied by duly executed stock powers with all requisite state and federal
transfer stamps affixed thereto, and with signatures guaranteed by a
commercial bank or by a member firm of the New York Stock Exchange;
(ii) The Purchaser shall deliver to the Seller the Cash Portion in
immediately available funds;
9
<PAGE>
(iii) The Purchaser shall deliver to the Seller the Subordinated Notes
for the Purchase Price and the Noncompete Payment;
(iv) The Purchaser shall deliver to the Seller the certificates
evidencing the NES Common Stock; and
(v) the Company, the Seller and the Purchaser, as applicable, shall
deliver the opinions, certificates and other documents and instruments
required to be delivered by or on behalf of such Party under Article III.
ARTICLE III
CONDITIONS TO CLOSING
3.1 CONDITIONS TO THE PURCHASER'S OBLIGATIONS. The obligation of the
Purchaser to consummate the transactions contemplated by this Agreement is
subject to the satisfaction of the following conditions as of the Closing Date:
(a) The representations and warranties set forth in Article V and Article VI
hereof shall be true and correct in all material respects at and as of the
Closing Date as though then made and as though the Closing Date were substituted
for the date of this Agreement throughout such representations and warranties
(without taking into account any disclosures made by the Company or the Seller
to the Purchaser pursuant to Sections 4.1(g), 5.24 and 6.6 hereof);
(b) The Company and the Seller shall have performed and complied with all of
the covenants and agreements required to be performed by each of them under this
Agreement on or prior to the Closing;
(c) All consents by third parties that are required for the transfer of the
Acquired Stock to the Purchaser, and the consummation of the other transactions
contemplated hereby or that are required in order to prevent a breach of, a
default under, a termination or modification of, or any acceleration of, any
obligations under any material contract to which the Company is a party shall
have been obtained, and payoff letters with respect to all of the Company's
Indebtedness outstanding as of the Closing and releases of any and all Liens
held by third parties against property of the Company shall have been obtained,
all on terms reasonably satisfactory to the Purchaser;
(d) All governmental filings, authorizations and approvals that are required
for the transfer of the Acquired Stock to the Purchaser and the consummation of
the oth er transactions contemplated hereby shall have been duly made and
obtained on terms reasonably satisfactory to the Purchaser;
(e) No action, suit, or proceeding shall be pending or threatened before any
court or quasi-judicial or administrative agency of any federal, state, local,
or foreign jurisdiction or before any arbitrator wherein an unfavorable
judgment, decree, injunction, order or ruling would prevent the performance of
this Agreement or any of the transactions contemplated hereby, declare unlawful
the transactions contemplated by this Agreement, cause such transactions to be
rescinded or materially and adversely affect the right of the Purchaser to own,
operate or control the Company, and no judgment, decree, injunction, order or
ruling shall have been entered which has any of the foregoing effects;
(f) Except as otherwise specified in writing by the Purchaser to the Seller,
all of the Company's directors shall have resigned and such resignations shall
be effective as of the Closing Date;
(g) Carter Wilson and the Company shall have entered into an agreement
relating to his employment with the Company (the "Employment Agreement"),
substantially in the form of Exhibit B attached hereto, and the Employment
Agreement shall be in full force and effect;
(h) Carter Wilson and the Company shall have entered into an agreement
relating to finder's fees for the possible acquisitions of West Georgia Aerials
and/or Balwin Rental by the Company (the "Finder's Fee Agreement"),
substantially in the form of Exhibit C attached hereto, and the Finder's Fee
Agreement shall be in full force and effect;
10
<PAGE>
(i) Carter Wilson and the Company shall have entered into an agreement
relating to restrictions on transfer of the NES Common Stock (the "Stock
Transfer Agreement"), substantially in the form of Exhibit D attached hereto,
and the Stock Transfer Agreement shall be in full force and effect;
(j) Purchaser shall have received an opinion, dated the Closing Date, of
Kearns, Benedict & Harp, counsel to the Company and the Seller, substantially in
the form of Exhibit E attached hereto;
(k) On or prior to the Closing Date, the Seller shall have delivered to
Purchaser all of the following:
(i) a certificate from the Company and the Seller in a form reasonably
satisfactory to the Purchaser, dated the Closing Date, stating that the
preconditions specified in Sections 3.1(a) through (i) have been satisfied;
(ii) copies of all third party and governmental consents, approvals,
filings, releases and terminations required in connection with the
consummation of the transactions contemplated herein;
(iii) certified copies of the resolutions of the Company's board of
directors approving the transactions contemplated by this Agreement;
(iv) certificates of the secretary of state of the State of Georgia and
each state where the Company is qualified to do business providing that the
Company is in good standing;
(v) copies of the resignations described in Section 3.1(f);
(vi) all documents and records relating to the business of the Company
that are in the Seller's possession;
(vii) landlord consents and estoppel certificates from the Company's
landlords in form and substance satisfactory to the Purchaser; and
(viii) such other documents or instruments as the Purchaser may reasonably
request to effect the transactions contemplated hereby;
(l) Purchaser shall have obtained on terms and conditions satisfactory to it
all of the debt and equity financing required in order to consummate the
transactions contemplated hereby, and to fund the working capital requirements
of the Company after the Closing; and
(m) All proceedings to be taken by the Company and the Seller in connection
with the consummation of the Closing Transactions and the other transactions
contemplated hereby and all certificates, opinions, instruments and other
documents required to be delivered by the Company and the Seller to effect the
transactions contemplated hereby reasonably requested by the Purchaser shall be
reasonably satisfactory in form and substance to the Purchaser.
Any condition specified in this Section 3.1 may be waived by the Purchaser;
provided that no such waiver shall be effective unless it is set forth in a
writing executed by the Purchaser.
3.2 CONDITIONS TO THE SELLERS' OBLIGATIONS. The obligation of the Seller to
consummate the transactions contemplated by this Agreement is subject to the
satisfaction of the following conditions as of the Closing Date:
(a) The representations and warranties set forth in Article VII shall be true
and correct in all material respects at and as of the Closing Date as though
then made and as though the Closing Date were substituted for the date of this
Agreement throughout such representations and warranties (without taking into
account any disclosures made by the Purchaser to the Seller pursuant to Sections
4.3(a) and 7.7 hereof);
11
<PAGE>
(b) The Purchaser shall have performed and complied with all of the covenants
and agreements required to be performed by it under this Agreement on or prior
to the Closing;
(c) All governmental filings, authorizations and approvals that are required
for the transfer of the Acquired Stock to the Purchaser and the consummation of
the other transactions contemplated hereby shall have been duly made and
obtained on terms reasonably satisfactory to the Seller;
(d) No action, suit, or proceeding shall be pending before any court or
quasi-judicial or administrative agency of any federal, state, local, or foreign
jurisdiction or before any arbitrator wherein an unfavorable judgment, decree,
injunction, order or ruling would prevent the performance of this Agreement or
any of the transactions contemplated hereby, declare unlawful the transactions
contemplated by this Agreement, cause such transactions to be rescinded or
materially and adversely affect the right of the Purchaser to own, operate or
control the Company, and no judgment, decree, injunction, order or ruling shall
have been entered which has any of the foregoing effects;
(e) Carter Wilson and the Company shall have entered into the Employment
Agreement, and the Employment Agreement shall be in full force and effect;
(f) Carter Wilson and the Company shall have entered into the Finder's Fee
Agreement, and the Finder's Fee Agreement shall be in full force and effect;
(g) Carter Wilson and the Company shall have entered into the Stock Transfer
Agreement, and the Stock Transfer Agreement shall be in full force and effect;
(h) On or prior to the Closing Date, the Purchaser shall have delivered to
the Seller all of the following:
(i) a certificate from the Purchaser in a form reasonably satisfactory
to the Seller, dated the Closing Date, stating that the preconditions
specified in Sections 3.2(a) through (d), inclusive, have been satisfied;
(ii) certified copies of the resolutions of the Purchaser's board of
directors approving the transactions contemplated by this Agreement; and
(iii) such other documents or instruments as the Seller may reasonably
request to effect the transactions contemplated hereby;
(i) All proceedings to be taken by the Purchaser in connection with the
consummation of the Closing Transactions and the other transactions contemplated
hereby and all certificates, opinions, instruments and other documents required
to be delivered by the Purchaser to effect the transactions contemplated hereby
reasonably requested by the Seller shall be reasonably satisfactory in form and
substance to the Seller;
(j) Payoff letters with respect to all of the Company's Indebtedness
outstanding as of the Closing and releases of any and all Liens held by third
parties against property of the Company shall have been obtained; and
(k) All guarantees of the Seller with respect to the Company's real estate
lease shall have been released or the Seller shall have received an indemnity
from the Purchaser in form and substance reasonably satisfactory to the Seller
providing reasonably adequate security that the Seller will not become liable
under such guarantees.
Any condition specified in this Section 3.2 may be waived by the Seller;
provided that no such waiver shall be effective unless it is set forth in a
writing executed by the Seller.
12
<PAGE>
ARTICLE IV
COVENANTS PRIOR TO CLOSING ARTICLE IV
4.1 AFFIRMATIVE COVENANTS OF THE COMPANY AND THE SELLER. Prior to the
Closing, unless the Purchaser otherwise agrees in writing, the Seller shall
cause the Company to, and in the case of Sections 4.1(f), (g), (h) and (i) the
Seller also shall:
(a) conduct its business and operations only in the Ordinary Course of
Business;
(b) keep in full force and effect its corporate existence and all rights,
franchises and intellectual property relating or pertaining to its business and
use its best efforts to cause its current insurance (or reinsurance) policies
not to be canceled or terminated or any of the coverage thereunder to lapse;
(c) use its best efforts to carry on the business of the Company in the same
manner as presently conducted and to keep the Company's business organization
and properties intact, including its present business operations, physical
facilities, working conditions and employees and its present relationships with
lessors, licensors, suppliers and customers and others having business relations
with it;
(d) maintain the material assets of the Company in good repair, order and
condition (normal wear and tear excepted) consistent with current needs, replace
in accordance with prudent practices its inoperable, worn out or obsolete assets
with assets of good quality consistent with prudent practices and current needs
and, in the event of a casualty, loss or damage to any of such assets or
properties prior to the Closing Date, whether or not the Company is insured,
either repair or replace such damaged property or use the proceeds of such
insurance in such other manner as mutually agreed upon by the Seller and the
Purchaser;
(e) maintain the books, accounts and records of the Company in accordance
with past custom and practice as used in the preparation of the Financial
Statements;
(f) encourage employees to continue their employment with the Company after
the Closing;
(g) promptly (once the Company or the Seller obtains Knowledge thereof)
inform Purchaser in writing of any variances from the representations and
warranties contained in Article V or Article VI hereof or any breach of any
covenant hereunder by the Company or the Seller;
(h) cooperate with the Purchaser and use best efforts to cause the conditions
to the Purchaser's obligation to close to be satisfied (including, without
limitation, the execution and delivery of all agreements contemplated hereunder
to be so executed and delivered and the making and obtaining of all third party
and governmental notices, filings, authorizations, approvals, consents, releases
and terminations); and
(i) cooperate with the Purchaser in the Purchaser's investigation of the
business and properties of the Company, to permit the Purchaser and its
employees, agents, accounting, legal and other authorized representatives to (i)
have full access to the premises, books and records of the Company at reasonable
hours, (ii) visit and inspect any of the properties of the Company, and (iii)
discuss the affairs, finances and accounts of the Company with the directors,
officers, partners, key employees, key customers, key sales representatives, key
suppliers and independent accountants of the Company.
4.2 NEGATIVE COVENANTS OF THE COMPANY AND THE SELLER. Prior to the Closing,
unless Purchaser otherwise agrees in writing, the Seller shall cause the Company
to not:
(a) take any action that would require disclosure under Section 5.8;
13
<PAGE>
(b) make any loans, enter into any transaction with any Insider or make or
grant any increase in any employee's or officer's compensation or make or grant
any increase in any employee benefit plan, incentive arrangement or other
benefit covering any of the employees of the Company;
(c) establish or, except in accordance with past practice, contribute to any
pension, retirement, profit sharing or stock bonus plan or multiemployer plan
covering the employees of the Company;
(d) except as specifically contemplated by this Agreement, enter into any
contract, agreement or transaction, other than in the Ordinary Course of
Business and at arm's length with unaffiliated Persons;
(e) declare, pay, make or otherwise effectuate any dividends, distributions,
redemptions, equity repurchases or other transactions involving the Company's
capital stock or equity securities;
(f) sell, transfer, contribute, distribute, or otherwise dispose of any
securities or assets of the Company, or agree to do any of the foregoing, to
any Person, or negotiate or have any discussions with any Person with respect to
any of the foregoing, other than in the Ordinary Course of Business.
4.3 COVENANTS OF PURCHASER. Prior to the Closing, the Purchaser shall:
(a) promptly (once it obtains Knowledge thereof) inform the Seller in writing
of any variances from the representations and warranties contained in Article
VII or any breach of any covenant hereunder by Purchaser; and
(b) cooperate with the Seller and use its best efforts to cause the
conditions to the Seller's obligation to close to be satisfied (including,
without limitation, the execution and delivery of all agreements contemplated
hereunder to be so executed and delivered and the making and obtaining of all
third party and governmental filings, authorizations, approvals, consents,
releases and terminations).
ARTICLE V
REPRESENTATIONS AND WARRANTIES
CONCERNING THE COMPANY
As a material inducement to Purchaser to enter into this Agreement, the Seller
hereby represents and warrants that:
5.1 ORGANIZATION AND CORPORATE POWER. The Company is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Georgia and is qualified to do business in every jurisdiction in which it is
required to be qualified. All jurisdictions in which the Company is qualified
to do business are set forth on the "Organization Schedule" attached hereto. The
Company has full power and authority and all licenses, permits and
authorizations necessary to own and operate its properties and to carry on its
business as now conducted. Correct and complete copies of the Company's
articles of incorporation and by-laws have been furnished to the Purchaser,
which documents reflect all amendments made thereto at any time prior to the
date of this Agreement. Correct and complete copies of the minute books
containing the records of meetings of the stockholders and board of directors,
the stock certificate books and the stock record books of the Company have been
furnished to the Purchaser. The Company is not in default under or in violation
of any provision of its articles of incorporation or by-laws.
5.2 AUTHORIZATION OF TRANSACTIONS. The Company has full corporate power and
authority to execute and deliver the Transaction Documents and to consummate the
transactions contemplated hereby and thereby. The board of directors of the
Company has duly approved the Transaction Documents and has duly authorized the
execution and delivery of the Transaction Documents and the consummation of the
transactions contemplated thereby. No other corporate proceedings on the part
of the Company are necessary to approve and authorize the execution and delivery
of the Transaction Documents and the consummation of the transactions
contemplated thereby. All Transaction Documents have been duly executed and
delivered by the Company and
14
<PAGE>
constitute the valid and binding agreements of the Company, enforceable against
the Company in accordance with their terms.
5.3 CAPITALIZATION. The authorized, issued and outstanding stock of the
Company consists of 10,000 shares of Common Stock, par value $0.01 per share, of
which 500 shares are issued and outstanding, and are held of record and
beneficially by the Seller free and clear of all Liens and are not subject to,
nor were they issued in violation of, any preemptive rights or rights of first
refusal. All of the issued and outstanding shares of the Company's capital
stock have been duly authorized, are validly issued, fully paid, and
nonassessable. There are no outstanding or authorized options, warrants,
rights, contracts, calls, puts, rights to subscribe, conversion rights or other
agreements or commitments to which the Company is a party or which are binding
upon the Company providing for the issuance, disposition or acquisition of any
of its capital stock (other than this Agreement). There are no outstanding or
authorized stock appreciation, phantom stock or similar rights with respect to
the Company. There are no voting trusts, proxies or any other agreements or
understandings with respect to the voting of the capital stock of the Company.
The Company is not subject to any obligation (contingent or otherwise) to
repurchase or otherwise acquire or retire any shares of its capital stock.
5.4 SUBSIDIARIES; INVESTMENTS. The Company does not own or hold any shares of
stock or any other security or interest in any other Person or any rights to
acquire any such stock or other security or interest, and the Company has ever
owned any Subsidiary.
5.5 ABSENCE OF CONFLICTS. Except as set forth on the "Conflicts Schedule"
attached hereto, the execution, delivery and performance of the Transaction
Documents and the consummation of the transactions contemplated thereby by the
Company do not and shall not (a) conflict with or result in any breach of any of
the terms, conditions or provisions of, (b) constitute a default under, (c)
result in a violation of, (d) give any third party the right to modify,
terminate or accelerate any obligation under, (e) result in the creation of any
Lien upon the Acquired Stock or the assets of the Company, or (f) require any
authorization, consent, approval, exemption or other action by or notice or
declaration to, or filing with, any court or administrative or other
governmental body or agency, under the provisions of the articles of
incorporation or by-laws of the Company or any indenture, mortgage, lease, loan
agreement or other agreement or instrument to which the Company is bound or
affected, or any law, statute, rule or regulation to which the Company is
subject or any judgment, order or decree to which the Company is subject.
5.6 FINANCIAL STATEMENTS AND RELATED MATTERS.
(a) Financial Statements. Attached hereto as the "Financial Statements
Schedule" are copies of the Company's (i) unaudited balance sheet as of December
31, 1996 (the "Latest Balance Sheet") and the related statements of income and
cash flows for the 11-month period then ended and (ii) reviewed balance sheets
and statements of income and cash flows for the fiscal years ended January 31,
1996, 1995 and 1994. Each of the foregoing financial statements (including in
all cases the notes thereto, if any) (the "Financial Statements") is accurate
and complete, is consistent with the Company's books and records (which, in
turn, are accurate and complete), present fairly the Company's financial
condition and results of operations as of the times and for the periods referred
to therein, and has been prepared in accordance with GAAP, subject in the case
of unaudited financial statements to changes resulting from normal year-end
adjustments for recurring accruals (which shall not be material individually or
in the aggregate) and to the absence of footnote disclosure.
(b) Receivables. The Company's notes and accounts receivable are valid
receivables, current, and are subject to no valid counterclaims or setoffs, at
the aggregate amount recorded on the Company's books and records as of the
Closing, net of an amount of allowances for doubtful accounts which relate to
those receivables computed in a manner consistent with GAAP and the accounting
practices used in the preparation of the Latest Balance Sheet.
(c) Inventory. The Company's inventory, net of the reserves applicable to
such inventory, consists of a quantity and quality which, except as reflected in
such reserve, is usable and saleable in the Ordinary Course of Business, and the
items of such inventory are not defective, slow-moving, obsolete or damaged and
are merchantable and fit for their particular use.
15
<PAGE>
5.7 ABSENCE OF UNDISCLOSED LIABILITIES. The Company has no obligations or
liabilities (whether accrued, absolute, contingent, unliquidated or otherwise,
whether or not known, whether due or to become due and regardless of when
asserted) arising out of transactions entered into at or prior to the Closing,
or any action or inaction at or prior to the Closing, or any state of facts
existing at or prior to the Closing, except (i) obligations under contracts or
commitments described on the Contracts Schedule attached hereto or under
contracts and commitments which are not required to be disclosed thereon (but
not liabilities for breaches thereof), (ii) liabilities reflected on the
liabilities side of the Latest Balance Sheet, and (iii) liabilities which have
arisen after the date of the Latest Balance Sheet in the Ordinary Course of
Business or otherwise in accordance with the terms and conditions of this
Agreement (none of which is a liability for breach of contract, breach of
warranty, tort or infringement or a claim or lawsuit or an environmental
liability).
5.8 ABSENCE OF CERTAIN DEVELOPMENTS. Except as set forth on the "Developments
Schedule" attached hereto and except as expressly contemplated by this
Agreement, since October 31, 1996, the Company has not:
(a) suffered any change that has had or could reasonably be expected to have
a Material Adverse Effect or suffered any theft, damage, destruction or casualty
loss in excess of $10,000, to its assets, whether or not covered by insurance or
suffered any substantial destruction of the Company's books and records;
(b) redeemed or repurchased, directly or indirectly, any shares of capital
stock or other equity security or declared, set aside or paid any dividends or
made any other distributions (whether in cash or in kind) with respect to any
shares of its capital stock or other equity security;
(c) issued, sold or transferred any equity securities, any securities
convertible, exchangeable or exercisable into shares of its capital stock or
other equity securities, or warrants, options or other rights to acquire shares
of its capital stock or other equity securities of the Company;
(d) incurred or become subject to any liabilities, except liabilities
incurred in the Ordinary Course of Business;
(e) subjected any portion of its properties or assets to any Lien;
(f) sold, leased, assigned or transferred (including, without limitation,
transfers to the Seller or any Insider) a portion of its tangible assets, except
for sales of inventory in the Ordinary Course of Business, or canceled without
fair consideration any material debts or claims owing to or held by it;
(g) sold, assigned, licensed or transferred (including, without limitation,
transfers to the Seller or any Insider) any Proprietary Rights owned by, issued
to or licensed to the Company or disclosed any confidential information (other
than pursuant to agreements requiring the disclosure to maintain the
confidentiality of and preserving all rights of the Company in such confidential
information) or received any confidential information of any third party in
violation of any obligation of confidentiality;
(h) suffered any extraordinary losses or waived any rights of material value;
(i) entered into, amended or terminated any material lease, contract,
agreement or commitment, or taken any other action or entered into any other
transaction other than in the Ordinary Course of Business;
(j) entered into any other material transaction, or materially changed any
business practice;
(k) made or granted any bonus or any wage, salary or compensation increase to
any director, officer, employee or sales representative, group of employees or
consultant or made or granted any increase in any employee benefit plan or
arrangement, or amended or terminated any existing employee benefit plan or
arrangement or adopted any new employee benefit plan or arrangement;
16
<PAGE>
(l) made any other change in employment terms for any of its directors,
officers, and employees outside the Ordinary Course of Business;
(m) incurred intercompany charges or conducted its cash management customs
and practices other than in the Ordinary Course of Business (including, without
limitation, with respect to collection of accounts receivable, purchases of
inventory and supplies, repairs and maintenance, and payment of accounts payable
and accrued expenses);
(n) made any capital expenditures or commitments for capital expenditures
that aggregate in excess of $20,000;
(o) made any loans or advances to, or guarantees for the benefit of, any
Persons;
(p) made charitable contributions, pledges, association fees or dues; or
(q) changed (or authorized any change) in its articles of incorporation or
by-laws.
5.9 TITLE TO PROPERTIES.
(a) The Company does not own, and has never owned, any real property.
(b) The leases and subleases described on the "Leased Real Property Schedule"
attached hereto (the "Leased Properties") constitute all of the leases and
subleases under which the Company holds leasehold or subleasehold interests in
real property. The real property leases and subleases described on the Leased
Real Property Schedule are valid, binding, enforceable and in full force and
effect and have not been modified (except to the extent disclosed in the
documents delivered to the Purchaser), and the Company holds a valid and
existing leasehold interest under such leases or subleases to which it is a
party for the term set forth on the Leased Real Property Schedule. The Company
has delivered to Purchaser complete and accurate copies of each of the leases or
subleases described on the Leased Real Property Schedule. With respect to each
lease and sublease listed on the Leased Real Property Schedule:
(i) the lease or sublease shall continue to be legal, valid, binding,
enforceable and in full force and effect on identical terms immediately
following the Closing;
(ii) neither the Company nor any other party to the lease or sublease is
in breach or default, and no event has occurred which, with notice or lapse of
time, would constitute such a breach or default or permit termination,
modification or acceleration under the lease or sublease;
(iii) no party to the lease or sublease has repudiated any provision
thereof and there are no disputes, oral agreements or forbearance programs in
effect as to the lease or sublease;
(iv) the Company has not assigned, transferred, conveyed, mortgaged,
deeded in trust or encumbered any interest in the leasehold or subleasehold;
and
(v) all buildings, improvements or other property leased or subleased
thereunder have received all approvals of governmental authorities required in
connection with the operation thereof and have been operated and maintained in
accordance with applicable laws, rules and regulations.
(c) The real property described on the Leased Real Property Schedule
constitutes all of the real property used or occupied by the Company.
(d) Except as set forth on the Leased Real Property Schedule, the Company
owns good and marketable title to, or a valid leasehold interest in, free and
clear of all Liens, all of the personal property and assets which are shown on
the Latest Balance Sheet or acquired thereafter or located on the Leased
Properties or used by the Company.
17
<PAGE>
(e) The buildings, machinery, equipment, personal properties, vehicles and
other tangible assets of the Company located upon or used in connection with the
Leased Properties are operated in conformity with all applicable laws and
regulations, are in good condition and repair, reasonable wear and tear
excepted, and are usable in the Ordinary Course of Business. The Company owns
or leases under valid leases all buildings, machinery, equipment and other
tangible assets necessary for the conduct of its business.
5.10 TAXES.
(a) Except as set forth on the "Taxes Schedule" attached hereto, (i) the
Company has timely filed or shall timely file all Tax Returns which are required
to be filed on or before the Closing Date, and all such Tax Returns are true,
complete and accurate, (ii) all Taxes due and payable by the Company have been
paid or shall be paid by the Company or the Seller on or before the Closing Date
and all Taxes accrued but not yet due are shown on the Latest Balance Sheet or
are set forth on the Taxes Schedule and no Taxes are delinquent, (iii) no
deficiency for any amount of Tax has been asserted or assessed by a taxing
authority against the Company and neither the Company nor the Seller reasonably
expects that any such assertion or assessment of Tax liability will be made,
(iv) the Company has not consented to extend the time in which any Tax may be
assessed or collected by any taxing authority, (v) the Company has not been a
member of an Affiliated Group, (vi) no claim has ever been made by a taxing
authority in a jurisdiction where the Company does not file Tax Returns that the
Company is or may be subject to Taxes assessed by such jurisdiction, (vii) the
Company has no liability for Taxes of any other Person under Treasury
Regulations Section 1.1502-6 (or any similar provision or state, local or
foreign Tax law), as a transferee, by contract, or otherwise, and (viii) the
Company has withheld and paid all Taxes required to have been withheld and paid
in connection with amounts paid or owing to any employee, independent
contractor, creditor, stockholder or other third party. The Taxes Schedule
contains a list of states, territories and jurisdictions (whether foreign or
domestic) in which the Company is required to file Tax Returns.
5.11 CONTRACTS AND COMMITMENTS.
(a) Except as specifically contemplated by this Agreement and except as set
forth on the "Contracts Schedule" attached hereto, the Company is not a party to
or bound by, whether written or oral, any:
(i) collective bargaining agreement or contract with any labor union or
any bonus, pension, profit sharing, retirement or any other form of deferred
compensation plan or any stock purchase, stock option, hospitalization
insurance or similar plan or practice, whether formal or informal;
(ii) any contract for the employment of any officer, individual employee
or other person on a full-time or consulting basis or any severance
agreements;
(iii) agreement or indenture relating to the borrowing of money or to
mortgaging, pledging or otherwise placing a Lien on any of its assets;
(iv) agreements with respect to the lending or investing of funds;
(v) license or royalty agreements;
(vi) guaranty of any obligation, other than endorsements made for
collection;
(vii) lease or agreement under which it is lessee of, or holds or
operates, any personal property owned by any other party calling for payments
in excess of $10,000 annually;
(viii) contract or group of related contracts with the same party
continuing over a period of more than six months from the date or dates
thereof, not terminable by it on 30 days or less notice without penalties or
involving more than $10,000;
(ix) contract which prohibits it from freely engaging in business
anywhere in the world; or
18
<PAGE>
(x) other agreement material to it whether or not entered into in the
Ordinary Course of Business.
(b) Except as disclosed on the Contracts Schedule, (i) no contract or
commitment required to be disclosed on the Contracts Schedule has been breached
or cancelled by the other party and the Company has no Knowledge of any
anticipated breach by any other party to any contract set forth on the Contracts
Schedule, (ii) no customer or supplier has indicated in writing or orally to the
Company or the Seller that it shall stop or decrease the rate of business done
with the Company or that it desires to renegotiate its contract or current
arrangement with the Company, (iii) the Company has performed all the
obligations required to be performed by it in connection with the contracts or
commitments required to be disclosed on the Contracts Schedule and is not in
default under or in breach of any contract or commitment required to be
disclosed on the Contracts Schedule, and no event has occurred which with the
passage of time or the giving of notice or both would result in a default or
breach thereunder, (iv) the Company has no present expectation or intention of
not fully performing any obligation pursuant to any contract set forth on the
Contracts Schedule, and (vi) each agreement is legal, valid, binding,
enforceable and in full force and effect and will continue as such following the
consummation of the transactions contemplated hereby.
(c) The Seller has provided the Purchaser with a true and correct copy of all
written contracts which are required to be disclosed on the Contracts Schedule,
in each case together with all amendments, waivers or other changes thereto (all
of which are disclosed on the Contracts Schedule). The Contracts Schedule
contains an accurate and complete description of all material terms of all oral
contracts referred to therein.
5.12 PROPRIETARY RIGHTS.
(b) The "Proprietary Rights Schedule" attached hereto sets forth a complete
and correct list of: (i) all patented, registered or applied for Proprietary
Rights owned or used by the Company; (ii) all trade names, unregistered
trademarks and material unregistered copyrights owned or used by the Company;
(iii) all licenses or other agreements to which the Company is a party, either
as licensee or licensor, for the Proprietary Rights.
(c) Except as set forth on the Proprietary Rights Schedule, (i) the Company
owns and possesses without restriction as to use, all right, title and interest
in and to the Proprietary Rights necessary for the operation of the Company's
businesses as currently conducted; (ii) the Company has not received any notices
of invalidity, infringement or misappropriation from any third party with
respect to any such Proprietary Rights; (iii) the Company has not interfered
with, infringed upon, misappropriated or otherwise come into conflict with any
Proprietary Rights of any third parties; and (iv) to the Company's Knowledge, no
third party has interfered with, infringed upon, misappropriated, or otherwise
come into conflict with any Proprietary Rights of the Company.
(d) The transactions contemplated by this Agreement shall have no adverse
effect on the Company's right, title and interest in and to any of their
Proprietary Rights. The Company has taken all necessary and desirable actions
to maintain and protect its Proprietary Rights and shall continue to maintain
and protect those rights prior to the Closing so as to not adversely affect the
validity or enforcement of such Proprietary Rights.
5.13 LITIGATION; PROCEEDINGS. Except as set forth on the "Litigation
Schedule" attached hereto, there are no actions, suits, proceedings, orders,
judgments, decrees or investigations pending or, to the Company's Knowledge,
threatened against or affecting the Company at law or in equity, or before or by
any federal, state, municipal or other governmental department, commission,
board, bureau, agency or instrumentality, domestic or foreign, and to the
Knowledge of the Company there is no basis known for any of the foregoing. The
Company is not subject to any outstanding order, judgment or decree issued by
any court or quasi-judicial or administrative agency of any federal, state,
local or foreign jurisdiction or any arbitrator.
5.14 BROKERAGE. Except as set forth on the "Brokerage Schedule" attached
hereto, there are no claims for brokerage commissions, finders' fees or similar
compensation in connection with the transactions contemplated by this Agreement
based on any arrangement or agreement made by or on behalf of the Company.
19
<PAGE>
5.15 GOVERNMENTAL LICENSES AND PERMITS. The "Permits Schedule" attached
hereto contains a complete listing and summary description of all Licenses owned
or possessed by the Company or used by the Company in the conduct of its
business. Except as indicated on the Permits Schedule, the Company owns or
possesses all right, title and interest in and to all Licenses which are
necessary to conduct its business as presently conducted and as proposed to be
conducted and shall use its reasonable efforts to maintain all such Licenses. No
loss or expiration of any License is pending or, to the Company's Knowledge,
threatened or reasonably foreseeable (including, without limitation, as a result
of the transactions contemplated hereby) other than expiration in accordance
with the terms thereof.
5.16 EMPLOYEES. Except as set forth on the "Employees Schedule" attached
hereto, to the Knowledge of the Company, no key executive employee and no group
of employees or independent contractors of the Company has any plans to
terminate his, her or its employment or relationship as an independent
contractor with the Company. The Company has complied with all applicable laws
relating to the employment of personnel and labor. The Company is not a party
to or bound by any collective bargaining agreement, nor has such party
experienced any strikes, grievances, unfair labor practices claims or other
material employee or labor disputes. The Company has not engaged in any unfair
labor practice. The Company has no Knowledge of any organizational effort
presently being made or threatened by or on behalf of any labor union with
respect to employees of the Company.
5.17 EMPLOYEE BENEFIT PLANS.
(a) Except as set forth on the "Benefit Plans Schedule" attached hereto, with
respect to current or former employees of the Company, the Company does not
maintain or contribute to or have any actual or potential liability with respect
to any (i) deferred compensation or bonus or retirement plans or arrangements,
(ii) qualified or nonqualified defined contribution or defined benefit plans or
arrangements which are employee pension benefit plans (as defined in Section
3(2) of the Employee Retirement Income Security Act of 1974 ("ERISA")), or (iii)
employee welfare benefit plans, (as defined in Section 3(1) of ERISA), stock
option or stock purchase plans, or material fringe benefit plans or programs
whether in writing or oral and whether or not terminated. The Company has not
ever contributed to any multiemployer pension plan (as defined in Section 3(37)
of ERISA), and the Company has not ever maintained or contributed to any defined
benefit plan (as defined in Section 3(35) of ERISA). The Company does not
maintain or contribute to any employee welfare benefit plan which provides
health, accident or life insurance benefits to former employees, their spouses
or dependents, other than in accordance with Section 4980B of the Code
("COBRA").
(b) The employee welfare benefit plans (and related trusts and insurance
contracts) set forth on the Benefit Plans Schedule comply in form and in
operation in all respects with the requirements of applicable laws and
regulations, including ERISA and the Code and the nondiscrimination rules
thereof.
(c) All required reports and descriptions (including Form 5500 Annual
Reports, Summary Annual Reports and Summary Plan Descriptions) with respect to
the employee pension benefit plans and employee welfare benefit plans set forth
on the Benefit Plans Schedule have been properly and timely filed with the
appropriate government agency and distributed to participants as required. The
Company has complied with the requirements of COBRA.
(d) With respect to each employee welfare benefit plan set forth on the
Benefit Plans Schedule, (i) there have been no prohibited transactions as
defined in Section 406 of ERISA or Section 4975 of the Code, (ii) no fiduciary
(as defined in Section 3(21) of ERISA) has any liability for breach of fiduciary
duty or any other failure to act or comply in connection with the administration
or investment of the assets of such plans, and (iii) no actions, investigations,
suits or claims with respect to the assets thereof (other than routine claims
for benefits) are pending or threatened, and the Company has no Knowledge of any
facts which would give rise to or could reasonably be expected to give rise to
any such actions, suits or claims.
(e) With respect to each of the employee welfare benefit plans listed on the
Benefit Plans Schedule, the Seller has furnished to the Purchaser true and
complete copies of (i) the plan documents, summary plan descriptions and
summaries of material modifications and other material employee communications,
(ii) the Form 5500 Annual Report (including all schedules and other attachments
for the most recent three years), (iii) all related trust
20
<PAGE>
agreements, insurance contracts or other funding agreements which implement such
plans and (iv) all contracts relating to each such plan, including, without
limitation, service provider agreements, insurance contracts, investment
management agreements and recordkeeping agreements.
5.18 INSURANCE. The "Insurance Schedule" attached hereto lists and briefly
describes each insurance policy maintained by the Company with respect to its
properties, assets and business, together with a claims history for the past
five years. All of such insurance policies are in full force and effect, and
the Company is not in default with respect to its obligations under any such
insurance policies and the Company has not been denied insurance coverage.
Except as set forth on the Insurance Schedule, the Company does not have any
self-insurance or co-insurance programs, and the reserves set forth on the
Latest Balance Sheet are adequate to cover all anticipated liabilities with
respect to self-insurance or coinsurance programs.
5.19 OFFICERS AND DIRECTORS; BANK ACCOUNTS. The "Officers, Directors and Bank
Accounts Schedule" attached hereto lists all officers and directors of the
Company, and all bank accounts, safety deposit boxes and lock boxes (designating
each authorized signatory with respect thereto) for the Company.
5.20 AFFILIATE TRANSACTIONS. Except as disclosed on the "Affiliated
Transactions Schedule" attached hereto, no Insider is a party to any agreement,
contract, commitment or transaction with the Company or which is pertaining to
the business of the Company or has any interest in any property, real or
personal or mixed, tangible or intangible, used in or pertaining to the business
of the Company.
5.21 COMPLIANCE WITH LAWS. The Company and its officers, directors, partners,
agents and employees have complied with and are in compliance with all
applicable laws, regulations and ordinances of foreign, federal, state and local
governments and all agencies thereof which are applicable to the business,
business practices (including, but not limited to, the Company's marketing and
sales of its products and services) or any owned or leased properties of the
Company and to which the Company may be subject, and no claims have been filed
against the Company alleging a violation of any such laws or regulations, and
the Company has not received notice of any such violations.
5.22 ENVIRONMENTAL MATTERS. Except as set forth on the "Environmental
Schedule" attached hereto:
(a) The Company has complied with and are currently in compliance with all
Environmental and Safety Requirements, and the Company has not received any oral
or written notice, report or information regarding any liabilities (whether
accrued, absolute, contingent, unliquidated or otherwise) or any corrective,
investigatory or remedial obligations arising under Environmental and Safety
Requirements which relate to the Company or any of its properties or facilities.
(b) Without limiting the generality of the foregoing, the Company has
obtained and complied with, and is currently in compliance with, all permits,
licenses and other authorizations that may be required pursuant to any
Environmental and Safety Requirements for the occupancy of its properties or
facilities or the operation of its business. A list of all such permits,
licenses and other authorizations which are material to the Company is set forth
on the Environmental Schedule.
(c) Neither this Agreement or the other Transaction Documents nor the
consummation of the transactions contemplated hereby and thereby shall impose
any obligations on the Company or otherwise for site investigation or cleanup,
or notification to or consent of any government agencies or third parties under
any Environmental and Safety Requirements (including, without limitation, any so
called "transaction-triggered" or "responsible property transfer" laws and
regulations).
(d) None of the following exists at any property or facility owned, occupied
or operated by the Company: (i) underground storage tanks or surface
impoundments; (ii) asbestos-containing material in any form or condition; (iii)
materials or equipment containing polychlorinated biphenyls; or (iv) landfills.
21
<PAGE>
(e) The Company has not treated, stored, disposed of, arranged for or
permitted the disposal of, transported, handled or Released any substance
(including, without limitation, any hazardous substance) or owned, occupied or
operated any facility or property, so as to give rise to liabilities of the
Company for response costs, natural resource damages or attorneys' fees pursuant
to CERCLA or any other Environmental and Safety Requirements.
(f) Without limiting the generality of the foregoing, no facts, events or
conditions relating to the past or present properties, facilities or operations
of the Company shall prevent, hinder or limit continued compliance with
Environmental and Safety Requirements, give rise to any corrective,
investigatory or remedial obligations pursuant to Environmental and Safety
Requirements or give rise to any other liabilities (whether accrued, absolute,
contingent, unliquidated or otherwise) pursuant to Environmental and Safety
Requirements, including, without limitation, those liabilities relating to
onsite or offsite Releases or threatened Releases of hazardous materials,
substances or wastes, personal injury, property damage or natural resources
damage.
(g) The Company has not, either expressly or by operation of law, assumed or
undertaken any liability or corrective investigatory or remedial obligation of
any other Person relating to any Environmental and Safety Requirements.
(h) No Environmental Lien has attached to any property owned, leased or
operated by the Company.
5.23 DISCLOSURE. Neither this Agreement, the other Transaction Documents, nor
any of the schedules, attachments or Exhibits hereto, contain any untrue
statement of a material fact or omit a material fact necessary to make each
statement contained herein or therein, not misleading; There is no fact which
has not been disclosed to the Purchaser of which the Company has Knowledge which
has a Material Adverse Effect or could reasonably be anticipated to have a
Material Adverse Effect.
5.24 CLOSING DATE. All of the representations and warranties contained in
this Article V and elsewhere in this Agreement and all information delivered in
any schedule, attachment or Exhibit hereto or in any writing delivered to the
Purchaser are true and correct on the date of this Agreement and shall be true
and correct on the Closing Date, except to the extent that the Seller has
advised the Purchaser otherwise in writing prior to the Closing.
ARTICLE VI
REPRESENTATIONS AND WARRANTIES CONCERNING THE SELLER
As a material inducement to the Purchaser to enter into this Agreement, the
Seller represents and warrants to the Purchaser that:
6.1 AUTHORIZATION OF TRANSACTIONS. The Seller has full power, authority and
legal capacity to enter into this Agreement and the other documents contemplated
hereby to which the Seller is a party and to perform his obligations hereunder
and thereunder. This Agreement and the other documents contemplated hereby to
which the Seller is a party have been duly executed and delivered by the Seller
and constitute the valid and binding agreements of the Seller, enforceable in
accordance with their respective terms.
6.2 ABSENCE OF CONFLICTS. Neither the execution and the delivery of this
Agreement and the other documents contemplated hereby to which the Seller is a
party, nor the consummation of the transactions contemplated hereby and thereby,
shall (a) conflict with, result in a breach of any of the provisions of, (b)
constitute a default under, (c) result in the violation of, (d) give any third
party the right to terminate or to accelerate any obligation under, (e) result
in the creation of any Lien upon the Acquired Stock owned by the Seller, or (f)
require any authorization, consent, approval, execution or other action by or
notice to any court or other governmental body, under the provisions of any
indenture, mortgage, lease, loan agreement or other agreement or instrument to
which the Seller is bound or affected, or any statute, regulation, rule,
judgment, order, decree or other restriction of any government, governmental
agency or court to which the Seller is subject. No notice to, filing with or
authorization, consent or approval of any government or governmental agency by
the Seller is necessary for the
22
<PAGE>
consummation of the transactions contemplated by this Agreement and the other
documents contemplated hereby to which the Seller is a party.
6.3 BROKERAGE. Except as set forth on the Brokerage Schedule, there are no
claims for brokerage commissions, finders' fees or similar compensation in
connection with the transactions contemplated by this Agreement based on any
arrangement or agreement made by or on behalf of the Seller.
6.4 SHARES. The Seller is not a party to any option, warrant, right,
contract, call, put or other agreement or commitment providing for the
disposition or acquisition of any capital stock of the Company (other than this
Agreement). The Seller is not a party to any voting trust, proxy or other
agreement or understanding with respect to the voting of any capital stock of
the Company.
6.5 INVESTMENT IN SUBORDINATED NOTES AND NES COMMON STOCK. The Seller (a)
understands that the Subordinated Notes and NES Common Stock (collectively, the
"NES Securities") have not been, and will not be, registered under the
Securities Act of 1933, as amended, or under any state securities laws, and are
being offered and sold in reliance upon federal and state exemptions for
transactions not involving any public offering, (b) understands that the NES
Securities are not transferable, (c) is acquiring the NES Securities solely for
his or its own account for investment purposes, and not with a view to the
distribution thereof, (d) is a sophisticated investor with knowledge and
experience in business and financial matters, (e) has received certain
information concerning Purchaser and has had the opportunity to obtain
additional information as desired in order to evaluate the merits and the risks
inherent in holding the NES Securities and (f) is able to bear the economic risk
and lack of liquidity inherent in holding the NES Securities.
6.6 CLOSING DATE. All of the representations and warranties concerning the
Seller contained in this Article VI and elsewhere in this Agreement and all
information delivered in any schedule, attachment or Exhibit hereto or in any
writing delivered to the Purchaser are true and correct on the date of this
Agreement and shall be true and correct on the Closing Date except to the extent
that the Seller has advised the Purchaser otherwise in writing prior to the
Closing.
ARTICLE VII
REPRESENTATIONS AND WARRANTIES CONCERNING THE PURCHASER
As a material inducement to the Seller to enter into this Agreement, the
Purchaser hereby represents and warrants to the Seller that:
7.1 ORGANIZATION AND CORPORATE POWER. The Purchaser is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware, with full corporate power and authority to enter into this Agreement
and the other agreements contemplated hereby to which the Purchaser is a party
and perform its obligations hereunder and thereunder.
7.2 AUTHORIZATION. The execution, delivery and performance of this Agreement
and the other agreements contemplated hereby to which the Purchaser is a party
have been duly and validly authorized by all requisite corporate action on the
part of the Purchaser, and no other corporate proceedings on its part are
necessary to authorize the execution, delivery or performance of this Agreement.
This Agreement constitutes, and each of the other agreements contemplated hereby
to which the Purchaser is a party shall when executed constitute, a valid and
binding obligation of the Purchaser, enforceable in accordance with their terms.
7.3 NO VIOLATION. The Purchaser is not subject to or obligated under its
certificate of incorporation, its by-laws, any applicable law, or rule or
regulation of any governmental authority, or any agreement or instrument, or any
license, franchise or permit, or subject to any order, writ, injunction or
decree, which would be breached or violated by its execution, delivery or
performance of this Agreement and the other agreements contemplated hereby to
which the Purchaser is a party.
23
<PAGE>
7.4 GOVERNMENTAL AUTHORITIES AND CONSENTS. The Purchaser is not required to
submit any notice, report or other filing with any governmental authority in
connection with the execution or delivery by it of this Agreement and the other
agreements contemplated hereby to which the Purchaser is a party or the
consummation of the transactions contemplated hereby or thereby. No consent,
approval or authorization of any governmental or regulatory authority or any
other party or person is required to be obtained by the Purchaser in connection
with its execution, delivery and performance of this Agreement and the other
agreements contemplated hereby to which the Purchaser is a party or the
transactions contemplated hereby or thereby.
7.5 LITIGATION. There are no actions, suits, proceedings or orders pending
or, to the Purchaser's knowledge, threatened against or affecting the Purchaser
at law or in equity, or before or by any federal, state, municipal or other
governmental department, commission, board, bureau, agency or instrumentality,
domestic or foreign, which would adversely affect the Purchaser's performance
under this Agreement and the other agreements contemplated hereby to which the
Purchaser is a party or the consummation of the transactions contemplated hereby
or thereby.
7.6 BROKERAGE. There are no claims for brokerage commissions, finders' fees
or similar compensation in connection with the transactions contemplated by this
Agreement based on any arrangement or agreement made by or on behalf of the
Purchaser.
7.7 CLOSING DATE. All of the representations and warranties contained in this
Article VII and elsewhere in this Agreement and all information delivered in any
schedule, attachment or Exhibit hereto or in any writing delivered to the Seller
are true and correct on the date of this Agreement and shall be true and correct
on the Closing Date, except to the extent that the Purchaser has advised the
Seller otherwise in writing prior to the Closing.
ARTICLE VIII
TERMINATION
8.1 TERMINATION. This Agreement may be terminated at any time prior to the
Closing:
(a) by mutual written consent of the Seller and the Purchaser;
(b) by the Seller or the Purchaser if there has been a material
misrepresentation or breach on the part of the other Party of the
representations, warranties or covenants set forth in this Agreement or if
events have occurred which have made it impossible to satisfy a condition
precedent to the terminating Party's obligations to consummate the transactions
contemplated hereby unless such terminating Party's willful or knowing breach of
this Agreement has caused the condition to be unsatisfied; or
(c) by the Seller or the Purchaser if the Closing has not occurred on or
prior to February 28, 1997; provided, however, that neither the Purchaser nor
the Seller shall be entitled to terminate this Agreement pursuant to this
Section 8.1(c) if such Party's willful or knowing breach of this Agreement has
prevented the consummation of the transactions contemplated hereby at or prior
to such time.
8.2 EFFECT OF TERMINATION. In the event of termination of this Agreement by
either the Seller or the Purchaser as provided in Section 8.1, this Agreement
shall forthwith become void and there shall be no liability on the part of any
Party to any other Party under this Agreement, except that the provisions of
Sections 10.4 and 10.8 and Article XI shall continue in full force and effect
and except that nothing herein shall relieve any Party from liability for any
breach of this Agreement prior to such termination.
24
<PAGE>
ARTICLE IX
INDEMNIFICATION AND RELATED MATTERS
9.1 SURVIVAL. All representations, warranties, covenants and agreements set
forth in this Agreement or in any writing or certificate delivered in connection
with this Agreement shall survive the Closing Date and the consummation of the
transactions contemplated hereby and shall not be affected by any examination
made for or on behalf of any Party, the knowledge of any of such Party's
officers, directors, stockholders, employees or agents, or the acceptance of any
certificate or opinion. Notwithstanding the foregoing, no Party shall be
entitled to recover for any Loss pursuant to Section 9.2(a)(i) or Section
9.2(c)(i) unless written notice of a claim thereof is delivered to the other
Party prior to the Applicable Limitation Date. For purposes of this Agreement,
the term "Applicable Limitation Date" shall mean the second anniversary of the
Closing Date; provided that the Applicable Limitation Date with respect to the
following Losses shall be as follows: (i) with respect to any Loss arising from
or related to a breach of the representations and warranties of the Company and
the Seller set forth in Section 5.10 (Taxes), the Applicable Limitation Date
shall be the 30th day after expiration of the statute of limitations (including
any extensions thereto to the extent that such statute of limitations may be
tolled) applicable to the Tax which gave rise to such Loss, (ii) with respect to
any Loss arising from or related to a breach of the representations and
warranties of the Company and the Seller set forth in Section 5.22
(Environmental), the Applicable Limitation Date shall be the fifth anniversary
of the Closing Date, (iii) with respect to any Loss arising from or related to a
breach of the representations and warranties contained in Section 5.24 (Closing
Date), Section 6.6 (Closing Date) and Section 7.7 (Closing Date) where the
subject matter of such breach is addressed by one of the representations and
warranties referred to in clauses (i), (ii), or (iv) of this Section 9.1, the
time limitation set forth in the relevant item of this clause (iii) shall
control when written notice of such breach must be given, and (iv) with respect
to any Loss arising from or related to a breach of the representations and
warranties of the Company and the Seller set forth in Section 5.1 (Organization
and Corporate Power), Section 5.2 (Authorization of Transactions), Section 5.3
(Capitalization), Section 5.5 (Absence of Conflicts), Section 5.14 (Brokerage)
or Article V (Representations and Warranties with Respect to the Seller) and
with respect to any Loss arising from or related to a breach of the
representations and warranties of Purchaser set forth in Section 7.1
(Organization an Corporate Power), 7.2 (Authorization of Transactions), 7.3 (No
Violation) or 7.6 (Brokerage), there shall be no Applicable Limitation Date
(i.e., such representations and warranties shall survive forever).
9.2 INDEMNIFICATION.
(a) The Seller shall indemnify the Purchaser, and the Company and each of
their respective officers, directors, stockholders, employees, agents,
representatives, affiliates, successors and assigns (collectively, the
"Purchaser Parties") and hold each of them harmless from and against and pay on
behalf of or reimburse such Purchaser Parties in respect of any Loss which any
such Purchaser Party may suffer, sustain or become subject to, as a result of or
relating to:
(i) the breach of any representation or warranty made by the Company or
the Seller contained in Article V of this Agreement or any certificate
delivered by the Company or the Seller to the Purchaser with respect thereto
in connection with the Closing;
(ii) the breach of any representation or warranty made by the Seller
contained in Article VI of this Agreement or any certificate delivered by the
Seller to Purchaser with respect thereto in connection with the Closing; or
(iii) the breach of any representation, warranty (other than
representations or warranties set forth in Articles V and VI), covenant or
agreement made by the Company or the Seller contained in this Agreement, the
other Transaction Documents, any Exhibit hereto or any certificate delivered
by the Company or the Seller to the Purchaser with respect thereto in
connection with the Closing.
The Purchaser's remedy for any indemnification of Losses hereunder may be
satisfied by proceeding against Seller for all or any portion of any such Loss.
In addition, Purchaser shall have the option of recouping all or any part of
25
<PAGE>
any Losses it may suffer (in lieu of seeking an equivalent amount of
indemnification to which it is entitled under this Section 9.2) by notifying the
Seller that Purchaser is reducing the principal amount outstanding under his
Subordinated Note. This shall affect the timing and amount of payments required
under such Subordinated Note in the same manner as if Purchaser had made a
prepayment (without premium or penalty) thereunder.
(b) The indemnification provided for in Section 9.2(a)(i) above is subject to
the following limitations:
(i) The Seller will be liable to the Purchaser Parties with respect to
claims referred to in Section 9.2(a)(i) only if Purchaser gives the Seller
written notice thereof within the Applicable Limitation Date; and
(ii) The aggregate amount of all payments made by the Seller in
satisfaction of claims for indemnification pursuant to Section 9.2(a)(i)
shall not exceed the Purchase Price (the "Cap").
Notwithstanding any implication to the contrary contained in this Agreement, so
long as the Purchaser delivers written notice of a claim to Seller no later than
the Applicable Limitation Date, the Seller shall be required to indemnify the
Purchaser Parties for all Losses (up to the Cap) which the Purchaser Parties may
incur in respect of the matters which are the subject of such claim, regardless
of when incurred.
(c) The Purchaser shall indemnify the Seller and hold the Seller and its
officers, directors, stockholders, employees, agents, representatives,
affiliates, successors and assigns (collectively, the "Seller Parties") harmless
from and against and pay on behalf of or reimburse the Seller in respect of any
Loss which the Seller Parties may suffer, sustain or become subject to, as a
result of or relating to:
(i) the breach of any representation or warranty made by the Purchaser
contained in Article VII of this Agreement or any certificate delivered by
the Purchaser to the Seller with respect thereto in connection with the
Closing;
(ii) the breach of any representation, warranty (other than
representations or warranties set forth in Article VII), covenant or
agreement made by the Purchaser contained in this Agreement, the other
Transaction Documents, any Exhibit hereto or any certificate delivered by the
Purchaser to the Seller with respect thereto in connection with the Closing;
or
(iii) any liability or obligation of Seller with respect to any guaranty
executed by Seller prior to the date hereof in favor of third parties with
respect to Indebtedness of the Company, the lease of property of the Company
or other obligations of the Company described on the Contracts Schedule
attached hereto.
(d) The indemnification provided for in Section 9.2(c)(i) above is subject to
the following limitations:
(i) The Purchaser will be liable to the Seller Parties with respect to
claims referred to in Section 9.2(c)(i) only if the Seller gives the
Purchaser written notice thereof within the Applicable Limitation Date; and
(ii) The aggregate amount of all payments made by the Purchaser in
satisfaction of claims for indemnification pursuant to Section 9.2(c)(i)
shall not exceed the Cap.
Notwithstanding any implication to the contrary contained in this Agreement, so
long as the Seller delivers written notice of a claim to the Purchaser no later
than the Applicable Limitation Date, the Purchaser shall be required to
indemnify the Seller Parties for all Losses (up to the Cap) which the Seller
Parties may incur in respect of the matters which are the subject of such claim,
regardless of when incurred.
(e) If a party hereto seeks indemnification under this Article VIII, such
party (the "Indemnified Party") shall give written notice to the other party
(the "Indemnifying Party") after receiving written notice of any action,
lawsuit, proceeding, investigation or other claim against it (if by a third
party) or discovering the liability, obligation or facts giving rise to such
claim for indemnification, describing the claim, the amount thereof (if known
and quantifiable), and the basis thereof; provided that the failure to so notify
the Indemnifying
26
<PAGE>
Party shall not relieve the Indemnifying Party of its or his obligations
hereunder except to the extent such failure shall have harmed the Indemnifying
Party. In that regard, if any action, lawsuit, proceeding, investigation or
other claim shall be brought or asserted by any third party which, if adversely
determined, would entitle the Indemnified Party to indemnity pursuant to this
Article IX, the Indemnified Party shall promptly notify the Indemnifying Party
of the same in writing, specifying in detail the basis of such claim and the
facts pertaining thereto and the Indemnifying Party shall be entitled to
participate in the defense of such action, lawsuit, proceeding, investigation or
other claim giving rise to the Indemnified Party's claim for indemnification at
its expense, and at its option (subject to the limitations set forth below)
shall be entitled to appoint lead counsel of such defense with reputable counsel
reasonably acceptable to the Indemnified Party; provided that, as a condition
precedent to the Indemnifying Party's right to assume control of such defense,
it must first:
(i) enter into an agreement with the Indemnified Party (in form and
substance reasonably satisfactory to the Indemnified Party) pursuant to which
the Indemnifying Party agrees to be fully responsible for all Losses relating
to such claims and that it will provide full indemnification to the
Indemnified Party for all Losses relating to such claim, and
(ii) unconditionally guarantees the payment and performance of any
liability or obligation which may arise with respect to such claim or the
facts giving rise to such claim for indemnification, and
(iii) furnish the Indemnified Party with reasonable evidence that the
Indemnifying Party is and will be able to satisfy any such liability;
and provided further that the Indemnifying Party shall not have the right to
assume control of such defense and shall pay the fees and expenses of counsel
retained by the Indemnified Party, if the claim which the Indemnifying Party
seeks to assume control (i) seeks non-monetary relief, (ii) involves criminal
or quasi-criminal allegations, (iii) involves a claim to which the Indemnified
Party reasonably believes an adverse determination would be detrimental to or
injure the Indemnified Party's reputation or future business prospects, or (iv)
involves a claim which, upon petition by the Indemnified Party, the appropriate
court rules that the Indemnifying Party failed or is failing to vigorously
prosecute or defend.
If the Indemnifying Party is permitted to assume and control the defense and
elects to do so, the Indemnified Party shall have the right to employ counsel
separate from counsel employed by the Indemnifying Party in any such action and
to participate in the defense thereof, but the fees and expenses of such counsel
employed by the Indemnified Party shall be at the expense of the Indemnified
Party unless (i) the employment thereof has been specifically authorized by the
Indemnifying Party in writing, or (ii) the Indemnifying Party has been advised
by counsel that a reasonable likelihood exists of a conflict of interest between
the Indemnifying Party and the Indemnified Party.
If the Indemnifying Party shall control the defense of any such claim, the
Indemnifying Party shall obtain the prior written consent of the Indemnified
Party (which shall not be unreasonably withheld) before entering into any
settlement of a claim or ceasing to defend such claim, if pursuant to or as a
result of such settlement or cessation, injunction or other equitable relief
will be imposed against the Indemnified Party or if such settlement does not
expressly unconditionally release the Indemnified Party from all liabilities and
obligations with respect to such claim, without prejudice.
(f) The Indemnifying Party shall pay the Indemnified Party in immediately
available funds promptly after the Indemnified Party provides the Indemnifying
Party with written notice of a claim hereunder and the Parties reasonably agree
that there is a reasonable basis for such claim.
(g) Amounts paid to or on behalf of the Seller or the Purchaser as
indemnification shall be treated as adjustments to the Purchase Price.
(h) Effective upon the Closing, the Seller hereby irrevocably waives, releases
and discharges the Company from any and all liabilities and obligations to the
Seller of any kind or nature whatsoever, whether in his capacity as Seller
27
<PAGE>
hereunder, as a stockholder, officer or director of the Company or otherwise
(including, without limitation, in respect of rights of contribution or
indemnification other than compensation as an employee of the Company), in each
case whether absolute or contingent, liquidated or unliquidated, and whether
arising hereunder or under any other agreement or understanding or otherwise at
law or equity, and the Seller shall not seek to recover any amounts in
connection therewith or thereunder from the Company.
ARTICLE X
ADDITIONAL AGREEMENTS
10.1 NES SECURITIES.
(a) Subordinated Notes. Each Subordinated Note will be imprinted with a
legend substantially in the following form:
THE PAYMENT OF PRINCIPAL AND INTEREST ON THIS NOTE IS SUBJECT TO CERTAIN
RECOUPMENT PROVISIONS SET FORTH IN A STOCK PURCHASE AGREEMENT DATED AS OF
FEBRUARY 18, 1997 (THE "PURCHASE AGREEMENT") AMONG THE ISSUER OF THIS NOTE,
THE PERSON TO WHOM THIS NOTE ORIGINALLY WAS ISSUED, AND CERTAIN OTHER PERSONS.
THIS NOTE WAS ORIGINALLY ISSUED ON FEBRUARY 18, 1997, AND HAS NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED. THE TRANSFER OF THIS
NOTE IS SUBJECT TO CERTAIN RESTRICTIONS SET FORTH IN THE PURCHASE AGREEMENT.
THE ISSUER OF THIS NOTE WILL FURNISH A COPY OF THESE PROVISIONS TO THE HOLDER
HEREOF WITHOUT CHARGE UPON WRITTEN REQUEST.
(b) NES Common Stock. Each certificate representing shares of NES Common
Stock will be imprinted with a legend substantially in the following form:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE WERE ORIGINALLY ISSUED ON
FEBRUARY 18, 1997, AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED. THE TRANSFER OF THE SECURITIES REPRESENTED BY THIS
CERTIFICATE IS SUBJECT TO THE CONDITIONS SPECIFIED IN THE STOCK PURCHASE
AGREEMENT, DATED AS OF FEBRUARY 18, 1997 AND AS AMENDED AND MODIFIED FROM TIME
TO TIME, BETWEEN THE ISSUER (THE "COMPANY") AND CERTAIN OTHER PERSONS, AND THE
COMPANY RESERVES THE RIGHT TO REFUSE THE TRANSFER OF SUCH SECURITIES UNTIL
SUCH CONDITIONS HAVE BEEN FULFILLED WITH RESPECT TO SUCH TRANSFER. A COPY OF
SUCH CONDITIONS SHALL BE FURNISHED BY THE COMPANY TO THE HOLDER HEREOF UPON
WRITTEN REQUEST AND WITHOUT CHARGE.
The NES Securities shall not be transferable without the Purchaser's prior
written consent.
10.2 CONTINUING ASSISTANCE. Subsequent to the Closing, the Seller and the
Purchaser (at their own cost) shall assist each other (including making records
available) in the preparation of their respective Tax Returns and the filing and
execution of Tax elections, if required, as well as any audits or litigation
that ensue as a result of the filing thereof, to the extent that such assistance
is reasonably requested. In addition, to the extent not otherwise obtained by
Closing, the Seller will use best efforts to obtain (a) all consents by third
parties that are required for the transfer of the Acquired Stock to the
Purchaser, and the consummation of the other transactions contemplated hereby or
that are required in order to prevent a breach of, a default under, a
termination or modification of, or any acceleration of, any obligations under
any material contract to which the Company is a party, (b) payoff letters with
respect to all of the Company's Indebtedness outstanding as of the Closing and
(c) releases of any and all Liens (including obtaining and filing appropriate
UCC termination statements) held by third parties against property of the
Company, all on terms reasonably satisfactory to the Purchaser.
10.3 TAX MATTERS. All transfer, documentary, sales, use, stamp, registration
and other such Taxes and fees (including any penalties and interest thereon)
incurred in connection with this Agreement shall be paid by the Seller
28
<PAGE>
when due, and the Seller shall, at his own expense, file all necessary Tax
Returns and other documentation with respect to all such transfer, documentary,
sales, use, stamp, registration and other Taxes and fees, and if required by
applicable law, the Purchaser shall, and shall cause its affiliates to, join in
the execution of any such Tax Returns and other documentation.
10.4 PRESS RELEASES AND ANNOUNCEMENTS. Prior to the Closing Date, no press
releases related to this Agreement and the transactions contemplated herein, or
other announcements to the employees, customers or suppliers of the Company
shall be issued without the mutual approval of all Parties, except for any
public disclosure which any Party in good faith believes is required by law or
regulation (in which case the disclosure shall be prepared jointly by the Seller
and the Purchaser). After the Closing Date, no press releases related to this
Agreement and the transactions contemplated herein, or other announcements to
the employees, customers or suppliers of the Company shall be issued without the
Purchaser's consent (which shall not be unreasonably withheld).
10.5 FURTHER TRANSFERS. The Seller shall execute and deliver such further
instruments of conveyance and transfer and take such additional action as the
Purchaser may reasonably request to effect, consummate, confirm or evidence the
transfer to the Purchaser of the Acquired Stock and any other transactions
contemplated hereby.
10.6 SPECIFIC PERFORMANCE. The Seller acknowledges that the Company's
business is unique and recognizes and affirms that in the event of a breach of
this Agreement by the Seller, money damages may be inadequate and Purchaser may
have no adequate remedy at law. Accordingly, the Seller agrees that Purchaser
shall have the right, in addition to any other rights and remedies existing in
its favor, to enforce its rights and the Seller's obligations hereunder not only
by an action or actions for damages but also by an action or actions for
specific performance, injunctive and/or other equitable relief.
10.7 TRANSITION ASSISTANCE. The Seller shall not in any manner take any
action which is designed, intended, or might be reasonably anticipated to have
the effect of discouraging customers, suppliers, lessors, licensors and other
business associates from maintaining the same business relationships with the
Company after the date of this Agreement as were maintained with the Company
prior to the date of this Agreement.
10.8 EXPENSES. Except as otherwise provided herein, the Seller and the
Purchaser shall pay all of their own fees, costs and expenses (including,
without limitation, fees, costs and expenses of legal counsel, investment
bankers, brokers or other representatives and consultants and appraisal fees,
costs and expenses) incurred in connection with the negotiation of the this
Agreement and the other agreements contemplated hereby, the performance of its
obligations hereunder and thereunder, and the consummation of the transactions
contemplated hereby and thereby (collectively, the "Transaction Expenses"); it
being understood that the Seller shall pay the fees, costs and expenses of the
Company and that the Company shall pay any of the Seller's fees, costs and
expenses (including, without limitation, legal and accounting fees, costs and
expenses) arising in connection with the transactions contemplated hereby if the
transactions are not consummated. At the request of the Seller, the fees, costs
and expenses for which they are liable pursuant to this Section 10.8 may be
deducted from the Cash Purchase Price and paid directly to the Seller's legal
counsel, investment bankers and other agents and representatives. To the
extent that the Company pays or becomes liable with respect to any Transaction
Expenses of the Company or the Seller, the Cash Purchase Price shall be reduced
dollar-for-dollar. Notwithstanding the foregoing, the Purchaser shall pay, on
behalf of the Company, the commission owing to Grand Teton Acquisitions pursuant
to that certain Commission Agreement dated as of November 20, 1996, and no
reduction to the Cash Purchase Price shall be made as a result of such payment.
10.9 EXCLUSIVITY. Until this Agreement is terminated by its terms, neither
the Company nor the Seller (and neither the Company nor the Seller shall cause
or permit any Insider or agent or any other Person acting on behalf of the
Seller, the Company, or its Affiliates to), (a) solicit, initiate or encourage
the submission of any proposal or offer from any Person (including any of them)
relating to any (i) liquidation, dissolution or recapitalization of, (ii) merger
or consolidation with or into, (iii) acquisition or purchase of assets of or any
equity interest in or (iv) similar transaction or business combination involving
the Company or (b) participate in any discussions or negotiations regarding,
furnish any information with respect to, assist or participate in, or facilitate
in any other manner any
29
<PAGE>
effort or attempt by any other Person to do or seek any of the foregoing. The
Company and the Seller agrees that it will discontinue immediately any
negotiations or discussion with respect to any of the foregoing. Until this
Agreement is terminated by its terms, the Seller and the Company shall notify
the Purchaser immediately if any Person makes any proposal, offer, inquiry or
contact with respect to any of the foregoing.
10.10 BOOKS AND RECORDS. Unless otherwise consented to in writing by the
Seller or the Purchaser (as the case may be), the Purchaser and the Seller will
not, for a period of seven years following the date hereof, destroy, alter or
otherwise dispose of any of the books and records of the Company acquired by the
Purchaser hereunder or retained by the Seller without first offering to
surrender to the Seller or the Purchaser such books and records or any portion
thereof of which the Seller or the Purchaser may intend to destroy, alter or
dispose. The Purchaser and the Seller will allow the other party's
representatives, attorneys and accountants access to such books and records,
upon reasonable request for during such party's normal business hours, for the
purpose of examining and copying the same in connection with any matter whether
or not related to or arising out of this Agreement or the transactions
contemplated hereby.
10.11 NONCOMPETITION, NONSOLICITATION AND CONFIDENTIALITY
(a) Noncompetition. In consideration of the mutual covenants provided for
herein to the Seller at the Closing, during the period beginning on the Closing
Date and ending on the fifth anniversary of the Closing Date (the "Noncompete
Period"), the Seller shall not engage (whether as an owner, operator, manager,
employee, officer, director, consultant, advisor, representative or otherwise)
directly or indirectly in any business that the Company conducts or proposes to
conduct as of the Closing Date in the State of Georgia or any other geographic
area in which the Company conducts its business as of the Closing Date, except
as expressly permitted under any employment agreement with the Company executed
at the Closing as contemplated hereunder; provided that ownership of less than
2% of the outstanding stock of any publicly-traded corporation shall not be
deemed to be engaging solely by reason thereof in any of its businesses. The
parties hereto agree that the covenant set forth in this Section 10.11 is
reasonable with respect to its duration, geographical area and scope. If the
final judgment of a court of competent jurisdiction declares that any term or
provision of this Section 10.11(a) is invalid or unenforceable, the Parties
agree that the court making the determination of invalidity or unenforceability
shall have the power to reduce the scope, duration, or area of the term or
provision, to delete specific words or phrases, or to replace any invalid or
unenforceable term or provision with a term or provision that is valid and
enforceable and that comes closest to expressing the intention of the invalid or
unenforceable term or provision, and this Agreement shall be enforceable as so
modified after the expiration of the time within which the judgment may be
appealed. As further consideration for the obligations of the Seller pursuant
to this Section 10.11, the Purchaser shall pay to the Seller $150,000 on the
Closing Date in the form of Subordinated Notes (the "Noncompete Payment").
(b) Nonsolicitation. The Seller agrees that, during the Noncompete Period,
the Seller (i) shall not, and shall use his best efforts not to permit the
Seller's affiliates to, directly or indirectly contact, approach or solicit for
the purpose of offering employment to or hiring (whether as an employee,
consultant, agent, independent contractor or otherwise) or actually hire any
person employed by the Company at any time prior to the Closing Date or during
the Noncompete Period, without the prior written consent of the Company and (ii)
shall not induce or attempt to induce any customer or other business relation of
the Company into any business relationship which might materially harm the
Company. The term "indirectly" as used in this Section 10.11 is intended to
mean any acts authorized or directed by or on behalf of the Seller or any person
controlled by the Seller.
(c) Confidentiality. The Seller shall treat and hold as confidential any
information concerning the business and affairs of the Company that is not
already generally available to the public (the "Confidential Information"),
refrain from using any of the Confidential Information except in connection with
this Agreement, and deliver promptly to the Purchaser or destroy, at the request
and option of the Purchaser, all tangible embodiments (and all copies) of the
Confidential Information which are in his possession or under his control. In
the event that the Seller is requested or required (by oral question or request
for information or documents in any legal proceeding, interrogatory, subpoena,
civil investigative demand, or similar process) to disclose any Confidential
Information, the Seller shall notify the Purchaser promptly of the request or
requirement so that the Purchaser may seek an appropriate protective order or
waive compliance with the provisions of this Section 10.11(c). If, in the
absence of a protective order or the receipt
30
<PAGE>
of a waiver hereunder, the Seller is, on the advice of counsel, compelled to
disclose any Confidential Information to any tribunal or else stand liable for
contempt, the Seller may disclose the Confidential Information to the tribunal;
provided that the Seller shall use his best efforts to obtain, at the request of
the Purchaser, an order or other assurance that confidential treatment shall be
accorded to such portion of the Confidential Information required to be
disclosed as the Purchaser shall designate.
(d) Trade Names. The Seller shall not use or permit any of his affiliates to
use the "Aerial Platforms" name or any name confusingly similar thereto in any
manner anywhere in the world after Closing.
(e) Remedy for Breach. The Seller acknowledges and agrees that in the event
of a breach by the Seller of any of the provisions of this Section 10.11,
monetary damages shall not constitute a sufficient remedy. Consequently, in the
event of any such breach, the Company, Purchaser and/or their respective
successors or assigns may, in addition to other rights and remedies existing in
their favor, apply to any court of law or equity of competent jurisdiction for
specific performance and/or injunctive or other relief in order to enforce or
prevent any violations of the provisions hereof, in each case without the
requirement of posting a bond or proving actual damages.
ARTICLE XI
MISCELLANEOUS
11.1 AMENDMENT AND WAIVER. This Agreement may be amended and any provision of
this Agreement may be waived, provided that any such amendment or waiver shall
be binding upon a Party only if such amendment or waiver is set forth in a
writing executed by Purchaser and the Seller. No course of dealing between or
among any persons having any interest in this Agreement shall be deemed
effective to modify, amend or discharge any part of this Agreement or any rights
or obligations of any Party under or by reason of this Agreement.
11.2 NOTICES. All notices, demands and other communications given or
delivered under this Agreement shall be in writing and shall be deemed to have
been given when personally delivered, mailed by first class mail, return receipt
requested, or delivered by express courier service or telecopied (with hard copy
to follow). Notices, demands and communications to the Seller, the Company and
Purchaser shall, unless another address is specified in writing, be sent to the
address or telecopy number indicated below:
31
<PAGE>
Notices to the Seller: with a copy to:
Carter B. Wilson Kearns, Benedict & Harp
c/o Aerial Platforms, Inc. 5775-B Glenridge Drive
1857 Doan Way Suite 210
Norcross, GA 30093 Atlanta, GA 30328
Attention: President Attn: William R. Harp
Telecopy: (770) 717-9227 Telecopy: (404) 256-3252
Notices to the Company (before Closing): with a copy to:
Aerial Platforms, Inc. Kearns, Benedict & Harp
1857 Doan Way 5775-B Glenridge Drive
Norcross, GA 30093 Suite 210
Attention: President Atlanta, GA 30328
Telecopy: (770) 717-9227 Attn: William R. Harp
Telecopy: (404) 256-3252
Notices to the Company (after Closing): with a copy to:
c/o National Equipment Services, Inc. Kirkland & Ellis
6100 Sears Tower 200 East Randolph Drive
Chicago, IL 60606 Chicago, IL 60601
Attention: President Attention: Sanford E. Perl
Telecopy: (312) 382-2201 Telecopy: (312) 861-2200
Notices to Purchaser: with a copy to:
National Equipment Services, Inc. Kirkland & Ellis
6100 Sears Tower 200 East Randolph Drive
Chicago, IL 60606 Chicago, IL 60601
Attention: President Attention: Sanford E. Perl
Telecopy: (312) 382-2201 Telecopy: (312) 861-2200
11.3 BINDING AGREEMENT; ASSIGNMENT. This Agreement and all of the provisions
hereof shall be binding upon and inure to the benefit of the Parties and their
respective successors and permitted assigns; provided that neither this
Agreement nor any of the rights, interests or obligations hereunder may be
assigned by the Seller without the prior written consent of Purchaser or by
Purchaser (except as otherwise provided in this Agreement) without the prior
written consent of the Seller. Without limiting the generality of the
foregoing:
(a) Purchaser may at any time prior to the Closing, at its sole discretion,
assign, in whole or in part, its rights and obligations pursuant to this
Agreement to one or more of its wholly-owned Subsidiaries. The Purchaser's
"wholly-owned Subsidiaries" include Subsidiaries which may be organized
subsequent to the date hereof;
(b) Purchaser may assign its rights under this Agreement for collateral
security purposes to any lender providing financing to Purchaser, the Company,
or any of their Affiliates and any such lender may exercise all of the rights
and remedies of the Purchaser hereunder; and
(c) Purchaser may assign its rights under this Agreement, in whole or in
part, to any subsequent purchaser of the Company or any material portion of its
assets (whether such sale is structured as a sale of stock, a sale of assets, a
merger or otherwise).
11.4 SEVERABILITY. Whenever possible, each provision of this Agreement shall
be interpreted in such manner as to be effective and valid under applicable law,
but if any provision of this Agreement is held to be prohibited by or invalid
under applicable law, such provision shall be ineffective only to the extent of
such prohibition or invalidity, without invalidating the remainder of such
provisions or the remaining provisions of this Agreement.
11.5 NO STRICT CONSTRUCTION. The language used in this Agreement shall be
deemed to be the language chosen by the Parties to express their mutual intent,
and no rule of strict construction shall be applied against any person.
32
<PAGE>
11.6 CAPTIONS. The captions used in this Agreement are for convenience of
reference only and do not constitute a part of this Agreement and shall not be
deemed to limit, characterize or in any way affect any provision of this
Agreement, and all provisions of this Agreement shall be enforced and construed
as if no caption had been used in this Agreement.
11.7 ENTIRE AGREEMENT. This Agreement and the documents referred to herein
contain the entire agreement between the Parties and supersede any prior
understandings, agreements or representations by or between the Parties, written
or oral, which may have related to the subject matter hereof in any way.
11.8 COUNTERPARTS. This Agreement may be executed in multiple counterparts,
each of which shall be deemed an original but all of which taken together shall
constitute one and the same instrument.
11.9 GOVERNING LAW. All questions concerning the construction, validity and
interpretation of this Agreement shall be governed by and construed in
accordance with the domestic laws of the State of Georgia, without giving effect
to any choice of law or conflict of law provision (whether of the State of
Georgia or any other jurisdiction) that would cause the application of the laws
of any jurisdiction other than the State of Georgia.
11.10 PARTIES IN INTEREST. Nothing in this Agreement, express or implied, is
intended to confer on any person other than the Parties and their respective
successors and assigns any rights or remedies under or by virtue of this
Agreement.
IN WITNESS WHEREOF, the Parties have executed this Stock Purchase Agreement as
of the date first written above.
NATIONAL EQUIPMENT SERVICES, INC.
By: /s/ Kevin Rodgers
--------------------------------
Its: President
AERIAL PLATFORMS, INC.
By: /s/ Carter B. Wilson
--------------------------------
Its: President
/s/ Carter B. Wilson
--------------------------------------
Carter B. Wilson
33
<PAGE>
Exhibit 10.17
ASSET PURCHASE AGREEMENT
BY AND AMONG
NES ACQUISITION CORP.,
LONE STAR RENTALS, INC.
AND
JAMES HORSLEY
DATED AS OF MARCH 17, 1997
1
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
ARTICLE 1
DEFINITIONS 1
1.1 Definitions 1
1.2 Other Definitional Provisions 5
ARTICLE 2
PURCHASE AND SALE; ASSUMPTION OF CERTAIN LIABILITIES; CLOSING 5
2.1 Purchase and Sale of Seller's Assets 5
2.2 Purchase Price for Acquired Assets 9
2.3 Purchase Price Adjustments 10
2.4 The Closing 11
2.5 Distribution of Holdback 12
ARTICLE 3
TRANSITIONAL ARRANGEMENTS 12
3.1 Seller's Name Change 12
ARTICLE 4
NON-COMPETITION AND CONFIDENTIALITY 12
4.1 Noncompetition Agreement of Seller and the Stockholder 12
4.2 Confidentiality Obligations of Seller and the Stockholder 14
4.3 Confidentiality Obligations of the Purchaser 14
4.4 Trade Names 15
4.5 Remedy for Breach 15
ARTICLE 5
REPRESENTATIONS AND WARRANTIES OF PURCHASER 15
5.1 Organization of Purchaser 15
5.2 Authorization; Binding Effect; No Breach 15
5.3 Brokerage 16
5.4 Disclosure 16
5.5 Accuracy on Closing Date 16
ARTICLE 6
REPRESENTATIONS AND WARRANTIES
OF SELLER AND THE STOCKHOLDERS 16
6.1 Organization and Corporate Power 16
6.2 Capital Stock and Related Matters 16
6.3 Authorization; Binding Effect; No Breach 17
6.4 Subsidiaries; Investments 17
6.5 Financial Statements and Related Matters 18
6.6 Absence of Undisclosed Liabilities 18
6.7 Acquired Assets 18
6.8 Absence of Certain Developments 19
6.9 Tax Matters 20
6.10 Contracts and Commitments 21
6.11 Certain Litigation 23
6.12 Brokerage 23
6.13 Insurance 23
6.14 Employees 23
6.15 Employee Benefits 24
6.16 Real Estate 25
6.17 Compliance with Laws 28
6.18 Product Warranty 29
6.19 Proprietary Rights 29
6.21 Disclosure 30
6.22 Accuracy on Closing Date 30
</TABLE>
2
<PAGE>
<TABLE>
<S> <C>
ARTICLE 7
REPRESENTATIONS AND WARRANTIES CONCERNING THE STOCKHOLDERS 30
7.1 Authorization of Transactions 31
7.2 Absence of Conflicts 31
7.3 Brokerage 31
7.4 Closing Date 31
ARTICLE 8
ACCESS TO RECORDS 32
8.1 Access to Records 32
ARTICLE 9
SURVIVAL AND INDEMNIFICATION 32
9.1 Survival of Representations and Warranties 32
9.2 Indemnification Obligations of Seller and the Stockholder 32
9.3 Indemnification Obligations of Purchaser 33
9.4 Indemnification Procedures 34
9.5 Threshold Amount 35
9.6 Treatment of Indemnification Payments 35
9.7 Payment 35
ARTICLE 10
CONDITIONS TO THE CLOSING 35
10.1 Conditions of Purchaser's Obligation 35
10.2 Conditions of Seller's Obligation 38
ARTICLE 11
OTHER COVENANTS 39
11.1 Interim Agreements of Seller and the Stockholder 39
11.2 Exclusivity 41
11.3 Notice by Purchaser 42
11.4 Additional Interim Agreements 42
11.5 Transaction Expenses 42
11.6 Prepayment of Certain Indebtedness 42
11.7 Further Assurances 42
11.8 Announcements 43
11.9 Employees 43
11.10 Necessary Third Party Consents 43
11.11 NES Promissory Note Legend 44
ARTICLE 12
OTHER AGREEMENTS 44
12.1 Termination 44
12.2 Remedies 45
12.3 Consent to Amendments 45
12.4 Successors and Assigns 45
12.5 Governing Law 45
12.6 Notices 46
12.7 Severability of Provisions 47
12.8 Schedules and Exhibits 47
12.9 Counterparts 47
12.10 No Third-Party Beneficiaries 47
12.11 Headings 47
12.12 Merger and Integration 47
12.13 Allocation of Purchase Price 47
12.14 Bulk Sales Law 47
</TABLE>
3
<PAGE>
EXHIBITS
Exhibit A - Form of Promissory Note
Exhibit B - Form of Opinion of Seller's Counsel
Exhibit C - Form of Employment Agreement
Exhibit D - Form of Stock Purchase Agreement
Exhibit E - Form of Lease Agreement
DISCLOSURE SCHEDULES
Schedule 6.1 - Organization Schedule
Schedule 6.2 - Capitalization Schedule
Schedule 6.3 - Consents Schedule
Schedule 6.6 - Liabilities Schedule
Schedule 6.7 - Assets Schedule
Schedule 6.8 - Developments Schedule
Schedule 6.9 - Taxes Schedule
Schedule 6.10 - Contracts Schedule
Schedule 6.10(e) - Affiliated Transactions Schedule
Schedule 6.11 - Litigation Schedule
Schedule 6.12 - Brokerage Schedule
Schedule 6.13 - Insurance Schedule
Schedule 6.15 - Employee Benefits Schedule
Schedule 6.16 - Real Estate Schedule
Schedule 6.17(a) - Compliance Schedule
Schedule 6.17(b) - Permits Schedule
Schedule 6.17(c) - Environmental Matters Schedule
Schedule 6.18 - Warranties Schedule
Schedule 6.19 - Proprietary Rights Schedule
4
<PAGE>
ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT is made as of March 17, 1997, by and among NES
ACQUISITION CORP., a Delaware corporation ("Purchaser"), LONE STAR RENTALS,
INC., a Texas corporation ("Seller"), and James Horsley, the holder of all of
the issued and outstanding capital stock of Seller (the "Stockholder").
Purchaser, Seller and the Stockholder are collectively referred to herein as the
"Parties."
WHEREAS, upon the terms and subject to the conditions set forth in this
Agreement, Purchaser desires to acquire from Seller and Seller desires to sell
to Purchaser, substantially all of Seller's assets.
NOW, THEREFORE, in consideration of the mutual promises herein made, and in
consideration of the representations, warranties and covenants herein contained,
the Parties agree as follows:
ARTICLE 1
DEFINITIONS
1.1 DEFINITIONS. For purposes hereof, the following terms, when used herein
with initial capital letters, shall have the respective meanings set forth
herein:
"Affiliate" of any Person means any other Person controlling, controlled by or
under common control with such first Person.
"Agreement" means this Asset Purchase Agreement, including all Exhibits and
Schedules hereto, as it may be amended from time to time in accordance with its
terms.
"Books and Records" means all lists, records and other information pertaining
to accounts, personnel and referral sources of Seller, all lists and records
pertaining to suppliers and customers of Seller, and all other books, ledgers,
files and business records of every kind relating or pertaining to the Business
whether evidenced in writing, electronically (including by computer) or
otherwise.
"Book Value of Assets" means (i) the net book value of Seller's total assets
(other than Seller's depreciable assets) as of the Closing Date and (ii) the net
book value of Seller's depreciable assets as of February 28, 1997, as determined
in accordance with GAAP.
"Business" means the business of Seller as now conducted.
"Code" means the United States Internal Revenue Code of 1986, as amended.
"Environmental Affiliates" of any Person means, with respect to any particular
matter, all other Persons whose liabilities or obligations with respect to that
particular matter have been assumed by, or are otherwise deemed by law to be
those of, such first Person.
"Environmental and Safety Requirements" means all federal, state, local and
foreign statutes, regulations, ordinances and similar provisions having the
force or effect of law, all judicial and administrative orders and
determinations, all contractual obligations and all common law concerning public
health and safety, worker health and safety and pollution or protection of the
environment, including all such standards of conduct and bases of obligations
relating to the presence, use, production, generation, handling, transport,
treatment, storage, disposal, distribution, labeling, testing, processing,
discharge, release, threatened release, control, or cleanup of any hazardous
materials, substances or wastes, chemical substances or mixtures, pesticides,
pollutants, contaminants, toxic chemicals, petroleum products or by-products,
asbestos, polychlorinated biphenyls (or PCBs), noise or radiation.
5
<PAGE>
"Environmental Lien" means any Lien, whether recorded or unrecorded, in favor
of any Government Entity relating to any liability of Seller or any
Environmental Affiliate of Seller arising under any Environmental and Safety
Requirement.
"ERISA" means the Employee Retirement Income Security Act of 1974, as amended.
"GAAP" means, at a given time, United States generally accepted accounting
principles, consistently applied.
"Government Entity" means the United States of America or any other nation,
any state or other political subdivision thereof, or any entity exercising
executive, legislative, judicial, regulatory or administrative functions of
government.
"Indebtedness" of any Person means, without duplication: (a) indebtedness for
borrowed money or for the deferred purchase price of property or services in
respect of which such Person is liable, contingently or otherwise, as obligor or
otherwise (other than trade payables and other current liabilities incurred in
the ordinary course of business) and any commitment by which such Person assures
a creditor against loss, including contingent reimbursement obligations with
respect to letters of credit; (b) indebtedness guaranteed in any manner by such
Person, including a guarantee in the form of an agreement to repurchase or
reimburse; (c) obligations under capitalized leases in respect of which such
Person is liable, contingently or otherwise, as obligor, guarantor or otherwise,
or in respect of which obligations such Person assures a creditor against loss;
and (d) any unsatisfied obligation of such Person for "withdrawal liability" to
a "multiemployer plan," as such terms are defined under ERISA.
"Investment" means, with respect to any Person, any direct or indirect
purchase or other acquisition by such Person of any notes, obligations,
instruments, stock, securities or other ownership or beneficial interest
(including, without limitation, partnership interests, limited liability company
interests and joint venture interests) of any other Person, and any capital
contribution by such Person to any other Person.
"Knowledge" means, with respect to any Person, (a) the actual knowledge of
such Person (which includes the actual knowledge of all officers, directors and
executive employees of such Person) and (b) the knowledge which a prudent
business person would have obtained in the conduct of his or her business after
making reasonable inquiry and exercising reasonable diligence with respect to
the particular matter in question.
"Legal Requirement" means any requirement arising under any action, law,
treaty, rule or regulation, determination or direction of an arbitrator or
Government Entity, including any Environmental and Safety Requirement.
"Lien" means any mortgage, pledge, security interest, encumbrance, easement,
restriction, charge, or other lien.
"Loss" means, with respect to any Person, any diminution in value,
consequential or other damage, liability, demand, claim, action, cause of
action, cost, damage, deficiency, Tax, penalty, fine or other loss or expense,
whether or not arising out of a third party claim, including all interest,
penalties, reasonable attorneys' fees and expenses and all amounts paid or
incurred in connection with any action, demand, proceeding, investigation or
claim by any third party (including any Government Entity) against or affecting
such Person or which, if determined adversely to such Person, would give rise
to, evidence the existence of, or relate to, any other Loss and the
investigation, defense or settlement of any of the foregoing, together with
interest thereon from the date on which such Person provides the written notice
of the related claim as described in Section 9.4 through and including the date
on which the total amount of the claim, including such interest, is recovered or
recouped pursuant to Article 9.
"NES" means National Equipment Services, Inc., a Delaware corporation.
"Officer's Certificate" of any Person means a certificate signed by such
Person's president or chief financial officer (or an individual having
comparable responsibilities with respect to such Person) stating that (a) the
individual signing such certificate has made or has caused to be made such
investigations as are necessary in order
6
<PAGE>
to permit such individual to verify the accuracy of the information set forth in
such certificate and (b) to the best of such individual's Knowledge, such
certificate does not misstate any material fact and does not omit to state any
fact necessary to make the facts stated therein not misleading.
"Person" means an individual, a partnership, a corporation, an association, a
limited liability company, a joint stock company, a trust, a joint venture, an
unincorporated organization, a governmental entity or any department, agency or
political subdivision thereof and any other entity.
"Proprietary Rights" means all of the following owned by, issued to or
licensed to Seller: (a) all inventions (whether patentable or unpatentable and
whether or not reduced to practice), all improvements thereto, and all patents,
patent applications, and patent disclosures, together with all reissuances,
continuations, continuations-in-part, revisions, extensions, and reexaminations
thereof; (b) all trademarks, service marks, trade dress, logos, trade names, and
corporate names, together with all translations, adaptations, derivations, and
combinations thereof and including all goodwill associated therewith, and all
applications, registrations, and renewals in connection therewith; (c) all
copyrightable works (including, without limitation, all software developed by
Seller for use in the Business), all copyrights, and all applications,
registrations, and renewals in connection therewith; (d) all mask works and all
applications, registrations, and renewals in connection therewith; (e) all trade
secrets and confidential business information (including ideas, research and
development, know-how, formulas, compositions, manufacturing and production
processes and techniques, technical data, designs, drawings, specifications,
customer and supplier lists, pricing and cost information, and business and
marketing plans and proposals); (f) all computer software (including data and
related documentation); (g) all other proprietary rights; and (h) all copies and
tangible embodiments thereof (in whatever form or medium).
"Subsidiary" means, with respect to any Person, any corporation a majority of
the total voting power of shares of stock of which is entitled (without regard
to the occurrence of any contingency) to vote in the election of directors,
managers or trustees thereof is at the time owned or controlled, directly or
indirectly, by that Person or one or more of the other Subsidiaries of that
Person or a combination thereof, or any partnership, association or other
business entity a majority of the partnership or other similar ownership
interest of which is at the time owned or controlled, directly or indirectly, by
that Person or one or more Subsidiaries of that Person or a combination thereof.
For purposes of this definition, a Person is deemed to have a majority ownership
interest in a partnership, association or other business entity if such Person
is allocated a majority of the gains or losses of such partnership, association
or other business entity or is or controls the managing director or general
partner of such partnership, association or other business entity.
"Taxes" means any federal, state, local, or foreign income, gross receipts,
license, payroll, employment, excise, severance, stamp, occupation, premium,
windfall profits, environmental (including taxes imposed pursuant to Section 59A
of the Code), customs duties, capital stock, franchise, profits, withholding,
social security, unemployment, disability, real property, personal property,
sales, use, transfer, registration, value added, alternative or add-on minimum,
or other tax, fee, assessment or charge of any kind whatsoever, including any
interest, penalty, or addition thereto, whether disputed or not.
"Transaction Documents" means this Agreement, and all other agreements,
instruments, certificates and other documents to be entered into or delivered by
any Party in connection with the transactions contemplated to be consummated
pursuant to any of the foregoing.
"Treasury Regulations" means the United States Treasury Regulations
promulgated pursuant to the Code.
1.2 OTHER DEFINITIONAL PROVISIONS.
(a) Accounting Terms. Accounting terms which are not otherwise defined in
this Agreement have the meanings given to them under GAAP. To the extent that
the definition of accounting term that is defined in this Agreement is
inconsistent with the meaning of such term under GAAP, the definition set forth
in this Agreement will control.
7
<PAGE>
(b) "Hereof," etc. The terms "hereof," "herein" and "hereunder" and terms of
similar import are references to this Agreement as a whole and not to any
particular provision of this Agreement. Section, clause, Schedule and Exhibit
references contained in this Agreement are references to Sections, clauses,
Schedules and Exhibits in or to this Agreement, unless otherwise specified.
(c) Successor Laws. Any reference to any particular Code section or any other
law or regulation will be interpreted to include any revision of or successor to
that section regardless of how it is numbered or classified.
ARTICLE 2
PURCHASE AND SALE; ASSUMPTION OF CERTAIN LIABILITIES; CLOSING
2.1 PURCHASE AND SALE OF SELLER'S ASSETS.
(a) Acquired Assets. Upon the terms and subject to the conditions set forth
in this Agreement, at the Closing Seller shall sell, assign, transfer and
deliver to Purchaser, and Purchaser shall purchase, all properties, assets,
rights and interests of every kind and nature, whether tangible or intangible,
and wherever located and by whomever possessed, owned by Seller as of the
Closing Date, except as set forth in Section 2.1(b) below (collectively, the
"Acquired Assets"), including, without limitation:
(i) all cash and cash equivalents (including, without limitation, all money
market accounts, mutual fund accounts and repurchase agreements);
(ii) all accounts and notes receivables (whether current or noncurrent);
(iii) all securities and other Investments;
(iv) all of Seller's Proprietary Rights, along with all income, royalties,
damages and payments due or payable as of the Closing or thereafter, including,
without limitation, damages and payments for past, present or future
infringements or misappropriations thereof, the right to sue and recover for
past infringements or misappropriations thereof and any and all corresponding
rights that, now or hereafter, may be secured throughout the world;
(v) all of Seller's rights existing under leases, contracts, licenses,
permits, distribution arrangements, sales and purchase agreements, accounts
receivable, other agreements and business arrangements, including, without
limitation, all contracts and agreements described on the Contracts Schedule
attached hereto (collectively, the "Seller Contracts");
(vi) all real property owned or leased by Seller, and all plants, buildings
and other improvements located on such leased property, and all easements,
licenses, rights of way, permits and all appurtenances to such leased property,
including, without limitation, all appurtenant rights in and to public streets,
whether or not vacated (collectively, the "Real Estate");
(vii) all leasehold improvements and all machinery, equipment (including all
transportation and office equipment), fixtures, trade fixtures, tools, dyes and
furniture owned by Seller wherever located, including, without limitation, all
such items which are located in any building, warehouse, office or other space
leased, owned or occupied by Seller or used in connection with the Real Estate;
(viii) all rental equipment of any kind, wherever located, rented by Seller
to any Person ;
(ix) all inventories of work in process, semi-finished and finished goods,
stores, replacement and spare parts, packaging materials, operating supplies,
and fuels, owned by Seller wherever located;
8
<PAGE>
(x) all office supplies, production supplies, spare parts, other
miscellaneous supplies, and other tangible property of any kind wherever
located, including, without limitation, all property of any kind located in any
building, office or other space leased, owned or occupied by Seller or in any
warehouse where any of Seller's properties and assets may be situated;
(xi) all prepayments and prepaid expenses;
(xii) all of Seller's claims, causes of action, choses in action, rights of
recovery and rights of set-off of any kind;
(xiii) the right to receive and retain mail, accounts receivable payments and
other communications relating to the Business;
(xiv) the right to bill and receive payment for products shipped or
delivered and services performed but unbilled or unpaid as of the Closing;
(xv) all lists, records and other information pertaining to accounts,
personnel and referral sources, all lists and records pertaining to suppliers
and customers, and all books, ledgers, files and business records of every kind,
whether evidenced in writing, electronically (including, without limitation, by
computer) or otherwise;
(xvi) all advertising, marketing and promotional materials and all other
printed or written materials;
(xvii) all permits, licenses, certifications and approvals from all
permitting, licensing, accrediting and certifying agencies, and the rights to
all data and records held by such permitting, licensing and certifying agencies;
(xviii) all goodwill as a going concern and all other intangible properties;
(xix) all telephone numbers (including, without limitation, "800" numbers)
of Seller;
(xx) the legal name "Lone Star Rentals, Inc.;" and
(xxi) except as specified in Section 2.1(b) below, all other property owned
by Seller, or in which it has an interest on the Closing Date, including,
without limitation, all fixed assets included on Seller's Latest Balance Sheet
and any and all subsequent improvements or additions thereon through the Closing
Date.
(b) Excluded Assets. Notwithstanding Section 2.1(a) above, the following
assets are expressly excluded from the purchase and sale contemplated hereby
and, as such, are not Acquired Assets (collectively, the "Excluded Assets"):
(i) all monies to be received by Seller from Purchaser;
(ii) all rights of Seller under this Agreement;
(iii) all qualifications to do business as a foreign corporation;
(iv) all arrangements with registered agents relating to foreign
qualifications;
(v) all taxpayer and other identification numbers;
(vi) all seals, minute books, stock transfer books, blank stock
certificates, and other documents relating to the organization, maintenance,
and existence of Seller as a corporation;
(vii) accounts previously written off and accounts which after Closing are
deducted from the Purchase Price due to non-collection; and
9
<PAGE>
(viii) accounts earned prior to the Closing but not reflected on the
Company's accounts receivable listing as of the Closing.
(c) Assumed Contracts; No Assumption of Liabilities. Subject to the
conditions specified in this Agreement, from and after the Closing, Purchaser
will not assume or in any way be responsible for any liabilities or obligations
of Seller or any other liabilities or obligations whatsoever related to the
operation of the Business or condition of the Acquired Assets at any time prior
to the Closing, except for liabilities and obligations under the Assumed
Contracts to the extent specifically provided below. From and after the
Closing, Purchaser will assume liabilities and obligations pursuant to the
Seller Contracts which are set forth on Schedule 6.3 and the Contracts Schedule
(the "Assumed Contracts"), but excluding any liability or obligation relating to
or arising out of any such Assumed Contract as a result of (A) any breach of
such Assumed Contract occurring on or prior to the Closing, (B) any violation of
law, breach of warranty, tort or infringement occurring on or prior to the
Closing; or (C) any related charge, complaint, action, suit, proceeding,
hearing, investigation, claim or demand. Payment for goods and services
received by the Seller prior to the Closing shall be paid by Seller. Payment
for goods and services received and accepted by Purchaser after the Closing
shall be paid by Purchaser.
(d) Excluded Liabilities. Notwithstanding anything to the contrary contained
in this Agreement and regardless of whether such liability is disclosed herein
or on any schedule hereto, Purchaser will not assume or be liable for any
liabilities or obligations of Seller or the Stockholder not expressly assumed by
Purchaser pursuant to Section 2.1(c) above, whether accrued, absolute or
contingent, whether known or unknown, whether disclosed or undisclosed, whether
due or to become due and whether related to the Acquired Assets or otherwise,
and regardless of when asserted (collectively, the "Excluded Liabilities"),
including, without limitation, the following liabilities and obligations of
Seller or the Stockholder:
(a) liabilities or obligations for any contracts, agreements, leases or
other arrangements, accounts payable, accrued liabilities or other short-term
liabilities (other than liabilities under the Assumed Contracts to the extent
set forth in Section 2.1(c) hereof) or any undisclosed or contingent
liabilities;
(b) liabilities or obligations with respect to all Taxes, including all
Taxes of Seller relating to the ownership or operation of the Business and/or
the Acquired Assets on or prior to the Closing and all Taxes arising out of or
relating to any of the transactions contemplated hereby;
(c) liabilities or obligations of Seller or the Stockholder for costs and
expenses incurred in connection with this Agreement and the consummation of
the transactions contemplated hereby (including liabilities or obligations
under this Agreement and the agreements contemplated hereunder);
(d) liabilities or obligations arising out of or relating to the Excluded
Assets;
(e) liabilities or obligations for any claims (whenever made) arising out
of, relating to, resulting from or caused by any transaction, status, event,
condition, occurrence or situation existing, arising or occurring (A) in
connection with the ownership or operation of the business and/or the Acquired
Assets on or prior to the Closing or (B) in connection with Seller's, the
Stockholder's or any of their Affiliates' businesses or activities at any time
prior to or on or after the Closing; or
(f) any liabilities or obligations under ERISA or any retirement or benefit
plan or arrangement.
Seller hereby acknowledges that it is retaining the Excluded Liabilities. Seller
and the Stockholder jointly and severally agree to promptly pay and discharge
all such liabilities and obligations covered by Section 11.6 in accordance
therewith and all other such liabilities and obligations when due.
2.2 PURCHASE PRICE FOR ACQUIRED ASSETS. The aggregate purchase price to be
paid to Seller for the Acquired Assets (the "Purchase Price") shall be paid as
follows: (i) Purchaser shall deliver $10,579,711 (as adjusted pursuant to
Section 2.3 below) in cash to Seller (as adjusted, the "Cash Purchase Price");
(ii) Purchaser shall deliver to Seller a Subordinated Promissory Note issued by
NES in the original principal amount of $350,000 in the form of
10
<PAGE>
Exhibit A attached hereto (a "NES Promissory Note");(iii) Purchaser shall
maintain $500,000 in a book entry account of Purchaser (the "Holdback"); and
(iv) Purchaser shall assume liabilities and obligations pursuant to the Assumed
Contracts to the extent provided in Section 2.1(c). The Holdback shall be
available to satisfy any amounts owing to Purchaser pursuant to Section 2.3
and/or Section 9.2. The Cash Purchase Price shall be subject to adjustment
pursuant to Section 2.3. The Holdback shall accrue interest at the rate of 8.25%
per annum from date of Closing until paid.
2.3 PURCHASE PRICE ADJUSTMENTS.
(a) Post-Closing Adjustment of Cash Purchase Price. Within 90 days after the
Closing Date, Purchaser and its auditors will conduct a review (the "Closing
Review") of the Book Value of Assets as of the close of business on the day
before the Closing Date and will prepare and deliver to Seller a computation of
the Book Value of Assets as of the close of business on the day before the
Closing Date (the "Draft Computation"). Purchaser and its auditors will give
Seller and its auditors an opportunity to observe the Closing Review and will
make available to such Persons all records and work papers used in preparing the
Draft Computation. If Seller disagrees with the computation of the Book Value
of Assets reflected on the Draft Computation, Seller may, within thirty (30)
days after receipt of the Draft Computation, deliver a notice (an "Objection
Notice") to Purchaser setting forth Seller's calculation of the amount of the
Book Value of Assets as of the close of business on the day before the Closing
Date. The Purchaser and Seller will use reasonable efforts to resolve any
disagreements as to the computation of the Book Value of Assets, but if they do
not obtain a final resolution within 30 days after Purchaser has received the
Objection Notice, Purchaser and Seller will jointly retain an independent
accounting firm of recognized national or regional standing (the "Firm") to
resolve any remaining disagreements. If Purchaser and Seller are unable to
agree on the choice of the Firm, the Firm will be a "big-six" accounting firm
selected by lot (after excluding one firm designated by the Purchaser and one
firm designated by Seller). Purchaser and Seller will direct the Firm to render
a determination within 15 days of its retention and Purchaser, Seller and their
respective agents will cooperate with the Firm during its engagement. The Firm
will consider only those items and amounts in the Draft Computation set forth in
the Objection Notice which the Purchaser and Seller are unable to resolve. The
Firm's determination will be based on the definition of Book Value of Assets
included herein. The determination of the Firm will be conclusive and binding
upon the Parties. Purchaser and Seller shall bear the costs and expenses of the
Firm based on the percentage which the portion of the contested amount not
awarded to each Party bears to the amount actually contested by such Party. The
amount of the Book Value of Assets, as finally determined pursuant to this
Section 2.3(a), is referred to herein as the "Actual Book Value of Assets." If
the Actual Book Value of Assets is less than $11,579,711 (the "Book Value of
Assets Shortfall"), Purchaser shall be entitled to receive from the Holdback,
within two (2) Business Days after the determination thereof, the amount of such
shortfall; provided, however, that if the amount then left in the Holdback is
less than the amount of the Book Value of Assets Shortfall, Seller shall pay to
the Purchaser, within two (2) Business Days after the determination of the
Actual Book Value of Assets, the amount by which the Holdback is less than the
Book Value of Assets Shortfall by wire transfer or delivery of other immediately
available funds. If the Actual Book Value of Assets exceeds $11,579,711,
Purchaser shall pay to Seller, within two (2) Business Days after the
determination of such excess by wire transfer or delivery of other immediately
available funds.
(b) Accounts Receivable Adjustment. Notwithstanding anything herein to the
contrary, the Cash Purchase Price will be reduced dollar-for-dollar by the
aggregate amount of the net notes and accounts receivable of Seller in existence
as of the Closing (the "Accounts Receivable"), which are uncollected by
Purchaser (the "Uncollected Receivables Amount") as of the 90th day following
the Closing Date (the "Receivables Determination Date"). If there is an
Uncollected Receivables Amount, Purchaser shall be entitled to receive the
Uncollected Receivables Amount from the Holdback within two (2) Business Days
after the Receivables Determination Date; provided, however, that if the amount
then left in the Holdback is less than the Uncollected Receivables Amount,
Seller shall pay to Purchaser, within two (2) Business Days after the
Receivables Determination Date, the amount by which the Holdback is less than
the Uncollected Receivables Amount by wire transfer or delivery of other
immediately available funds. For the purpose of determining amounts collected
by Purchaser with respect to the Accounts Receivable, (i) in the absence of a
bona fide dispute between an account debtor and Purchaser regarding receivables
of such account debtor accrued prior to the Closing Date, all payments by an
account debtor shall first be applied to the oldest outstanding invoice due from
that account debtor, and (ii) in the case of a dispute between Purchaser and
11
<PAGE>
an account debtor with respect to a particular invoice, all payments shall be
first applied to the next oldest invoice due from that account debtor. Purchaser
shall not be required to retain a collection agency, bring any suit, or take any
other action out of the ordinary course of business to collect any of the
Accounts Receivable. To the extent that Purchaser has not collected the full
amount of the Accounts Receivable and Purchaser has been compensated therefor in
accordance with this Section, Purchaser shall assign any such uncollected
Accounts Receivable to Seller (the "Uncollected Accounts Receivable").
Notwithstanding any provision to the contrary, but subject to any offsets
herein, Purchaser shall pay to Seller all funds collected by Purchaser on (i)
accounts written off by Seller prior to Closing which are not reflected in the
determination of Actual Book Value of Assets and (iii) the Uncollected Accounts
Receivable.
2.4 THE CLOSING. The closing of the purchase and sale of the Acquired Assets,
and the transactions relating thereto (the "Closing") will take place at the
offices of Kirkland & Ellis, 200 East Randolph Drive, Chicago, Illinois, or at
such other place as is mutually agreeable to the Parties, commencing at 10:00
a.m. local time on such day as Purchaser may specify on three days prior written
notice to Seller or such other date as the Parties may mutually determine. The
date and time of the Closing are herein referred to as the "Closing Date." At
the Closing, subject to the atisfaction or waiver of each of the conditions
specified in Sections 10.1 and 10.2 below:
(a) Seller will convey to Purchaser good title to all of the Acquired Assets,
free and clear of all Liens, and deliver to Purchaser warranty deeds, bills of
sale, assignments of leases and contracts and all other instruments of
conveyance which are necessary or desirable to effect transfer of the Acquired
Assets (the "Sale");
(b) Purchaser will deliver to Seller (or, at Seller's direction, to lenders or
other third parties) the Cash Purchase Price by wire transfer of immediately
available funds;
(c) Purchaser will deliver to Seller a NES Promissory Note in the aggregate
principal amount of $500,000 as payment which constitutes payment of $350,000 of
the Purchase Price and payment of the Noncompete Payment; and
(d) there shall be delivered to Purchaser and Seller the opinions,
certificates and other documents and instruments provided to be delivered under
Article 10 hereof.
2.5 DISTRIBUTION OF HOLDBACK. On the 120th day after the Closing Date,
Purchaser shall pay to Seller an amount equal to the amount of the Holdback
(together with all accrued but undistributed interest thereon), if any,
remaining after (i) all amounts owing to Purchaser pursuant to Section 2.3 have
been satisfied and (ii) all claims of Purchaser under Section 9.2 which have
theretofore been finally resolved have been satisfied (the "Remaining Holdback")
less any amount which Purchaser claims, prior to such 90th day, that it is
entitled to receive pursuant to Section 2.3 or Section 9.2 (each, a Pending
Claim"). As soon as practicable following final resolution of all Pending
Claims, Purchaser shall pay to Seller an aggregate amount equal to the portion,
if any, of the Holdback (together with all accrued but undistributed interest
thereon) which remains after payment of the Remaining Holdback and final
resolution of all Pending Claims.
ARTICLE 3
TRANSITIONAL ARRANGEMENTS
3.1 SELLER'S NAME CHANGE. Within five days after the Closing, Seller will
change its corporate name to a name which is not (and which is not confusingly
similar to) "Lone Star Rentals, Inc.," it being the intent of the Parties that
from and after the Closing Purchaser will have the sole right as against Seller
and all other Persons to conduct business under such name and that Purchaser
will commence doing so at the time of the Closing.
12
<PAGE>
ARTICLE 4
NON-COMPETITION AND CONFIDENTIALITY
4.1 NONCOMPETITION AGREEMENT OF SELLER AND THE STOCKHOLDER.
(a) Noncompetition. In consideration of the Noncompete Payment (as defined
below) and the mutual covenants provided herein to Seller at the Closing, during
the period beginning on the Closing Date and ending on the fifth anniversary of
the Closing Date (the "Noncompete Period"), each of Seller and the Stockholder
shall not, and shall use such Person's best efforts not to permit such Person's
Affiliates to, engage (whether as an owner, operator, manager, employee,
officer, director, consultant, advisor, representative or otherwise) directly or
indirectly in any business competing with the businesses of NES and its
Affiliates as such businesses exist (after giving effect to the transactions
contemplated by this Agreement) or are contemplated to exist on the Closing Date
(including, without limitation, the sale, rental and maintenance of construction
equipment) within 150 miles of any store location which NES or any of its
Affiliates at any time conducts such business (but excluding any store location
of NES or any Affiliate of NES which is opened within 150 miles of any store
location of a competing enterprise with respect to which the Stockholder has
previously incurred significant financial obligations or in which the
Stockholder has previously made a significant financial investment without
violating the provisions of this Article IV), except on behalf of Purchaser as
expressly permitted under the Employment Agreement; provided that ownership of
less than 2% of the outstanding stock of any publicly-traded corporation shall
not be deemed to be engaging solely by reason thereof in any of its businesses.
The Parties agree that the covenant set forth in this Section 4.1 is reasonable
with respect to its duration, geographical area and scope. If the final
judgment of a court of competent jurisdiction declares that any term or
provision of this Section 4.1 is invalid or unenforceable, the Parties agree
that the court making the determination of invalidity or unenforceability shall
have the power to reduce the scope, duration, or area of the term or provision,
to delete specific words or phrases, or to replace any invalid or unenforceable
term or provision with a term or provision that is valid and enforceable and
that comes closest to expressing the intention of the invalid or unenforceable
term or provision, and this Agreement shall be enforceable as so modified after
the expiration of the time within which the judgment may be appealed. As
further consideration for the obligations of the Seller pursuant to this Section
4.1, at the Closing Purchaser shall deliver to Seller a NES Promissory Note
(the "Noncompete Payment") in the original principal amount of $150,000.
Notwithstanding any provision to the contrary, the obligations of the
Stockholder under this Article 4 shall terminate (without affecting the
obligations of NES under the Promissory Note) if (i) Purchaser fails to make a
payment to Seller when due pursuant to Section 2.3(a) or Section 2.5 and such
non-payment continues after sixty (60) days written notice from Seller to NES
and Purchaser; or (ii) NES ceases to pay quarterly interest payments as provided
in the NES Promissory Note and such non-payment continues after sixty (60) days
written notice from Seller to NES and Purchaser; or (iii) Purchaser fails to
make a payment of rent when due under any of the Stockholder Lease Agreements,
other than as a result of a breach of such Stockholder Lease Agreement by Seller
or the Stockholder, and without the written consent of the Stockholder, and such
non-payment continues after sixty (60) days written notice from Seller to NES
and Purchaser. The earlier termination of the noncompetition agreements
contained in Section 7 of the Employment Agreement shall not affect in any
manner the operation and effectiveness of this Article 4.
(b) Nonsolicitation. Each of Seller and the Stockholder agrees that, during
the Noncompete Period, such Person (i) shall not, and shall use such Person's
best efforts not to permit such Person's Affiliates to, directly or indirectly
contact, approach or solicit for the purpose of offering employment to or hiring
(whether as an employee, consultant, agent, independent contractor or otherwise)
or actually hire any person employed by Purchaser at any time prior to the
Closing Date or during the Noncompete Period, without the prior written consent
of Purchaser (as to Stockholder's brother, which consent shall not be
unreasonably withheld) and (ii) shall not induce or attempt to induce any
customer or other business relation of Purchaser into any business relationship
which might materially harm Purchaser. The term "indirectly" as used in this
Section 4.1 is intended to mean any acts authorized or directed by or on behalf
of Seller, the Stockholder or any Person controlled by Seller or the
Stockholder.
13
<PAGE>
4.2 CONFIDENTIALITY OBLIGATIONS OF SELLER AND THE STOCKHOLDER.
(a) Confidential Treatment. Seller and the Stockholder will (and will cause
each of their Affiliates to) treat and hold as confidential all information
concerning the conduct or affairs of the Business (the "Confidential
Information"), refrain from using any Confidential Information, and, at
Purchaser's request, deliver to Purchaser or destroy all tangible embodiments
(and all copies) of any Confidential Information which are in Seller's,
Stockholder's or any such Affiliate's possession. This Section 4.2(a) will not
apply to any Confidential Information which is generally available to the public
(other than by reason of any disclosure by Seller, the Stockholder or Affiliate
thereof which constitutes or is the result of breach of this Section 4.2(a) or
any disclosure by any such Affiliate which would constitute a breach of this
Section 4.2(a) if such Affiliate were Seller) immediately prior to the time of
disclosure.
(b) Forced Disclosure. If Seller, the Stockholder or any Affiliate thereof is
requested or required (by oral question or request for information or documents
in any legal proceeding, interrogatory, subpoena, civil investigative demand, or
similar process) to disclose any Confidential Information, such Person will
notify Purchaser promptly of such request or requirement so that Purchaser may
seek an appropriate protective order or waive compliance with the provisions of
this Section 4.2. If, in the absence of such a protective order or waiver, the
Seller, the Stockholder or any Affiliate thereof, on the advice of counsel, is
compelled to disclose any Confidential Information to any Government Entity,
such Person will use his or its best efforts to ensure that such disclosure is
limited to Confidential Information which is so required to be disclosed and
obtain an order or other assurance that confidential treatment will be accorded
to any Confidential Information disclosed.
4.3 CONFIDENTIALITY OBLIGATIONS OF THE PURCHASER.
(a) Confidential Treatment. From the date of this Agreement until the
Closing, Purchaser will (and will cause each of its Affiliates to) treat and
hold as confidential all Confidential Information, refrain from using any
Confidential Information (other than in preparation for the transactions
contemplated by this Agreement), and, at Seller's request after termination of
this Agreement, deliver to Seller or destroy all tangible embodiments (and all
copies) of any Confidential Information which are in Purchaser's or any such
Affiliate's possession. This Section 4.3(a) will not apply to any Confidential
Information which is generally available to the public (other than by reason of
any disclosure by Purchaser or any Affiliate of Purchaser which constitutes or
is the result of breach of this Section 4.3(a) or any disclosure by such an
Affiliate which would constitute a breach of this Section 4.3(a) if such
Affiliate were Purchaser) immediately prior to the time of disclosure.
(b) Forced Disclosure. If Purchaser or any Affiliate of Purchaser is
requested or required (by oral question or request for information or documents
in any legal proceeding, interrogatory, subpoena, civil investigative demand, or
similar process) to disclose any Confidential Information prior to the Closing,
Purchaser will notify Seller promptly of such request or requirement so that
Seller may seek an appropriate protective order or waive compliance with the
provisions of this Section 4.3. If, in the absence of such a protective order
or waiver, Purchaser or any Affiliate of Purchaser, on the advice of counsel, is
compelled to disclose any Confidential Information to any Government Entity,
Purchaser will use its best efforts to ensure that such disclosure is limited to
Confidential Information which is so required to be disclosed and obtain an
order or other assurance that confidential treatment will be accorded to any
Confidential Information disclosed.
4.4 TRADE NAMES. Neither Seller nor the Stockholder shall use or permit any
of its Affiliates to use the "Lone Star Rental" name or any name confusingly
similar thereto in any manner anywhere in the world after Closing.
4.5 REMEDY FOR BREACH. Each Party acknowledges and agrees that in the event of
a breach by any Party of any of the provisions of this Article 4, monetary
damages shall not constitute a sufficient remedy. Consequently, in the event of
any such breach, the Parties and/or their respective successors or assigns may,
in addition to other rights and remedies existing in their favor, apply to any
court of law or equity of competent jurisdiction for specific performance and/or
injunctive or other relief in order to enforce or prevent any violations of the
provisions hereof, in each case without the requirement of posting a bond or
proving actual damages.
14
<PAGE>
ARTICLE 5
REPRESENTATIONS AND WARRANTIES OF PURCHASER
As a material inducement to Seller to enter into this Agreement, Purchaser
hereby represents and warrants that:
5.1 ORGANIZATION OF PURCHASER. Purchaser is a corporation duly organized,
validly existing and in good standing under the laws of the State of Delaware.
Purchaser has the requisite corporate power and authority and all licenses,
permits and authorizations necessary to enter into, deliver and carry out its
obligations pursuant to the Transaction Documents to which it is a party.
5.2 AUTHORIZATION; BINDING EFFECT; NO BREACH. Purchaser's execution, delivery
and performance of each Transaction Document to which Purchaser is a party has
been duly authorized by Purchaser. Each Transaction Document to which Purchaser
is a party constitutes a valid and binding obligation of Purchaser which is
enforceable in accordance with its terms. The execution, delivery and
performance by Purchaser of the Transaction Documents to which Purchaser is a
party do not and will not (i) conflict with or result in a breach of the terms,
conditions or provisions of, (ii) constitute a default under, (iii) result in a
violation of, or (iv) require any authorization, consent, approval, exemption or
other action by or declaration or notice to any Governmental Entity pursuant to,
the charter or bylaws of Purchaser or any agreement, instrument, or other
document, or any Legal Requirement, to which Purchaser or any of its assets is
subject.
5.3 BROKERAGE. There is no claim for brokerage commissions, finders' fees or
similar compensation in connection with the transactions contemplated by the
Transaction Documents based on any arrangement or agreement which is binding
upon Purchaser.
5.4 DISCLOSURE. Neither this Article 5 nor any certificate or other item
delivered to Seller by or on behalf of Purchaser with respect to the
transactions contemplated by the Transaction Documents contains any untrue
statement of a material fact or omits a material fact which is necessary to make
any statement contained herein or therein not misleading.
5.5 ACCURACY ON CLOSING DATE. Each representation and warranty set forth in
this Article 5 and all information contained in any certificate delivered by or
on behalf of Purchaser pursuant to this Agreement will be true and correct as of
the time of the Closing as though then made, except to the extent that Purchaser
has advised Seller otherwise in writing prior to the Closing.
ARTICLE 6
REPRESENTATIONS AND WARRANTIES OF SELLER AND THE STOCKHOLDERS
As a material inducement to Purchaser to enter into this Agreement, purchase
the Acquired Assets, Seller and the Stockholder hereby jointly and severally
represent and warrant that:
6.1 ORGANIZATION AND CORPORATE POWER. Seller is a corporation duly organized,
validly existing and in good standing under the laws of its state of
incorporation and is duly qualified to do business in each jurisdiction in which
its ownership of property or conduct of business requires it to so qualify.
Schedule 6.1 - Organization Schedule attached hereto lists every jurisdiction
where Seller is duly qualified to do business and its jurisdiction of
incorporation. Seller has the requisite corporate power necessary to own and
operate its properties, carry on the Business, and enter into, deliver and carry
out the transactions contemplated by the Transaction Documents.
6.2 CAPITAL STOCK AND RELATED MATTERS. The authorized capital stock of Seller
consists of 500,000 shares of Common Stock, no par value per share, of which
1,000 shares are issued and outstanding. All of the issued and outstanding
shares of Seller have been duly authorized, are validly issued, fully paid, and
nonassessable,
15
<PAGE>
and are held of record and beneficially by the Stockholder, free and clear of
any Lien, option or other right of any nature. No class of capital stock of
Seller is entitled to contractual or other preemptive rights. Except as set
forth on the attached Schedule 6.2 - Capitalization Schedule:
(a) there are no outstanding or authorized options, warrants, purchase rights,
subscription rights, conversion rights, exchange rights, or other contracts or
commitments that could require Seller to issue, sell, or otherwise cause to
become outstanding any of its capital stock;
(b) there are no outstanding or authorized stock appreciation, phantom stock,
profit participation, or similar rights with respect to Seller; and
(c) there are no voting trusts, proxies, or other agreements or understandings
with respect to the voting of the capital stock of Seller.
To the extent any of the rights described in clauses (a) and (b) above are in
existence, Schedule 6.2 - Capitalization Schedule sets forth a description of
the nature of such rights and the names of the Persons holding such rights and
the amounts thereof.
6.3 AUTHORIZATION; BINDING EFFECT; NO BREACH. Seller's execution, delivery and
performance of each Transaction Document to which it is a party have been duly
authorized by Seller. Each Transaction Document to which Seller is a party
constitutes a valid and binding obligation of Seller which is enforceable in
accordance with its terms. Except as set forth on the attached Schedule 6.3 -
Consents Schedule, the execution, delivery and performance of the Transaction
Documents to which Seller is a party do not and will not (i) conflict with or
result in a breach of the terms, conditions or provisions of, (ii) constitute a
default under, (iii) result in the creation of any Lien upon any of the Acquired
Assets under, (iv) give any third party the right to modify, terminate or
accelerate any liability or obligation of Seller under, (v) result in a
violation of, or (vi) require any authorization, consent, approval, exemption or
other action by or declaration or notice to any Governmental Entity pursuant to,
the charter or bylaws of Seller or any agreement, instrument or other document,
or any Legal Requirement, to which Seller or any of Seller's assets is subject.
Without limiting the generality of the foregoing, except as set forth on the
attached Schedule 6.3 - Consents Schedule, neither Seller nor any Affiliate of
Seller has entered into any agreement, or is bound by any obligation of any kind
whatsoever, directly or indirectly to transfer or dispose of (whether by sale of
stock or assets, assignment, merger, consolidation or otherwise) the Business or
the Acquired Assets (or any substantial portion thereof) to any Person other
than Purchaser, and Seller has not entered into any agreement, nor is it bound
by any obligation of any kind whatsoever, to issue any capital stock of Seller
to any Person.
6.4 SUBSIDIARIES; INVESTMENTS. Seller does not own or hold any rights to
acquire any capital stock or any other security, interest or Investment in any
other Person other than investments which constitute cash or cash equivalents.
Seller does not have, and has never had, a Subsidiary.
6.5 FINANCIAL STATEMENTS AND RELATED MATTERS.
(a) Financial Statements. Each of (i) the balance sheets of Seller as of
December 31, 1995 and December 31, 1996 and the related statements of income
and cash flows for the respective 12-month periods then ended and (ii) the
unaudited balance sheet of Seller as of February 28, 1997 (the "Latest Balance
Sheet") and the related unaudited statements of income and cash flows for the 2-
month period then ended (collectively, the "Financial Statements") (including in
all cases the notes thereto, if any) is accurate and complete in all material
respects, is consistent with the books and records of Seller (which, in turn,
are accurate and complete in all material respects) and has been prepared in
accordance with GAAP.
(b) Receivables. The notes and accounts receivable which are part of the
Acquired Assets are valid receivables, current, and are subject to no valid
counterclaims or setoffs, at the aggregate amount recorded on the Seller's books
and records as of the Closing, net of an amount of allowances for doubtful
accounts which relate to those receivables computed in a manner consistent with
GAAP and the accounting practices used in the preparation of the Latest Balance
Sheet.
16
<PAGE>
6.6 ABSENCE OF UNDISCLOSED LIABILITIES. Except as set forth on the attached
Schedule 6.6 - Liabilities Schedule, Seller does not have any liability (whether
accrued, absolute, contingent, unliquidated or otherwise, whether or not known
to Seller or the Stockholder, whether due or to become due, and regardless of
when asserted) other than: (a) the liabilities set forth on the face of the
Latest Balance Sheet, (b) current liabilities which have arisen after the date
of the Latest Balance Sheet, in the ordinary course of the Business and
consistent with Seller's past practice (none of which is a liability resulting
from breach of contract, breach of warranty, tort, infringement, claim or
lawsuit) and (c) other liabilities and obligations expressly disclosed and
quantified in the other Schedules to this Agreement.
6.7 ACQUIRED ASSETS. Except as set forth on the attached Schedule 6.7 -Assets
Schedule:
(a) the Acquired Assets constitute all of the assets and rights (other than
the Excluded Assets) which are necessary for the conduct of the Business as
currently conducted and presently proposed to be conducted;
(b) Seller has good and marketable title to, or a valid leasehold interest in,
all properties and assets used by it, located on its premises, or shown on the
Latest Balance Sheet or acquired by it since the date of the Latest Balance
Sheet in each case free and clear of all Liens, other than (i) properties and
assets disposed of in the ordinary course of business and consistent with its
past practice since the date of the Latest Balance Sheet and (ii) Liens
disclosed on the Latest Balance Sheet (including any notes thereto); and
(c) Except for normal and ordinary service and maintenance requirements
consistent with Seller's prior operation of the business, Seller's equipment and
other tangible assets are in good operating condition and fit for use in the
ordinary course of business and consistent with its past practice.
6.8 ABSENCE OF CERTAIN DEVELOPMENTS. Except as set forth on the attached
Schedule 6.8 - Developments Schedule, since January 1, 1997, there has been no
adverse change in the Acquired Assets or the financial condition, operating
results, assets, customer or supplier relations, employee relations or business
prospects of the Business. Without limiting the generality of the preceding
sentence, except as expressly contemplated by this Agreement or as set forth on
the attached Schedule 6.8 - Developments Schedule, since January 1, 1997, Seller
has not:
(a) redeemed or repurchased, directly or indirectly, any shares of capital
stock or other equity security or declared, set aside or paid any dividends or
made any other distributions (whether in cash or in kind) with respect to any
shares of its capital stock or other equity security;
(b) issued, sold or transferred any equity securities, any securities
convertible, exchangeable or exercisable into shares of its capital stock or
other equity securities, or warrants, options or other rights to acquire shares
of its capital stock or any other equity securities;
(c) engaged in any activity which has resulted in the acceleration or delay of
the collection of its accounts or notes receivable or any delay in the payment
in its accounts payable, in each case as compared with its custom and practice
in the conduct of the Business immediately prior to January 1, 1997;
(d) discharged or satisfied any Lien or paid any obligation or liability other
than current liabilities paid in the ordinary course of the Business and
consistent with Seller's past practice;
(e) mortgaged or pledged any Acquired Asset or subjected any Acquired Asset to
any Lien;
(f) sold, assigned, conveyed, transferred, canceled or waived any property,
tangible asset, Proprietary Right of Seller or other intangible asset or right
which, if it were held by Seller on the Closing Date, would constitute an
Acquired Asset other than in the ordinary course of the Business and consistent
with Seller's past practice;
17
<PAGE>
(g) disclosed any Confidential Information to any Person other than Purchaser
and Purchaser's representatives, agents, attorneys, accountants and present and
proposed financing sources;
(h) waived any right other than in the ordinary course of the Business or
consistent with Seller's past practice;
(i) made commitments for capital expenditures which, in the aggregate, would
exceed $500,000;
(j) made any loan or advance to, or guarantee for the benefit of, or any
Investment (other than Investments which constitute Excluded Assets) in, any
other Person;
(k) granted any bonus or any increase in wages, salary or other compensation
to any employee (other than any increase in wages or salaries granted in the
ordinary course of the Business and consistent with Seller's past practice
granted to any employee who is not affiliated with Seller other than by reason
of such Person's employment by Seller);
(l) made any charitable contributions;
(m) suffered damages, destruction or casualty losses which, in the aggregate,
exceed $10,000 (whether or not covered by insurance) to any Acquired Asset, or
any other property or asset which, if it existed and was held by Seller on the
Closing Date, would constitute an Acquired Asset;
(n) received any indication from any material supplier of Seller to the effect
that such supplier will stop, or materially decrease the rate of, supplying
materials, products or services to Seller (or to Purchaser, if the Sale is
consummated), or received any indication from any material customer of Seller to
the effect that such customer will stop, or materially decrease the rate of,
buying materials, products or services from Seller (or from Purchaser, if the
Sale is consummated);
(o) entered into any transaction other than in the ordinary course of the
Business, and consistent with Seller's past practice, or entered into any other
material transaction, whether or not in the ordinary course of the Business
which may adversely affect the Business or the Acquired Assets; or
(p) agreed to do any act described in any of clauses 6.8(a) through (o) above.
6.9 TAX MATTERS. Except as set forth in the attached Schedule 6.9 - Taxes
Schedule:
(a) Seller has filed all Tax returns and other reports which it was required
to file and each such return or other report was correct and complete in all
respects, and Seller has paid all Taxes due and owing by it (whether or not
shown on any Tax return or other report) and has withheld and paid over all
Taxes which it is obligated to withhold from amounts paid or owing to any
employee, independent contractor, stockholder, creditor or other third party;
(b) no Tax audits are pending or being conducted with respect to Seller;
(c) there are no Liens on any of the assets of Seller that arose in connection
with any failure (or alleged failure) to pay any Tax;
(d) no information related to Tax matters has been requested by any Taxing
authority and Seller has not received notice indicating an intent to open an
audit or other review from any Taxing authority;
(e) there are no unresolved disputes or claims concerning Seller's Tax
liability;
(f) no claim has ever been made by any jurisdiction in which Seller does not
file Tax returns to the effect that Seller is or may be subject to any Tax
imposed by that jurisdiction;
18
<PAGE>
(g) a valid election to be an S Corporation (as defined in Section 1361(d) of
the Code and any corresponding provision of state, local or foreign law) has
been in effect with respect to Lone Star Rentals, Inc. at all times since
January 31, 1990;
(h) Seller has not waived any statute of limitations in respect of Taxes or
agreed to an extension of time with respect to any Tax assessment or deficiency;
and
(i) Seller is not a party to any Tax sharing or allocation agreement, and
Seller does not have any liability for the Taxes of any person under Section
1.1502-6 of the Treasury Regulations (or any similar provision of state, local
or foreign law), as a transferee or successor, by contract, or otherwise.
6.10 CONTRACTS AND COMMITMENTS.
(a) Contracts Schedule. Other than this Agreement or as described on the
attached Schedule 6.10 - Contracts Schedule, Seller is not a party to any
written or oral:
(i) pension, profit sharing, stock option, employee stock purchase or
other plan or arrangement providing for deferred or other compensation to
employees or any other employee benefit, welfare or stock plan or arrangement
which is not described on the attached Schedule 6.15 - Employee Benefits
Schedule, or any contract with any labor union, or any severance agreement;
(ii) contract for the employment or engagement as an independent
contractor of any Person on a full-time, part-time, consulting or other basis;
(iii) contract pursuant to which Seller has advanced or loaned funds, or
agreed to advance or loan funds, to any other Person;
(iv) contract or indenture relating to any Indebtedness or the
mortgaging, pledging or otherwise placing a Lien on any of the Acquired Assets
after the Closing except as disclosed on Schedule 6.3;
(v) contract pursuant to which Seller is the lessee of, or holds or
operates, any real or personal property owned by any other Person;
(vi) contract pursuant to which Seller is the lessor of, or permits any
third party to hold or operate, any real or personal property owned by Seller
or of which Seller is a lessee;
(vii) assignment, license, indemnification or other contract with respect
to any intangible property (including any Proprietary Right of Seller);
(viii) contract or agreement with respect to services rendered or goods
sold or leased to or from others, other than any customer purchase order
accepted in the ordinary course of business and in accordance with Seller's
past practice which both (1) requires delivery after the date which is six
months after to Closing Date and (2) involves a sale price of more than
$25,000;
(ix) contract prohibiting it from freely engaging in any business
anywhere in the world;
(x) independent sales representative or distributorship agreement with
respect to the Business; or
(xi) any other contract which involves consideration in excess of
$25,000, other than (i) equipment rental and sales contracts entered into by
Seller in the ordinary course of business and consistent with the prior
practices of Seller or (ii) agreements identified in Schedule 6.3 hereto.
(b) Enforceability. Each item described on the attached Schedule 6.10 -
Contracts Schedule (the "Contracts") is valid, binding and enforceable in
accordance with its terms, except as such enforceability may be limited by (a)
19
<PAGE>
applicable insolvency, bankruptcy, reorganization, moratorium or other similar
laws affecting creditors' rights generally and (b) applicable equitable
principles (whether considered in a proceeding at law or in equity).
(c) Compliance. Seller has performed all obligations required to be performed
by it under each Contract to which it is a party, and, to the best of Seller's
Knowledge, Seller is not in default under or in breach in any material respect
of (nor is it in receipt of any claim of default or breach under) any such
obligation. No event has occurred which with the passage of time or the giving
of notice (or both) would result in a default, breach or event of noncompliance
in any material respect under any obligation of Seller pursuant to any Contract
to which it is a party. Seller has no present expectation or intention of not
fully performing any obligation of Seller pursuant to any Contract to which it
is a party, and Seller has no Knowledge of any breach or anticipated breach by
any other party to any Contract.
(d) Leases. With respect to each Contract which is a lease of personal
property, Seller holds a valid and existing leasehold interest under such lease
for the term set forth with respect to such lease on the attached Schedule 6.10
- - Contracts Schedule.
(e) Affiliated Transactions. Except as set forth on the attached Schedule
6.10(e) - Affiliated Transactions Schedule, no officer, director, stockholder or
Affiliate of Seller (and no individual related by blood or marriage to any such
Person, and no entity in which any such Person or individual owns any beneficial
interest) is a party to any agreement, contract, commitment or transaction with
Seller (other than this Agreement) or has any material interest in any material
property used by Seller.
(d) Copies. Purchaser has been supplied with a true and correct copy of each
written Contract, each as currently in effect.
6.11 CERTAIN LITIGATION. Except as set forth on the attached Schedule 6.11 -
Litigation Schedule, there is no action, suit, proceeding, order, investigation
or claim pending (or, to the best of Seller's Knowledge, threatened) against or
affecting Seller, the Business (or to the best of Seller's Knowledge, pending or
threatened against or affecting any officer, director or employee of Seller with
respect to the Business, at law or in equity, or before or by any Government
Entity (a) with respect to the transactions contemplated by the Transaction
Documents, or (b) concerning the design, manufacture, rendering or sale by
Seller of product or service in the course of the Business or otherwise
concerning the conduct of the Business, and, to the best of Seller's Knowledge,
there is no basis for any of the foregoing.
6.12 BROKERAGE. Except as set forth on the attached Schedule 6.12 - Brokerage
Schedule, there is no claim for brokerage commissions, finders' fees or similar
compensation in connection with the transactions contemplated by the Transaction
Documents based on any arrangement or agreement which may be binding upon Seller
or to which Seller or any of the Acquired Assets may be subject.
6.13 INSURANCE. The attached Schedule 6.13 - Insurance Schedule contains a
description of each insurance policy maintained by Seller with respect to its
properties, assets or business, and each such policy is in full force and
effect. Seller is not in default on any obligation pursuant to any insurance
policy maintained by it.
6.14 EMPLOYEES.
(a) Continued Employment. To the best of Seller's Knowledge, no executive or
key employee of Seller or any group of employees of Seller has any plans to
terminate employment with Seller.
(b) Compliance and Restrictions. Seller has complied with all laws relating
to the employment of labor in connection with the Business, including provisions
of such laws relating to wages, hours, equal opportunity, collective bargaining
and the payment of social security and other taxes, and Seller has no material
labor relations problem (including any union organization activities, threatened
or actual strikes or work stoppages or material grievances). Neither Seller nor
any of its employees is subject to any noncompete, nondisclosure,
confidentiality, employment, consulting or similar agreement relating to,
affecting, or in conflict with, the Business activities.
20
<PAGE>
6.15 EMPLOYEE BENEFITS. Except as set forth on the attached Schedule 6.15 -
Employee Benefits Schedule:
(a) with respect to all current employees (including those on lay-off,
disability or leave of absence), former employees, and retired employees of
Seller (the "Seller Employees"), Seller does not maintain or contribute to any
(a) employee welfare benefit plans (as defined in Section 3(1) of ERISA)
("Employee Welfare Plans"), or (b) any plan, policy or arrangement which
provides nonqualified deferred compensation, bonus or retirement benefits,
severance or "change of control" (as set forth in Code Section 280G) benefits,
or life, disability accident, vacation, tuition reimbursement or other material
fringe benefits ("Other Plans");
(b) Seller does not, and has not during the past six (6) years, maintained,
contributed to, or participated in any defined benefit plan or defined
contribution plan which are employee pension benefit plans (as defined in
Section 3(2) of ERISA) ("Employee Pension Plans");
(c) Seller does not, and never has, contributed to or participated in any
multiemployer plan (as defined in Section 3(37) of ERISA) (a "Multiemployer
Plan");
(d) Seller does not maintain or have any obligation to contribute to or
provide any post-retirement health, accident or life insurance benefits to any
Seller Employee, other than limited medical benefits required to be provided
under Code Section 4980B;
(e) all Plans (and all related trusts and insurance contracts) comply in form
and in operation in all respects with the applicable requirements of ERISA and
the Code;
(f) all required reports and descriptions (including all Form 5500 Annual
Reports, Summary Annual Reports, PBGC-1s and Summary Plan Descriptions) with
respect to all Plans have been properly filed with the appropriate government
agency or distributed to participants, and Seller has complied with the
requirements of Code Section 4980B;
(g) with respect to each Plan, all contributions, premiums or payments which
are due on or before the Closing Date have been paid to such Plan; and
(h) Seller has not incurred, and has no reason to believe that it will incur,
any liability to the Pension Benefit Guaranty Corporation (the "PBGC"), the
United States Internal Revenue Service, any multiemployer plan or otherwise with
respect to any employee pension benefit plan or with respect to any employee
pension benefit plan currently or previously maintained by members of the
controlled group of companies (as defined in Sections 414(b) and (c) of the
Code) that includes Seller (the "Controlled Group") that has not been satisfied
in full, and no condition exists that presents a material risk to Seller or any
member of the Controlled Group of incurring such a liability (other than
liability for premiums due the PBGC) which could reasonably be expected to have
any adverse effect on Purchaser or any of the Acquired Assets after the Closing.
The "Plans" means all Employee Pension Plans, Employee Welfare Plans, Other
Plans and Multiemployer Plans to which Seller contributes or is a party.
Schedule 6.15 - Employee Benefits Schedule sets forth a true, correct and
complete list of all Continuing Employees employed by Seller indicating the
amount of each such Continuing Employee's severance payments (if any) and earned
or accrued vacation pay, sick leave pay and floating holiday pay.
6.16 REAL ESTATE.
(a) Owned Properties. The attached Schedule 6.16 - Real Estate Schedule lists
and describes briefly all real property that Seller owns (the "Owned Real
Property"). Except as otherwise described on Schedule 6.16 - Real Estate
Schedule, with respect to each such parcel of Owned Real Property:
21
<PAGE>
(i) Seller has good and marketable fee simple title to each such parcel
free and clear of any Lien, except for (1) statutory liens for current taxes
or other governmental charges with respect to the Owned Real Property not yet
due and payable or the amount or validity of which is being contested in good
faith by appropriate proceedings by Seller, and with respect to which all
reserves required by GAAP have been established; (2) mechanics, carriers
workers, repairers and similar statutory liens arising or incurred in the
ordinary course of business for amounts which are not delinquent and which are
not, individually or in the aggregate, material to the Business; (3) zoning,
entitlement, building and other land use regulations imposed by governmental
agencies having jurisdiction over the Owned Real Property which are not
violated by the current use and operation of the Owned Real Property; and (d)
covenants, conditions, restrictions, easements and other matters of record
affecting title to the Owned Real Property which do not materially impair the
use or value of the Owned Real Property for the purposes for which it is used
in connection with the Business (collectively, the "Permitted Liens");
(ii) there are no pending (or, to the best of the Seller's Knowledge,
threatened) condemnation proceedings, lawsuits, or administrative actions
relating to the Owned Real Property or other matters affecting adversely the
current use, occupancy, or value of the Owned Real Property;
(iii) the Owned Real Property does not serve any adjoining property for
any purpose inconsistent with the use of the Owned Real Property, and the
Owned Real Property is not located within any flood plain or subject to any
similar type restriction for which any permits or licenses necessary to the
use thereof have not been obtained;
(iv) there are no leases, subleases, licenses, concessions, or other
agreements, written or oral, granting to any Person the right of use or
occupancy of any portion of the Owned Real Property;
(v) there are no outstanding options or rights of first refusal to
purchase any of the Owned Real Property, or any portion thereof or interest
therein;
(vi) no Person (other than Seller which owns such parcel) is in
possession of any of the Owned Real Property;
(vii) the current use of the Owned Real Property and the operation of the
Business does not violate any instrument of record or agreement affecting the
Owned Real Property or any applicable Legal Requirements except for such
violations which, individually and in the aggregate, could not reasonably be
foreseen to have a material adverse affect on the Business;
(viii) all buildings, structures and other improvements located on the
Owned Real Property, including all material components thereof, are in good
operating condition and repair, subject only to the provision of usual and
customary maintenance provided in the ordinary course of business with respect
to buildings, structures and improvements of like age and construction and all
water, gas, electrical, steam, compressed air, telecommunication, sanitary and
storm sewage lines and other utilities and systems serving the Owned Real
Property are sufficient to enable the continued operation of the Owned Real
Property as it is now operated in connection with the conduct of the Business;
and
(ix) all certificates of occupancy, permits, licenses, approvals and
other authorizations required in connection with the operation of the Business
on the Owned Real Property required to have been issued to enable the Owned
Real Property to be lawfully occupied and used for all of the purposes for
which it is currently occupied and used in connection with the operation of
the Business, have been lawfully issued and are, as of the date, hereof, in
full force and effect.
22
<PAGE>
(b) Leased Property. The attached Schedule 6.16 - Real Estate Schedule lists
and describes briefly all real property leased or subleased to Seller and all
other real property which is used in the Business, and not owned by Seller (the
"Leased Real Property"). Seller has delivered to Purchaser correct and
complete copies of the leases and subleases listed on Schedule 6.16 - Real
Estate Schedule (collectively, the "Leases"). With respect to the Leased Real
Property and each of the Leases:
(i) such Lease is legal, valid, binding, enforceable, and in full force
and effect;
(ii) such Lease is fully assignable to Purchaser and will continue to be
legal, valid, binding, enforceable, and in full force and effect on identical
terms following the consummation of the Sale and the Assumption and the
commencement of the operation of the Business by Purchaser;
(iii) no party to such Lease is in breach or default, and no event has
occurred which, with notice or lapse of time, would constitute a breach or
default or permit termination, modification, or acceleration of such lease or
sublease;
(iv) no party to such Lease has repudiated any provision thereof;
(v) there are no disputes, oral agreements, or forbearance programs in
effect as to such Lease;
(vi) in the case of each Lease which is a sublease, the representations
and warranties set forth in clauses 6.16(b)(i) through (v) are true and
correct with respect to the underlying lease;
(vii) Seller has not assigned, transferred, conveyed, mortgaged, deeded
in trust, or encumbered any interest in the leasehold or subleasehold created
pursuant to such Lease;
(viii) none of the Leases has been modified in any respect, except to the
extent that such modifications are in writing and have been delivered or made
available to Purchaser;
(ix) all buildings, improvements and other structures located upon the
Leased Real Property have received all approvals or governmental authorities,
including licenses and permits, required in connection with the operation of
the Business, thereon and have been operated and maintained in accordance with
all applicable Legal Requirements and the terms and conditions of the Leases;
and
(x) all buildings, structures and other improvements located upon the
Leased Real Property, including, without limitation, all components thereof,
are in good operating condition subject to the provision of usual and
customary maintenance in the ordinary course of business with respect to
buildings, structures and improvements of like age and construction and all
water, gas, electrical, steam, compressed air, telecommunication, sanitary and
storm sewage and other utility lines and systems serving the Leased Real
Property are sufficient to enable the continued operation of the Leased Real
Property in the manner currently being used in connection with the operation
of the Business.
6.17 COMPLIANCE WITH LAWS.
(a) Generally. To the best of Stockholder's knowledge, except as set forth on
the attached Schedule 6.17(a) - Compliance Schedule, Seller has not violated any
Legal Requirement the violation of which could have an adverse effect on the
Acquired Assets or the financial condition, operating results, assets, customer
or supplier relations, employee relations or business prospects of the Business,
and Seller has not received notice alleging any such violation.
(b) Required Permits. To the best of Stockholder's knowledge, Seller has
complied with (and is in compliance with) all permits, licenses and other
authorizations required for the occupation of Seller's facilities and the
operation of the Business. To the best of Stockholder's knowledge, the items
described on the attached Schedule 6.17(b) - Permits Schedule constitute all of
the permits, filings, notices, licenses, consents, authorizations,
accreditation,
23
<PAGE>
waivers, approvals and the like of, to or with any Government Entity which are
required for the consummation of the Sale, the Assumption or any other
transaction contemplated by the Transaction Documents or the ownership of the
Acquired Assets or Purchaser's conduct of the Business (as such is presently
conducted by Seller) thereafter.
(c) Environmental and Safety Matters. Without limiting the generality of
Section 6.18(a) and (b) above, except as set forth on the attached Schedule
6.17(c) - Environmental Matters Schedule, Seller and all of Seller's
Environmental Affiliates have complied (and are in compliance, in all respects)
with all applicable Environmental and Safety Requirements, and neither Seller
nor any of Seller's Environmental Affiliates has received any notice, report or
information regarding any liabilities (whether accrued, absolute, contingent,
unliquidated or otherwise), or any corrective, investigatory or remedial
obligations, arising under any Environmental and Safety Requirement. Without
limiting the generality of the preceding sentence, except as set forth on the
attached Schedule 6.17(c) - Environmental Matters Schedule:
(i) no underground storage tank, asbestos-containing material in any
form or condition, or PCB-containing materials or equipment, exists at any
property owned or occupied by Seller or any of its Environmental Affiliates;
(ii) to the best of the Stockholder's knowledge, the transactions
contemplated to be consummated pursuant to the Transaction Documents will not
result in the imposition of any obligations under Environmental and Safety
Requirements for site investigation, cleanup or notification to or consent of
any government agency or third party;
(iii) to the best of the Stockholder's knowledge, no equipment, facts,
events, conditions, conduct or methods relating to the past or present
facilities, properties or operations of Seller or any of its Environmental
Affiliates will prevent, hinder or limit continued compliance with any
Environmental and Safety Requirement, give rise to or result in any
corrective, investigatory or remedial obligation pursuant to Environmental and
Safety Requirements, or give rise to or result in any other liability
(including any liability relating to onsite or offsite hazardous or non-
hazardous substance releases, personal injury, cleanup, remediation, property
damage or natural resources damage) pursuant to any Environmental and Safety
Requirement; and
(iv) no Environmental Lien has attached to any property of Seller or any
of its Environmental Affiliates.
6.18 PRODUCT WARRANTY. Except as set forth on the attached Schedule 6.18 -
Warranties Schedule, all products leased, manufactured, serviced, distributed,
sold or delivered by Seller in connection with the Business have been
manufactured, serviced, distributed, sold and/or delivered in conformity with
all applicable contractual commitments and all express and implied warranties.
No material liability of Seller exists for replacement or other damages in
connection with any such product.
6.19 PROPRIETARY RIGHTS.
(a) The Schedule 6.19 - Proprietary Rights Schedule attached hereto sets forth
a complete and correct list of: (i) all patented, registered or applied for
Proprietary Rights owned or used by Seller; (ii) all trade names, unregistered
trademarks and material unregistered copyrights owned or used by Seller; (iii)
all licenses or other agreements to which Seller is a party, either as licensee
or licensor, for the Proprietary Rights.
(b) Except as set forth on the Schedule 6.19 - Proprietary Rights Schedule,
(i) Seller owns and possesses without restriction as to use, all right, title
and interest in and to the Proprietary Rights necessary for the operation of
Seller's businesses as currently conducted; (ii) Seller has not received any
notices of invalidity, infringement or misappropriation from any third party
with respect to any such Proprietary Rights; (iii) Seller has not interfered
with, infringed upon, misappropriated or otherwise come into conflict with any
Proprietary Rights of any third parties; and (iv) to Seller's Knowledge, no
third party has interfered with, infringed upon, misappropriated, or otherwise
come into conflict with any Proprietary Rights of Seller.
24
<PAGE>
(c) The transactions contemplated by this Agreement shall have no adverse
effect on Seller's right, title and interest in and to any of their Proprietary
Rights. Seller has taken all necessary and desirable actions to maintain and
protect its Proprietary Rights and shall continue to maintain and protect those
rights prior to the Closing so as to not adversely affect the validity or
enforcement of such Proprietary Rights.
6.20 SELLER'S INVESTMENT REPRESENTATIONS. Seller (a) understands that the NES
Promissory Note has not been, and will not be, registered under the Securities
Act of 1933, as amended, or under any state securities laws, and are being
offered and sold in reliance upon federal and state exemptions for transactions
not involving any public offering, (b) understands that the NES Promissory Note
is not transferable, (c) is acquiring the NES Promissory Note solely for its own
account for investment purposes, and not with a view to the distribution
thereof, (d) is a sophisticated investor with knowledge and experience in
business and financial matters, (e) acknowledges that it has been furnished
with such financial and other information concerning Purchaser as it considers
necessary in connection with its purchase of the NES Promissory Note and
evaluating the merits and the risks inherent in holding the NES Promissory Note,
(f) has carefully reviewed such information and is thoroughly familiar with the
proposed business, operations, properties and financial condition of the
Purchaser, (g) has discussed with representatives of Purchaser any questions it
may have had with respect thereto has received certain information concerning
Purchaser and (h) is able to bear the economic risk and lack of liquidity
inherent in holding the NES Promissory Note.
6.21 DISCLOSURE. Neither this Article 6 nor any schedule, attachment, written
statement, document, certificate or other item supplied to Purchaser by or on
behalf of Seller with respect to the transactions contemplated by the
Transaction Documents contains any untrue statement of a material fact or omits
a material fact necessary to make each statement contained herein or therein not
misleading. There is no fact which Seller has not disclosed to Purchaser in
writing and of which any officer, director or executive employee of Seller is
aware (other than matters of a general economic nature) and which has had or
could reasonably be expected to have a material adverse effect upon the Acquired
Assets or the financial condition, operating results, assets, customer or
supplier relations, employee relations or business prospects of the Business.
6.22 ACCURACY ON CLOSING DATE. Each representation and warranty set forth in
this Article 6 and all information contained in any exhibit, schedule or
attachment to this Agreement or in any certificate or other writing delivered
by, or on behalf of, Seller to Purchaser will be true and correct as of the time
of the Closing as though then made, except (i) as affected by the transactions
expressly contemplated by the Transaction Documents, (ii) to the extent that
such representation or warranty relates solely to an earlier date and (iii) to
the extent that Seller has advised Purchaser otherwise in writing prior to the
Closing.
ARTICLE 7
REPRESENTATIONS AND WARRANTIES CONCERNING THE STOCKHOLDERS
As a material inducement to the Purchaser to enter into this Agreement, the
Stockholder severally represents and warrants to the Purchaser that:
7.1 AUTHORIZATION OF TRANSACTIONS. Such Stockholder has full power, authority
and legal capacity to enter into this Agreement and the other documents
contemplated hereby to which such Stockholder is a party and to perform his
obligations hereunder and thereunder. This Agreement and the other documents
contemplated hereby to which such Stockholder is a party have been duly executed
and delivered by such Stockholder and constitute the valid and binding
agreements of such Stockholder, enforceable in accordance with their respective
terms.
7.2 ABSENCE OF CONFLICTS. The execution, delivery and performance of the
Transaction Documents to which such Stockholder is a party do not and will not
(i) conflict with or result in a breach of the terms, conditions or provisions
of, (ii) constitute a default under, (iii) result in the creation of any Lien
upon any of the Acquired Assets under, (iv) give any third party the right to
modify, terminate or accelerate any liability or obligation of such Stockholder
under, (v) result in a violation of, or (vi) require any authorization, consent,
approval, exemption or other action by or declaration or notice to any
Governmental Entity pursuant to, the charter or bylaws of Seller or
25
<PAGE>
any agreement, instrument or other document, or any Legal Requirement, to which
such Stockholder or any of Stockholder's assets is subject. Without limiting the
generality of the foregoing, neither such Stockholder nor any Affiliate of such
Stockholder has entered into any agreement, or is bound by any obligation of any
kind whatsoever, directly or indirectly to transfer or dispose of (whether by
sale of stock or assets, assignment, merger, consolidation or otherwise) the
Business or the Acquired Assets (or any substantial portion thereof) to any
Person other than Purchaser, and such Stockholder has not entered into any
agreement, nor is it bound by any obligation of any kind whatsoever, to sell any
capital stock of Seller to any Person.
7.3 BROKERAGE. Except as set forth on the Brokerage Schedule, there are no
claims for brokerage commissions, finders' fees or similar compensation in
connection with the transactions contemplated by this Agreement based on any
arrangement or agreement made by or on behalf of such Stockholder.
7.4 CLOSING DATE. All of the representations and warranties concerning such
Stockholder contained in this Article 7 and elsewhere in this Agreement and all
information delivered in any schedule, attachment or Exhibit hereto or in any
writing delivered to the Purchaser are true and correct on the date of this
Agreement and shall be true and correct on the Closing Date except to the extent
that such Stockholder has advised the Purchaser otherwise in writing prior to
the Closing.
ARTICLE 8
ACCESS TO RECORDS
8.1 ACCESS TO RECORDS. To the extent reasonably required for any bona fide
business purpose, each Party will allow, and will use its best efforts to cause
its Affiliates to allow, the other Parties (and the other Parties' agents,
representatives and Affiliates) access to all business records and files
concerning the Business or the Acquired Assets which relate to the period prior
to the Closing Date and will permit such Persons to make copies of the same.
Such access will be granted upon reasonable advance notice, during normal
business hours, and in such a manner so as not to interfere unreasonably with
the operations of the Person affording such access. Without limiting the
generality of the foregoing, if any Party or any of its Affiliates actively is
contesting or defending against any charge, complaint, action, suit, proceeding,
hearing, investigation, claim, or demand in connection with (a) any transaction
contemplated by the Transaction Documents, or (b) any fact, situation,
circumstance, status, condition, activity, practice, plan, occurrence, event,
incident, action, failure to act, or transaction on or prior to the Closing
relating to the Business, then the other Parties will cooperate, and use their
best efforts to cause their Affiliates to cooperate, with the contesting or
defending Person and its counsel in such contest or defense, make available such
other Parties' and their Affiliates' personnel and provide such testimony and
access to books and records as are reasonably requested in connection with such
contest or defense, all at the contesting or defending Person's expense (unless
the contesting or defending Person is entitled to indemnification therefor
pursuant to Section 9.2 or 9.3). No provision of this Article 8 will be
construed so as to limit Seller's obligation to transfer to Purchaser all Books
and Records which are part of the Acquired Assets.
ARTICLE 9
SURVIVAL AND INDEMNIFICATION
9.1 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All representations and
warranties contained herein or made in writing by any Party in connection
herewith shall survive the execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby, regardless of any
investigation made by any Party or on its behalf. Neither a Party's
participation in the consummation of any transaction pursuant to any Transaction
Document nor any waiver of any condition to such participation (including any
condition that a representation or warranty of any other Party be true and
correct) will constitute a waiver by such participating Party of any
representation or warranty of any Party or otherwise affect the survival of any
such representation or warranty.
26
<PAGE>
9.2 INDEMNIFICATION OBLIGATIONS OF SELLER AND THE STOCKHOLDER. In addition to
any other right or remedy available to Purchaser at law or in equity, Seller and
the Stockholder will jointly and severally indemnify Purchaser and its
Affiliates, stockholders, officers, directors, employees, agents,
representatives and permitted successors and assigns (collectively, the
"Purchaser Indemnitees") in respect of, and save and hold each Purchaser
Indemnitee harmless against and pay on behalf of or reimburse each Purchaser
Indemnitee as and when incurred, any Loss which any Purchaser Indemnitee
suffers, sustains or becomes subject to as a result of, in connection with,
relating or incidental to or by virtue of, without duplication:
(a) any misrepresentation or breach of any representation or warranty by
Seller or the Stockholder set forth in this Agreement or any Schedule, Exhibit,
certificate or other instrument or document furnished to Purchaser by Seller or
the Stockholder pursuant to any Transaction Document;
(b) any nonfulfillment or breach of any covenant or agreement of Seller or the
Stockholder set forth in any Transaction Document;
(c) any Excluded Liability; or
(d) any Excluded Asset.
The Purchaser Indemnitees may proceed against Seller and/or any or all of the
Stockholder, at the Purchaser Indemnitees' option. In addition, Purchaser shall
have the option of recouping all or any part of any Losses it may suffer (in
lieu of seeking an equivalent amount of indemnification to which it is entitled
under this Section 9.2) by notifying the Seller that Purchaser is reducing the
principal amount outstanding under the NES Promissory Note. This shall affect
the timing and amount of payments required under the NES Promissory Note in the
same manner as if Purchaser had made a prepayment (without premium or penalty)
thereunder.
9.3 INDEMNIFICATION OBLIGATIONS OF PURCHASER. Purchaser will indemnify Seller
and its Affiliates, stockholders, officers, directors, employees, agents,
representatives and permitted successors and assigns (collectively, the "Seller
Indemnitees") and hold each of them harmless against any Loss which such Seller
Indemnitee suffers, sustains or becomes subject to as a result of, in connection
with, relating to or by virtue of, without duplication:
(a) any misrepresentation or breach of any representation or warranty by
Purchaser set forth in this Agreement or any certificate delivered by Purchaser
to Seller pursuant to any Transaction Document; or
(b) any nonfulfillment or breach of any covenant or agreement of Purchaser set
forth in any Transaction Document.
9.4 INDEMNIFICATION PROCEDURES.
(a) Notice of Claim. Any Person making a claim for indemnification pursuant
to Section 9.2 or 9.3 above (an "Indemnified Party") must give the Party from
whom indemnification is sought (an "Indemnifying Party") written notice of such
claim (an "Indemnification Claim Notice") promptly after the Indemnified Party
receives any written notice of any action, lawsuit, proceeding, investigation or
other claim (a "Proceeding") against or involving the Indemnified Party by a
Government Entity or other third party or otherwise discovers the liability,
obligation or facts giving rise to such claim for indemnification; provided that
the failure to notify or delay in notifying an Indemnifying Party will not
relieve the Indemnifying Party of its obligations pursuant to Section 9.2 or
9.3, as applicable, except to the extent that such failure actually harms the
Indemnifying Party. Such notice must contain a description of the claim and the
nature and amount of such Loss (to the extent that the nature and amount of such
Loss is known at such time).
27
<PAGE>
(b) Control of Defense: Conditions. With respect to the defense of any
Proceeding against or involving an Indemnified Party in which the Government
Entity or other third party in question seeks only the recovery of a sum of
money for which indemnification is provided in Section 9.2 or 9.3, at its option
an Indemnifying Party may appoint as lead counsel of such defense any legal
counsel selected by the Indemnified Party; provided that before the Indemnifying
Party assumes control of such defense it must first
(i) enter into an agreement with the Indemnified Party (in form and
substance satisfactory to the Indemnified Party) pursuant to which the
Indemnifying Party agrees to be fully responsible (with no reservation of any
rights other than the right to be subrogated to the rights of the Indemnified
Party) for all Losses relating to such Proceeding and unconditionally
guarantees the payment and performance of any liability or obligation which
may arise with respect to such Proceeding or the facts giving rise to such
claim for indemnification, and
(ii) furnish the Indemnified Party with evidence that the Indemnifying
Party, in the Indemnified Party's sole judgment, is and will be able to
satisfy any such liability.
(c) Control of Defense: Exceptions, etc. Notwithstanding Section 9.4(b), the
Indemnified Party will be entitled to participate in the defense of such claim
and to employ counsel of its choice for such purpose at its own expense;
provided that the Indemnifying Party will bear the reasonable fees and expenses
of such separate counsel incurred prior to the date upon which the Indemnifying
Party effectively assumes control of such defense. The Indemnifying Party will
not be entitled to assume control of the defense of such claim, and will pay the
reasonable fees and expenses of legal counsel retained by the Indemnified Party,
if
(i) the Indemnified Party reasonably believes that an adverse
determination of such Proceeding could be detrimental to or injure the
Indemnified Party's reputation or future business prospects,
(ii) the Indemnified Party reasonably believes that there exists or
could arise a conflict of interest which, under applicable principles of legal
ethics, could prohibit a single legal counsel from representing both the
Indemnified Party and the Indemnifying Party in such Proceeding, or
(iii) a court of competent jurisdiction rules that the Indemnifying Party
has failed or is failing to prosecute or defend vigorously such claim; and
The Indemnifying Party must obtain the prior written consent of the
Indemnified Party (which the Indemnified Party will not unreasonably withhold)
prior to entering into any settlement of such claim or Proceeding or ceasing to
defend such claim or Proceeding.
9.5 THRESHOLD AMOUNT. No amount of indemnity shall be payable to a Purchaser
Indemnitee pursuant to Section 9.2 unless, until and only to the extent that all
Purchaser Indemnitees have collectively suffered or incurred Losses aggregating
in excess of $50,000 as a result of or arising out of the matters described in
Section 9.2.
9.6 TREATMENT OF INDEMNIFICATION PAYMENTS. Amounts paid to or on behalf of
Purchaser or Seller as indemnification hereunder shall be treated as adjustments
to the Purchase Price. If any Tax authority asserts that an indemnification
payment is not an adjustment to the Purchase Price, the Indemnifying Party will
indemnify the Indemnified Party against any Tax imposed on the receipt of such
indemnification payment pursuant to Section 9.2 or 9.3, including any Tax
imposed on any payment pursuant to this Section 9.5.
9.7 PAYMENT. Subject to Section 2.3, the Indemnifying Party shall pay the
Indemnified Party to the extent the Indemnified Party is entitled to payment
hereunder in immediately available funds promptly after the Indemnified Party
provides the Indemnifying Party with notice of a claim hereunder and the parties
reasonably agree that there is a reasonable basis for such claim, or a final
result, determination, finding, judgment and/or award is made with respect to
such claim by any court of competent jurisdiction.
28
<PAGE>
ARTICLE 10
CONDITIONS TO THE CLOSING
10.1 CONDITIONS OF PURCHASER'S OBLIGATION. Purchaser's obligation to effect
the Sale and the Assumption at the Closing is subject to the satisfaction as of
the Closing of the following conditions precedent:
(a) Representations and Warranties. Each representation and warranty set
forth in Article 6 will be true and correct in all material respects at and as
of the Closing as though then made (without giving effect to any disclosure made
by Seller pursuant to Section 6.22 above), except to the extent of any change
solely caused by the transactions expressly contemplated by the Transaction
Documents.
(b) Covenants. Seller and the Stockholder will have performed and observed
each covenant or other obligation required to be performed or observed by them
pursuant to the Transaction Documents prior to the Closing.
(c) Compliance with Applicable Laws. The consummation of the transactions
contemplated by the Transaction Documents will not be prohibited by any Legal
Requirement or subject Purchaser, the Business or the Acquired Assets to any
penalty, liability or other onerous condition arising under any applicable Legal
Requirement or imposed by any Government Entity.
(d) Proceedings. No action, suit or proceeding will be pending or threatened
before any Government Entity the result of which could prevent or prohibit the
consummation of any transaction pursuant to the Transaction Documents, cause any
such transaction to be rescinded following consummation, or adversely affect
Purchaser's right to acquire or hold the Acquired Assets or conduct the Business
or Seller's performance or its obligations pursuant to the Transaction
Documents, and no judgment, order, decree, stipulation, injunction or charge
having any such effect will exist.
(e) Consents. All filings, notices, licenses, consents, authorizations,
accreditation, waivers, approvals and the like of, to or with any Government
Entity or any other Person that are required for the consummation of the Sale,
the Assumption or any other transaction contemplated by the Transaction
Documents or the ownership of the Acquired Assets or the conduct of the Business
by Purchaser thereafter (the "Consents") will have been duly made or obtained.
(f) Opinion of Counsel. Purchaser will have received from M. R. Carr, legal
counsel for Seller and the Stockholder, an opinion with respect to the matters
set forth in Exhibit B attached hereto addressed to Purchaser. Such opinion will
be dated the Closing Date and will be in form satisfactory to Purchaser's
special legal counsel.
(g) Due Diligence. Purchaser shall be satisfied with the results of its
legal, accounting, business, environmental and other due diligence review of the
Business; provided that this condition shall terminate as of March 15, 1997.
(h) Payment of Indebtedness. Seller shall apply the Cash Purchase Price to
pay all Indebtedness of Seller and all accounts payable of Seller pursuant to
Section 11.6 below, and Purchaser shall have received, at Seller's sole cost and
expense, evidence satisfactory to Purchaser of the release of all Liens on the
Acquired Assets securing such Indebtedness.
(i) Employment Agreement. James Horsley and Purchaser shall have entered into
an agreement relating to Mr. Horsley's employment by Purchaser (the "Employment
Agreement"), substantially in the form of Exhibit C attached hereto, and such
Employment Agreement shall be in full force and effect.
(j) Stock Purchase Agreement. James Horsley and Purchaser shall have entered
into an agreement relating to restrictions on transfer of the Common Stock of
NES(the "Stock Purchase Agreement"), substantially in the form of Exhibit D
attached hereto, and such Stock Purchase Agreement shall be in full force and
effect.
29
<PAGE>
(k) Lease Agreements. James Horsley and Purchaser shall have entered into
lease agreements (the "Stockholder Lease Agreements") in the form of Exhibit E
attached hereto for each of the premises set forth on Schedule 6.16, and each
such Stockholder Lease Agreement shall be in full force and effect.
(l) Sellers' Closing Documents. Seller will have delivered to Purchaser the
following documents:
(i) an Officer's Certificate of Seller, dated the Closing Date, stating
that the conditions specified in Sections 10.1(a) through (e), and (h) through
(k), inclusive, have been fully satisfied;
(ii) a copy of the resolutions duly adopted by Seller's board of
directors and stockholders authorizing Seller's execution, delivery and
performance of the Transaction Documents to which Seller is a party and the
consummation of the Sale and all other transactions contemplated by the
Transaction Documents, as in effect as of the Closing, certified by an officer
of Seller;
(iii) a certificate (dated not earlier than five business days prior to
the Closing) of the Secretary of State of the state of incorporation of Seller
as to the good standing of Seller in such state;
(iv) a certificate (dated not earlier than five business days prior to
the Closing) of the Secretary of State of each state wherein Seller has
qualified to do business as a foreign corporation as to the good standing of
Seller in such state;
(v) the Books and Records;
(vi) such a bill of sale, warranty deeds, warranty assignments of leases
and all other instruments of conveyance which are necessary or desirable to
effect the Sale, including documents acceptable for recordation in the United
States Patent and Trademark Office, the United States Copyright Office and any
other similar Government Entity; and
(vii) such other documents relating to the transactions contemplated by
the Transaction Documents as Purchaser reasonably requests.
All corporate and other proceedings or actions taken or required to be taken by
Seller or the Stockholder in connection with the transactions contemplated by
the Transaction Documents, and all documents incident thereto, must be
reasonably satisfactory in form and substance to Purchaser and its special legal
counsel. Any condition set forth in this Section 10.1 may be waived only in a
writing executed by Purchaser.
10.2 CONDITIONS OF SELLER'S OBLIGATION. Seller's obligation to effect the
Sale at the Closing is subject to the satisfaction as of the Closing of the
following conditions precedent:
(a) Representations and Warranties. Each representation and warranty set
forth in Article 5 will be true and correct in all material respects at and as
of the Closing as though then made (without giving effect to any disclosure made
by Purchaser pursuant to Section 5.5 above), except to the extent of any change
solely caused by the transactions expressly contemplated by the Transaction
Documents.
(b) Covenants. Purchaser will have performed each covenant or other
obligation required to be performed by it pursuant to the Transaction Documents
prior to the Closing.
(c) Compliance with Applicable Laws. The consummation of the transactions
contemplated by the Transaction Documents will not be prohibited by any Legal
Requirement or subject Seller to any penalty or liability arising under any
Legal Requirement or imposed by any Government Entity.
30
<PAGE>
(d) Proceedings. No action, suit or proceeding will be pending or threatened
before any Government Entity the result of which could prevent or prohibit the
consummation of any transaction pursuant to the Transaction Documents, cause any
such transaction to be rescinded following such consummation or adversely affect
Purchaser's performance of its obligations pursuant to the Transaction
Documents, and no judgment, order, decree, stipulation, injunction or charge
having any such effect will exist.
(e) Employment Agreement. James Horsley and Purchaser shall have entered into
an agreement relating to Mr. Horsley's employment by Purchaser (the "Employment
Agreement"), substantially in the form of Exhibit C attached hereto, and such
Employment Agreement shall be in full force and effect.
(f) Stock Purchase Agreement. James Horsley and Purchaser shall have entered
into an agreement relating to restrictions on transfer of the Common Stock of
NES (the "Stock Purchase Agreement"), substantially in the form of Exhibit D
attached hereto, and such Stock Purchase Agreement shall be in full force and
effect.
(g) Lease Agreements. James Horsley and Purchaser shall have entered into
lease agreements (the "Stockholder Lease Agreements") in the form of Exhibit E
attached hereto for each of the premises set forth on Schedule 6.16, and each
such Stockholder Lease Agreement shall be in full force and effect.
(h) Purchaser Closing Documents. Purchaser will have delivered to Seller the
following documents:
(i) an Officer's Certificate of Purchaser, dated the Closing Date,
stating that the conditions specified in Sections 10.2(a) through (g),
inclusive, have been fully satisfied;
(ii) all instruments which are necessary or desirable to effect the
Assumption; and
(iii) such other documents relating to the transactions contemplated by
the Transaction Documents to be consummated at the Closing as Seller
reasonably requests.
(i) Payment of Cash Purchase Price. Purchaser will have delivered to Seller
by cashier's check or wire transfer the Cash Purchase Price.
All corporate and other proceedings or actions taken or required to be taken
by Purchaser in connection with the transactions contemplated by the Transaction
Documents, and all documents incident thereto, must be reasonably satisfactory
in form and substance to Seller and its legal counsel. Any condition set forth
in this Section 10.2 may be waived only in a writing executed by Seller.
ARTICLE 11
OTHER COVENANTS
11.1 INTERIM AGREEMENTS OF SELLER AND THE STOCKHOLDER. Seller and each
Stockholder covenants and agrees that prior to the Closing, unless Purchaser
agrees otherwise in writing, or as otherwise expressly contemplated or permitted
by the Transaction Documents, Seller will conduct the Business in, and Seller
will not take any action with respect to the Business, other than in, the
ordinary course, on an arm's-length basis and in accordance in all material
respects with all Legal Requirements and Seller's past custom and practice.
Without limiting the generality of the preceding sentence, Seller and each
Stockholder covenant that:
(a) Seller will not, directly or indirectly
(i) sell, pledge, dispose of or encumber any Acquired Asset or, other than
sales of inventory in the ordinary course of the Business,
31
<PAGE>
(ii) engage in any activity which would accelerate the collection of its
accounts or notes receivable, delay the payment of its accounts payable, or
reduce or otherwise restrict the amount of inventory (including raw material,
packaging, work-in-process, or finished goods) on hand, in each case, other
than in the ordinary course of the conduct of the Business,
(iii) acquire (by merger, exchange, consolidation, acquisition of stock
or assets or otherwise) any corporation, partnership, joint venture or other
business organization or division or material assets thereof,
(iv) incur any Indebtedness or issue any debt securities,
(v) take any action with respect to the grant of any bonuses, salary
increases, severance or termination pay,
(vi) declare, set aside, or pay any dividend or make any distribution
with respect to its capital stock or redeem, purchase, or otherwise acquire
any of its capital stock,
(vii) not take any action which would render, or which could reasonably
be expected to render, any representation or warranty made by Seller in this
Agreement untrue at (or at any time prior to) the Closing;
(viii) adopt or amend any employee benefit or welfare plan, or
(ix) enter into or modify, or propose to enter into or modify, any
agreement, arrangement or understanding with respect to any of the matters
referred to in clauses (i) through (viii) above;
(b) Seller will use its best efforts to cause its current insurance policies
not to be canceled or terminated, and not to permit any of the coverage pursuant
to any such policy to lapse, unless at the time of such termination,
cancellation or lapse there is in full force and effect a replacement policy
which provides coverage in an amount which is not less than the amount of the
coverage pursuant to the canceled, terminated or lapsed policy;
(c) Seller will
(i) insofar as such matters relate to the Acquired Assets or the
Business, use its best efforts to (1) preserve intact the organization and
goodwill of the Business, (2) keep available the services of its officers and
employees as a group, and (3) maintain satisfactory relationships with its
material financing sources, suppliers and customers and other Persons having
business relationships with it,
(ii) upon reasonable request, confer with representatives of Purchaser
and Purchaser's present and proposed financing sources regarding the Acquired
Assets and the Business,
(iii) upon reasonable request, arrange meetings with such customers of,
and suppliers to, Seller as Purchaser shall reasonably designate in order that
Seller and Purchaser may confer with such customers and suppliers regarding
the Business, and the nature of the transactions contemplated by this
Agreement,
(iv) maintain its facilities and assets in good condition, and
(v) notify Purchaser of any emergency or other change in the normal
course of the Business, or in the condition of the Acquired Assets, or the
operation of the Business, and any governmental or third party complaint,
investigation or hearing (or communication indicating that such a complaint,
investigation or hearing is or may be contemplated) if such emergency, change,
complaint, investigation or hearing could reasonably be expected to be
material, individually or in the aggregate, to the Acquired Assets or the
financial condition, operating results, assets, customer or supplier
relations, employee relations or business prospects of the Business;
(d) Seller promptly will notify Purchaser if it discovers that any
representation or warranty by Seller set forth in this Agreement was untrue when
made or subsequently has become untrue; and
32
<PAGE>
(e) Seller will permit representatives of Purchaser and Purchaser's present
and proposed financing sources to have full access (at reasonable times and in a
manner so as not to unreasonably interfere with Seller's normal business
operations) to all Seller's personnel and all premises, properties, books,
records, contracts, Tax records and other documents of Seller pertaining to the
Business and will allow such Persons to make and retain copies of such
documents.
11.2 EXCLUSIVITY. Neither Seller nor any of the Stockholder will (i) solicit,
initiate, or encourage the submission of any proposal or offer from any Person
relating to the acquisition of any capital stock or other voting securities, or
any substantial portion of the assets, of Seller (including any acquisition
structured as a merger, consolidation, or share exchange) or (ii) participate in
any discussions or negotiations regarding, furnish any information with respect
to, assist or participate in, or facilitate in any other manner any effort or
attempt by any Person to do or seek any of the foregoing. The Stockholder will
not vote any shares of Seller in favor of any such acquisition structured as a
merger, consolidation, or share exchange. Seller will notify Purchaser
immediately if any Person makes any proposal, offer, inquiry, or contact with
respect to any of the foregoing.
11.3 NOTICE BY PURCHASER. From the date of this Agreement until the Closing,
Purchaser promptly will notify Seller if any representation or warranty of
Purchaser set forth in this Agreement was untrue when made or subsequently has
become untrue.
11.4 ADDITIONAL INTERIM AGREEMENTS. Each Party will use reasonable efforts
to:
(a) take or cause to be taken all actions, and do or cause to be done all
things, which are necessary, proper or advisable to cause any other Party's
conditions set forth in Sections 10.1 and 10.2 to be fully satisfied, and
(b) consummate and make effective as promptly as practicable the transactions
contemplated by the Transaction Documents, including using reasonable efforts to
obtain the Consents.
11.5 TRANSACTION EXPENSES. Purchaser will be responsible for all costs and
expenses incurred by Purchaser in connection with the negotiation, preparation
and entry into the Transaction Documents and the consummation of the
transactions to be consummated pursuant to the Transaction Documents; provided
that if either Seller or the Stockholder terminate this Agreement or fail to
proceed toward the Closing in good faith, Seller will reimburse Purchaser for
all such costs and expenses. In addition, Purchaser will pay all transfer,
sales and use Taxes imposed by reason of the transactions contemplated by this
Agreement. Seller will pay (i) all stamp and recording taxes, fees and
expenses, settlement fees, escrow fees and other miscellaneous closing fees or
costs associated therewith, and (ii) all costs and expenses incurred by Seller
in connection with the negotiation, preparation and entry into the Transaction
Documents, and the consummation of the transactions to be consummated pursuant
to the Transaction Documents.
11.6 PREPAYMENT OF CERTAIN INDEBTEDNESS. At the Closing, the Seller shall
apply the Cash Purchase Price to pay all Indebtedness of Seller and all accounts
payable of Seller and shall secure complete releases of any Lien any holder of
Indebtedness may have in any of the Acquired Assets.
11.7 FURTHER ASSURANCES. From and after the Closing, Seller will execute all
documents and take any other action which it is reasonably requested to execute
or take to further effectuate the transactions contemplated by the Transaction
Documents.
11.8 ANNOUNCEMENTS. Prior to the Closing, Purchaser will not make any public
announcement of or regarding the transactions contemplated by this Agreement
without the prior approval of Seller as to the timing and content of such
announcement (which approval Seller may not unreasonably withhold or delay).
Neither Seller nor the Stockholder will make any public announcement of or
regarding the transactions contemplated by this Agreement without the prior
approval of Purchaser as to the timing and content of such announcement (which
approval Purchaser may not unreasonably withhold or delay).
33
<PAGE>
11.9 EMPLOYEES.
(a) Seller has provided Purchaser with a true, correct and complete list of
all of Seller's employees indicating the rate of pay of each such employee
during the twelve months preceding the date hereof and the location of such
employee. Seller shall pay all amounts of wages, bonuses and other remuneration
(including, without limitation, discretionary benefits and bonuses) payable to
such employees with respect to the period ending on the day prior to the Closing
Date, together with any worker's compensation claims or amounts payable on an
ongoing basis to such employees in connection with events occurring prior to the
Closing Date.
(b) Purchaser will offer employment to all Persons employed as of the Closing
Date (the "Continuing Employees") on terms and conditions which are in the
aggregate substantially equivalent to those applicable to such Persons'
employment with Seller as of the Closing Date. Nothing in this Section 11.9
shall obligate Purchaser to continue to employ any Continuing Employee for any
period of time.
(c) After the Closing, Purchaser shall be responsible for all such severance
payments (if any) and earned or accrued vacation pay, sick leave pay and
floating holiday disclosed on Schedule 6.15.
(d) Seller has provided Purchaser with a true, correct and complete list of
all Continuing Employees employed by Seller indicating the amount of each such
Continuing Employee's severance payments (if any) and earned or accrued vacation
pay, sick leave pay and floating holiday pay.
11.10 NECESSARY THIRD PARTY CONSENTS. Anything contained in this Agreement to
the contrary notwithstanding, this Agreement shall not constitute an agreement
to transfer or assign any right, title or interest in, or liability under, any
contract, license, lease, commitment, sales order, purchase order or other
agreement, nor any claim or right or any benefit arising thereunder or resulting
therefrom, if (i) an attempted transfer or assignment thereof, without the
consent of a third party thereto, would constitute a breach thereof or in any
way adversely affect the rights of Purchaser or Seller or any of their
respective Affiliates thereunder and (ii) such consent is not obtained (the
"Unassignable Contracts"). Seller shall use all reasonable efforts to obtain
the consent of all necessary third parties to the transfer or assignment to
Purchaser pursuant to this Agreement of all Unassignable Contracts. With
respect to each Unassignable Contract, until consent to assign such contract is
obtained, or in the event such consent is never obtained, Seller and Purchaser
shall cooperate in any reasonable arrangements designed to provide for
Purchaser, to the maximum extent possible, the benefits thereunder, including,
without limitation, enforcement for the benefit of Purchaser of any and all
rights of Seller against such third party arising out of cancellation by such
third party or otherwise.
11.11 NES PROMISSORY NOTE LEGEND. The NES Promissory Note will be imprinted
with a legend substantially in the following form:
THE PAYMENT OF PRINCIPAL AND INTEREST ON THIS NOTE IS SUBJECT TO CERTAIN
RECOUPMENT PROVISIONS SET FORTH IN AN ASSET PURCHASE AGREEMENT DATED AS OF
MARCH 17, 1997, AMONG NES ACQUISITION CORP., A WHOLLY-OWNED SUBSIDIARY OF THE
ISSUER OF THIS NOTE, THE PERSON TO WHOM THIS NOTE ORIGINALLY WAS ISSUED, AND
CERTAIN OTHER PERSONS. THE ISSUER OF THIS NOTE WILL FURNISH A COPY OF THESE
PROVISIONS TO THE HOLDER HEREOF WITHOUT CHARGE UPON WRITTEN REQUEST. THIS NOTE
WAS ORIGINALLY ISSUED ON MARCH 17, 1997, AND HAS NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED.
ARTICLE 12
OTHER AGREEMENTS
12.1 TERMINATION. This Agreement may be terminated:
(a) at any time prior to the Closing by mutual agreement of Purchaser and
Seller,
34
<PAGE>
(b) by Purchaser, at any time when any Party other than Purchaser is in breach
of any of its material obligations pursuant to this Agreement or if any
representation or warranty of any Party other than Purchaser is false or
misleading in any material respect (provided that such condition is not the
result of any breach of any covenant, representation or warranty of Purchaser
set forth in any Transaction Document),
(c) by Seller, at any time when Purchaser is in breach of any of its material
obligations pursuant to this Agreement or if any representation or warranty of
Purchaser is false or misleading in any material respect (provided that such
condition is not the result of any breach of any covenant, representation or
warranty of a Party other than Purchaser set forth in any Transaction Document),
or
(d) by Purchaser or Seller, at any time after April 30, 1997, if the Closing
has not then occurred.
Any termination of this Agreement pursuant to any of clauses 12.1(b) through
(d) will be effected by written notice from the terminating Party to Purchaser
(if Seller is the terminating Party) or Seller (if Purchaser is the terminating
Party). Any termination of this Agreement pursuant to clause 12.1(b) or (c)
will not terminate the liability of any Party for any breach or default of any
representation, warranty, covenant or other agreement set forth in any
Transaction Document which exists at the time of such termination.
12.2 REMEDIES. No failure to exercise, and no delay in exercising, any right,
remedy, power or privilege under this Agreement by any Party will operate as a
waiver of such right, remedy, power or privilege, nor will any single or partial
exercise of any right, remedy, power or privilege under this Agreement preclude
any other or further exercise of such right, remedy, power or privilege or the
exercise of any other right, remedy, power or privilege. The rights, remedies,
powers and privileges provided pursuant to this Agreement are cumulative and not
exhaustive of any other rights, remedies, powers and privileges which may be
provided by law.
12.3 CONSENT TO AMENDMENTS. No waiver, amendment, modification or supplement
of this Agreement will be binding upon any Party unless such waiver, amendment,
modification or supplement is set forth in writing and is executed by such
Party. No other course of dealing between or among any of the Parties or any
delay in exercising any rights pursuant to this Agreement will operate as a
waiver of any rights of any Party.
12.4 SUCCESSORS AND ASSIGNS. Except as otherwise expressly provided in this
Agreement, all covenants and agreements set forth in this Agreement by or on
behalf of the Parties will bind and inure to the benefit of the respective
successors and assigns of the Parties, whether so expressed or not, except that
neither this Agreement nor any of the rights, interests or obligations hereunder
may be assigned by Seller without Purchaser's prior written consent. Purchaser
may (at any time prior to the Closing) at its sole discretion, in whole or in
part assign its rights and delegate its obligations pursuant to this Agreement,
including the right to purchase the Acquired Assets to one or more of its
Affiliates, and Purchaser may, at its sole discretion, direct Seller to convey
the Acquired Assets, in whole or in part, to one or more of Purchaser's
Affiliates. Furthermore, Purchaser may assign its rights under this Agreement
for collateral security purposes to any lenders providing financing to Purchaser
or any of its Affiliates.
12.5 GOVERNING LAW. This Agreement will be governed by and construed in
accordance with the domestic laws of the State of Texas, without giving effect
to any choice of law or conflict provision or rule (whether of the State of
Texas or any other jurisdiction) that would cause the laws of any jurisdiction
other than the State of Texas to be applied. In furtherance of the foregoing,
the internal law of the State of Texas will control the interpretation and
construction of this Agreement, even if under such jurisdiction's choice of law
or conflict of law analysis, the substantive law of some other jurisdiction
would ordinarily apply.
12.6 NOTICES. All demands, notices, communications and reports provided for
in this Agreement will be in writing and will be either personally delivered,
mailed by first class mail (postage prepaid) or sent by reputable overnight
courier service (delivery charges prepaid) to any Party at the address specified
below, or at such address, to the attention of such other Person, and with such
other copy, as the recipient party has specified by prior written notice to the
sending Party pursuant to the provisions of this Section 12.6.
35
<PAGE>
If to Seller or the Stockholder:
Lone Star Rentals, Inc.
6903 N. Shepard
Houston, TX 77091
Attn: James Horsley
with a copy, which will not constitute notice to Seller or the
Stockholder, to:
M. R. Carr
902 Main
Humble, Texas 77338
If to Purchaser:
NES Acquisition Corp.
c/o National Equipment Services, Inc.
6100 Sears Tower
Chicago, IL 60606
Attn: Kevin P. Rodgers
with a copy, which will not constitute notice to Purchaser, to:
Kirkland & Ellis
200 East Randolph Drive
Chicago, Illinois 60601
Attn: Sanford E. Perl
Any such demand, notice, communication or report will be deemed to have been
given pursuant to this Agreement when delivered personally, on the third
business day after deposit in the U.S. mail or on the business day after deposit
with a reputable overnight courier service, as the case may be.
12.7 SEVERABILITY OF PROVISIONS. If any covenant, agreement, provision or
term of this Agreement is held to be invalid for any reason whatsoever, then
such covenant, agreement, provision or term will be deemed severable from the
remaining covenants, agreements, provisions and terms of this Agreement and will
in no way affect the validity or enforceability of any other provision of this
Agreement.
12.8 SCHEDULES AND EXHIBITS. The Schedules and Exhibits constitute a part of
this Agreement and are incorporated into this Agreement for all purposes.
12.9 COUNTERPARTS. The Parties may execute this Agreement in two or more
counterparts (no one of which need contain the signatures of all Parties), each
of which will be an original and all of which together will constitute one and
the same instrument.
12.10 NO THIRD-PARTY BENEFICIARIES. Except as otherwise expressly provided in
this Agreement, no Person which is not a Party will have any right or obligation
pursuant to this Agreement.
12.11 HEADINGS. The headings used in this Agreement are for the purpose of
reference only and will not affect the meaning or interpretation of any
provision of this Agreement.
12.12 MERGER AND INTEGRATION. Except as otherwise provided in this Agreement,
this Agreement sets forth the entire understanding of the Parties relating to
the subject matter hereof, and all prior understandings, whether written or oral
are superseded by this Agreement.
36
<PAGE>
12.13 ALLOCATION OF PURCHASE PRICE. The allocation of the Purchase Price
among the Acquired Assets shall be made in accordance with Section 1060 of the
Code and applicable Treasury Regulations thereunder; provided that an amount
equal to $2,300,000 of the Purchase Price shall be allocated to goodwill. The
fair market value of the Acquired Assets shall be determined jointly by
Purchaser and Seller reasonably and in good faith, and such determination shall
be used by the parties in allocating the Purchase Price and in preparing (a)
Form 8594, Asset Acquisition Statement, for each of Purchaser and Seller, and
(b) all Tax Returns. Each of Purchaser and Seller shall file Form 8594,
prepared in accordance with this Section, with its federal income Tax Return for
its Tax period including the Closing Date.
12.14 BULK SALES LAW. Seller will bear any loss, liability, obligation or
cost suffered by Seller or Purchaser as a result of Seller's noncompliance with
any provision of any bulk sales law which is applicable to the transfer of the
Acquired Assets or pursuant to this Agreement.
IN WITNESS WHEREOF, the Parties have executed this Asset Purchase Agreement as
of the date first written above.
NES ACQUISITION CORP.
By: /s/ Dennis O'Connor
-----------------------------
Its: Chief Financial Officer
-----------------------------
LONE STAR RENTALS, INC.
By: /s/ James E. Horsley
------------------------------
Its: President
-----------------------------
/s/ James E. Horsley
---------------------------------
James Horsley
37
<PAGE>
Exhibit 10.18
================================================================================
ASSET PURCHASE AGREEMENT
BY AND AMONG
BAT ACQUISITION CORP.
AND
BAT RENTALS, INC.
AND
PAUL B. BRONKEN
DATED AS OF APRIL 1, 1997
================================================================================
1
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
ARTICLE 1
DEFINITIONS................................................................ 1
1.1 Definitions.................................................... 1
1.2 Other Definitional Provisions.................................. 5
1.3 Cross Reference of Other Definitions........................... 5
ARTICLE 2
PURCHASE AND SALE; ASSUMPTION OF CERTAIN LIABILITIES; CLOSING.............. 7
2.1 Purchase and Sale of Seller's Assets........................... 7
2.2 Purchase Price Adjustments..................................... 10
2.3 Accounts Receivable Guarantee.................................. 11
2.4 The Closing.................................................... 12
2.5 Distribution of Holdback....................................... 12
ARTICLE 3
TRANSITIONAL ARRANGEMENTS.................................................. 13
3.1 Seller's Name Change........................................... 13
ARTICLE 4
CONFIDENTIALITY............................................................ 13
4.1 Confidentiality Obligations of Seller.......................... 13
4.2 Confidentiality Obligations of the Purchaser................... 14
ARTICLE 5
REPRESENTATIONS AND WARRANTIES OF PURCHASER AND NES........................ 14
5.1 Organization of Purchaser...................................... 14
5.2 Authorization; Binding Effect; No Breach....................... 15
5.3 Brokerage...................................................... 15
5.4 Investment in NES.............................................. 15
5.5 Investment in Purchaser........................................ 15
5.6 Disclosure..................................................... 15
5.7 Accuracy on Closing Date....................................... 15
ARTICLE 6
REPRESENTATIONS AND WARRANTIES OF SELLER................................... 15
6.1 Organization and Corporate Power............................... 15
6.2 Capital Stock and Related Matters.............................. 16
6.3 Authorization; Binding Effect; No Breach....................... 16
6.4 Subsidiaries; Investments...................................... 17
6.5 Financial Statements and Related Matters....................... 17
6.6 Absence of Undisclosed Liabilities............................. 17
6.7 Acquired Assets................................................ 18
6.8 Absence of Certain Developments................................ 18
6.9 Tax Matters.................................................... 19
6.10 Contracts and Commitments...................................... 20
6.11 Certain Litigation............................................. 22
6.12 Brokerage...................................................... 22
6.13 Insurance...................................................... 22
6.14 Employees...................................................... 22
6.15 ERISA.......................................................... 22
6.16 Real Estate.................................................... 23
6.17 Compliance with Laws........................................... 25
6.18 Product Warranty............................................... 26
6.19 Disclosure..................................................... 26
6.20 Accuracy on Closing Date....................................... 26
ARTICLE 7
ACCESS TO RECORDS.......................................................... 27
7.1 Access to Records.............................................. 27
</TABLE>
2
<PAGE>
<TABLE>
<S> <C>
ARTICLE 8
SURVIVAL AND INDEMNIFICATION............................................... 27
8.1 Survival of Representations and Warranties..................... 27
8.2 Indemnification Obligations of Seller and Bronken.............. 28
8.3 Indemnification Obligations of Purchaser....................... 29
8.4 Indemnification Procedures..................................... 29
8.5 Treatment of Indemnification Payments.......................... 31
8.6 Payment........................................................ 31
ARTICLE 9
CONDITIONS TO THE CLOSING.................................................. 31
9.1 Conditions of Purchaser's Obligation........................... 31
9.2 Conditions of Seller's Obligation.............................. 34
ARTICLE 10
OTHER COVENANTS............................................................ 35
10.1 Interim Agreements of Seller and Bronken....................... 35
10.2 Exclusivity.................................................... 37
10.3 Notice by Purchaser............................................ 37
10.4 Additional Interim Agreements.................................. 37
10.5 Transaction Expenses........................................... 38
10.6 Special Leasing Arrangement.................................... 38
10.7 Prepayment of Certain Obligations.............................. 38
10.8 Nonsolicitation................................................ 38
10.9 Further Assurances............................................. 39
10.10 Announcements.................................................. 39
10.11 Employees...................................................... 39
10.12 Employee Benefit Plans......................................... 40
10.13 Necessary Third Party Consents................................. 40
ARTICLE 11
OTHER AGREEMENTS........................................................... 40
11.1 Termination.................................................... 40
11.2 Remedies....................................................... 41
11.3 Consent to Amendments.......................................... 41
11.4 Successors and Assigns......................................... 41
11.5 Governing Law.................................................. 42
11.6 Notices........................................................ 42
11.7 Severability of Provisions..................................... 43
11.8 Schedules and Exhibits......................................... 43
11.9 Counterparts................................................... 43
11.10 No Third-Party Beneficiaries................................... 43
11.11 Headings....................................................... 43
11.12 Merger and Integration......................................... 43
11.13 Allocation of Purchase Price................................... 43
11.14 Construction................................................... 44
</TABLE>
3
<PAGE>
EXHIBITS
Exhibit A - Bill of Sale, Assignment and Assumption Agreement
Exhibit B - Form of Opinion of Seller's Counsel
Exhibit C - Form of Real Estate Lease
DISCLOSURE SCHEDULES
Schedule 2.2(a)(i) - Accounting Methodology
Schedule 2.3 - Accounts Receivable
Schedule 6.1 - Organization
Schedule 6.2 - Capitalization
Schedule 6.10 - Contracts
Schedule 6.13 - Insurance
Schedule 6.15 - Employee Benefits
Schedule 6.16 - Real Estate
Schedule 6.17(b) - Permits
Schedule 6.17(c) - Environmental Matters
4
<PAGE>
ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT is made as of April 1, 1997, by and among BAT
ACQUISITION CORP., a Delaware corporation ("Purchaser"), BAT RENTALS, INC., a
Nevada corporation ("Seller"), and Paul B. Bronken (Bronken"). Purchaser,
Seller and Bronken are collectively referred to herein as the "Parties."
WHEREAS, upon the terms and subject to the conditions set forth in this
Agreement, Purchaser desires to acquire from Seller and Seller desires to sell
to Purchaser, substantially all of Seller's assets (subject to certain of
Seller's liabilities as specifically provided herein).
NOW, THEREFORE, in consideration of the mutual promises herein made, and in
consideration of the representations, warranties and covenants herein contained,
the Parties agree as follows:
ARTICLE 1
DEFINITIONS
1.1 DEFINITIONS. For purposes hereof, the following terms, when used herein
with initial capital letters, shall have the respective meanings set forth
herein:
"Affiliate" of any Person means any other Person controlling, controlled by or
under common control with such first Person.
"Agreement" means this Asset Purchase Agreement, including all Exhibits and
Schedules hereto, as it may be amended from time to time in accordance with its
terms.
"Books and Records" means all lists, records and other information pertaining
to accounts, personnel and referral sources of Seller, all lists and records
pertaining to suppliers and customers of Seller, and all other books, ledgers,
files and business records of every kind relating or pertaining to the Business
whether evidenced in writing, electronically (including by computer) or
otherwise.
"Business" means the business of Seller as now conducted.
"Cash" means cash, cash equivalents, marketable securities and all partnership
interests in Consol-Granada Hills and Consol-Blk.Diamond Bay.
"Code" means the United States Internal Revenue Code of 1986, as amended.
"Environmental Affiliates" of any Person means, with respect to any particular
matter, all other Persons whose liabilities or obligations with respect to that
particular matter have been assumed by, or are otherwise deemed by law to be
those of, such first Person.
"Environmental and Safety Requirements" means all federal, state, local and
foreign statutes, regulations, ordinances and similar provisions having the
force or effect of law, all judicial and administrative orders and
determinations, all contractual obligations and all common law concerning public
health and safety, worker health and safety and pollution or protection of the
environment, including all such standards of conduct and bases of obligations
relating to the presence, use, production, generation, handling, transport,
treatment, storage, disposal, distribution, labeling, testing, processing,
discharge, release, threatened release, control, or cleanup of any hazardous
materials, substances or wastes, chemical substances or mixtures, pesticides,
pollutants, contaminants, toxic chemicals, petroleum products or by-products,
asbestos, polychlorinated biphenyls (or PCBs), noise or radiation.
5
<PAGE>
"Environmental Lien" means any Lien, whether recorded or unrecorded, in favor
of any Government Entity relating to any liability of Seller or any
Environmental Affiliate of Seller arising under any Environmental and Safety
Requirement.
"ERISA" means the Employee Retirement Income Security Act of 1974, as amended.
"GAAP" means, at a given time, United States generally accepted accounting
principles, consistently applied.
"Government Entity" means the United States of America or any other nation,
any state or other political subdivision thereof, or any entity exercising
executive, legislative, judicial, regulatory or administrative functions of
government.
"Indebtedness" of any Person means, without duplication: (a) indebtedness for
borrowed money or for the deferred purchase price of property or services in
respect of which such Person is liable, contingently or otherwise, as obligor or
otherwise (other than trade payables and other current liabilities incurred in
the ordinary course of business) and any commitment by which such Person assures
a creditor against loss, including contingent reimbursement obligations with
respect to letters of credit; (b) indebtedness guaranteed in any manner by such
Person, including a guarantee in the form of an agreement to repurchase or
reimburse; (c) obligations under capitalized leases in respect of which such
Person is liable, contingently or otherwise, as obligor, guarantor or otherwise,
or in respect of which obligations such Person assures a creditor against loss;
and (d) any unsatisfied obligation of such Person for "withdrawal liability" to
a "multiemployer plan," as such terms are defined under ERISA.
"Investment" means, with respect to any Person, any direct or indirect
purchase or other acquisition by such Person of any notes, obligations,
instruments, stock, securities or other ownership or beneficial interest
(including partnership interests and joint venture interests) of any other
Person, and any capital contribution by such Person to any other Person.
"Knowledge" means, with respect to a Person, (a) the actual knowledge of such
Person (which includes the actual knowledge of all officers, directors and
executive employees of such Person) and (b) the knowledge which a prudent
business person would have obtained in the conduct of his or her business after
making reasonable inquiry and exercising reasonable diligence with respect to
the particular matter in question.
"Legal Requirement" means any requirement arising under any action, law,
treaty, rule or regulation, determination or direction of an arbitrator or
Government Entity, including any Environmental and Safety Requirement.
"Lien" means any mortgage, pledge, security interest, encumbrance, easement,
restriction, charge, or other lien.
"Loss" means, with respect to any Person, any diminution in value,
consequential or other damage, liability, demand, claim, action, cause of
action, cost, damage, deficiency, Tax, penalty, fine or other loss or expense,
whether or not arising out of a third party claim, including all interest,
penalties, reasonable attorneys' fees and expenses and all amounts paid or
incurred in connection with any action, demand, proceeding, investigation or
claim by any third party (including any Government Entity) against or affecting
such Person or which, if determined adversely to such Person, would give rise
to, evidence the existence of, or relate to, any other Loss and the
investigation, defense or settlement of any of the foregoing, together with
interest thereon from the date on which such Person provides the written notice
of the related claim as described in Section 8.4 through and including the date
on which the total amount of the claim, including such interest, is recovered or
recouped pursuant to Article 8.
"NES" means National Equipment Services, Inc., a Delaware corporation.
"Officer's Certificate" of any Person means a certificate signed by such
Person's president or chief financial officer (or an individual having
comparable responsibilities with respect to such Person) stating that (a) the
individual signing such certificate has made or has caused to be made such
investigations as are necessary in order
6
<PAGE>
to permit such individual to verify the accuracy of the information set forth in
such certificate and (b) to the best of such individual's Knowledge, such
certificate does not misstate any material fact and does not omit to state any
fact necessary to make the facts stated therein not misleading.
"Owned Real Property" means all real property owned by Seller.
"Person" means an individual, a partnership, a corporation, an association, a
limited liability company, a joint stock company, a trust, a joint venture, an
unincorporated organization, a governmental entity or any department, agency or
political subdivision thereof and any other entity.
"Proprietary Rights" means all of the following owned by, issued to or
licensed to Seller: (a) all inventions (whether patentable or unpatentable and
whether or not reduced to practice), all improvements thereto, and all patents,
patent applications, and patent disclosures, together with all reissuances,
continuations, continuations-in-part, revisions, extensions, and reexaminations
thereof; (b) all trademarks, service marks, trade dress, logos, trade names, and
corporate names, together with all translations, adaptations, derivations, and
combinations thereof and including all goodwill associated therewith, and all
applications, registrations, and renewals in connection therewith; (c) all
copyrightable works (including, without limitation, all software developed by
Seller for use in the Business), all copyrights, and all applications,
registrations, and renewals in connection therewith; (d) all mask works and all
applications, registrations, and renewals in connection therewith; (e) all trade
secrets and confidential business information (including ideas, research and
development, know-how, formulas, compositions, manufacturing and production
processes and techniques, technical data, designs, drawings, specifications,
customer and supplier lists, pricing and cost information, and business and
marketing plans and proposals); (f) all computer software (including data and
related documentation); (g) all other proprietary rights; and (h) all copies and
tangible embodiments thereof (in whatever form or medium).
"Subsidiary" means, with respect to any Person, any corporation a majority of
the total voting power of shares of stock of which is entitled (without regard
to the occurrence of any contingency) to vote in the election of directors,
managers or trustees thereof is at the time owned or controlled, directly or
indirectly, by that Person or one or more of the other Subsidiaries of that
Person or a combination thereof, or any partnership, association or other
business entity a majority of the partnership or other similar ownership
interest of which is at the time owned or controlled, directly or indirectly, by
that Person or one or more Subsidiaries of that Person or a combination thereof.
For purposes of this definition, a Person is deemed to have a majority ownership
interest in a partnership, association or other business entity if such Person
is allocated a majority of the gains or losses of such partnership, association
or other business entity or is or controls the managing director or general
partner of such partnership, association or other business entity.
"Taxes" means any federal, state, local, or foreign income, gross receipts,
license, payroll, employment, excise, severance, stamp, occupation, premium,
windfall profits, environmental (including taxes imposed pursuant to Section 59A
of the Code), customs duties, capital stock, franchise, profits, withholding,
social security, unemployment, disability, real property, personal property,
sales, use, transfer, registration, value added, alternative or add-on minimum,
or other tax, fee, assessment or charge of any kind whatsoever, including any
interest, penalty, or addition thereto, whether disputed or not.
"Transaction Documents" means this Agreement, and all other agreements,
instruments, certificates and other documents to be entered into or delivered by
any Party in connection with the transactions contemplated to be consummated
pursuant to any of the foregoing.
"Treasury Regulations" means the United States Treasury Regulations
promulgated pursuant to the Code.
1.2 OTHER DEFINITIONAL PROVISIONS.
(a) Accounting Terms. Accounting terms which are not otherwise defined in
this Agreement have the meanings given to them under GAAP. To the extent that
the definition of accounting term that is defined in this Agreement is
inconsistent with the meaning of such term under GAAP, the definition set forth
in this Agreement will control.
7
<PAGE>
(b) "Hereof," etc. The terms "hereof," "herein" and "hereunder" and terms of
similar import are references to this Agreement as a whole and not to any
particular provision of this Agreement. Section, clause, Schedule and Exhibit
references contained in this Agreement are references to Sections, clauses,
Schedules and Exhibits in or to this Agreement, unless otherwise specified.
(c) Successor Laws. Any reference to any particular Code section or any other
law or regulation will be interpreted to include any revision of or successor to
that section regardless of how it is numbered or classified.
8
<PAGE>
1.3 CROSS REFERENCE OF OTHER DEFINITIONS. Each capitalized term listed below
is defined in the corresponding Section of this Agreement:
<TABLE>
<CAPTION>
TERM Section
- ---- -------
<S> <C>
Accounts Receivable........................................................ 2.3
Acquired Assets............................................................ 2.1(a)
Actual Asset Book Value.................................................... 2.2(b)
Asset Book Value........................................................... 2.2(a)(i)
Assumed Liabilities........................................................ 2.1(c)
Assumption................................................................. 2.4(b)
Bill of Sale............................................................... 2.4(a)
Business................................................................... 2.1(a)(xii)
Cash Purchase Price........................................................ 2.1(e)
Closing.................................................................... 2.4
Closing Date............................................................... 2.4
Closing Review............................................................. 2.2(b)
Confidential Information................................................... 4.1(a)
Consents................................................................... 9.1(e)
Continuing Employees....................................................... 10.11(b)
Contracts.................................................................. 6.10(b)
Controlled Group........................................................... 6.15(h)
Deficit.................................................................... 2.2(a)(ii)
Draft Worksheet............................................................ 2.2(b)
Employee Pension Plans..................................................... 6.15(b)
Employee Welfare Plans..................................................... 6.15(a)
Estimated Asset Book Value................................................. 2.2(a)(i)
Excluded Assets............................................................ 2.1(b)
Excluded Liabilities....................................................... 2.1(d)
Financial Statements....................................................... 6.5(a)
Firm....................................................................... 2.2(b)
Holdback................................................................... 2.1(e)
Indemnification Claim Notice............................................... 8.4(a)
Indemnified Party.......................................................... 8.4(a)
Indemnifying Party......................................................... 8.4(a)
Latest Balance Sheet....................................................... 6.5(a)
Leased Real Property....................................................... 6.16(a)
Leases..................................................................... 6.16(a)
Multiemployer Plan......................................................... 6.15(c)
Notice of Arbitration...................................................... 8.7(b)
Objection Notice........................................................... 2.2(b)
Other Plans................................................................ 6.15(a)
Owned Real Property........................................................ 6.17
Parties.................................................................... Preface
PBGC....................................................................... 6.15(h)
Pending Claim.............................................................. 2.5
Permitted Lien............................................................. 6.17(a)(i)
Plans...................................................................... 6.15(h)
Proceeding................................................................. 8.4(a)
Purchase Price............................................................. 2.1(e)
Purchaser.................................................................. Preface
Purchaser Indemnitees...................................................... 8.2(a)
Purchaser's Arbitrator..................................................... 8.7(c)
Real Estate................................................................ 2.1(a)(v)
Receivables Determination Date............................................. 2.3
Remaining Holdback......................................................... 2.5
Sale....................................................................... 2.4(a)
Seller..................................................................... Preface
Seller Employees........................................................... 6.15(a)
Seller Indemnitees......................................................... 8.3(a)
Title Company.............................................................. 9.1(i)
Title Policies............................................................. 9.1(i)
Unassignable Contracts..................................................... 10.13
Uncollected Receivables Amount............................................. 2.3
</TABLE>
9
<PAGE>
ARTICLE 2
PURCHASE AND SALE; ASSUMPTION OF CERTAIN LIABILITIES; CLOSING
2.1 PURCHASE AND SALE OF SELLER'S ASSETS.
(a) Acquired Assets. Upon the terms and subject to the conditions set forth
in this Agreement, at the Closing Seller shall sell, assign, transfer and
deliver to Purchaser, and Purchaser shall purchase, all properties, assets,
rights and interests of every kind and nature, whether tangible or intangible,
and wherever located and by whomever possessed, owned by Seller as of the
Closing Date, except as set forth in Section 2.1(b) below (collectively, the
"Acquired Assets"), including, without limitation:
(i) all accounts and notes receivables (whether current or noncurrent);
(ii) all Investments (other than Investments which constitute Cash);
(iii) all of Seller's Proprietary Rights, along with all income,
royalties, damages and payments due or payable as of the Closing or
thereafter, including, without limitation, damages and payments for past,
present or future infringements or misappropriations thereof, the right to sue
and recover for past infringements or misappropriations thereof and any and
all corresponding rights that, now or hereafter, may be secured throughout the
world;
(iv) all of Seller's rights existing under leases, contracts, licenses,
permits, distribution arrangements, sales and purchase agreements, accounts
receivable, other agreements and business arrangements, including, without
limitation, all contracts and agreements described on the Contracts Schedule
attached hereto;
(v) all of Seller's rights with respect to real property leased by
Seller, and all plants, buildings and other improvements located on such
leased property, and all easements, licenses, rights of way, permits and all
appurtenances to such leased property, including, without limitation, all
appurtenant rights in and to public streets, whether or not vacated
(collectively, the "Real Estate");
(vi) all machinery, equipment (including all transportation and office
equipment), fixtures, trade fixtures, tools, dyes and furniture owned by
Seller wherever located, including, without limitation, all such items which
are located in any building, warehouse, office or other space leased, owned or
occupied by Seller or used in connection with the Real Estate;
(vii) all rental equipment of any kind, wherever located, rented by
Seller to any Person;
(viii) all inventories of work in process, semi-finished and finished
goods, stores, replacement and spare parts, packaging materials, operating
supplies, and fuels, owned by Seller wherever located;
(ix) all office supplies, production supplies, spare parts, other
miscellaneous supplies, and other tangible property of any kind wherever
located, including, without limitation, all property of any kind located in
any building, office or other space leased, owned or occupied by Seller or in
any warehouse where any of Seller's properties and assets may be situated;
(x) all prepayments and prepaid expenses;
(xi) all of Seller's claims, causes of action, choses in action, rights
of recovery and rights of set-off of any kind;
(xii) the right to receive and retain mail, accounts receivable payments
and other communications relating to the Business as now conducted;
10
<PAGE>
(xiii) the right to bill and receive payment for products shipped or
delivered and services performed but unbilled or unpaid as of the Closing;
(xiv) all lists, records and other information pertaining to accounts,
personnel and referral sources, all lists and records pertaining to suppliers
and customers, and all books, ledgers, files and business records of every
kind, whether evidenced in writing, electronically (including, without
limitation, by computer) or otherwise;
(xv) all advertising, marketing and promotional materials and all other
printed or written materials;
(xvi) all permits, licenses, certifications and approvals from all
permitting, licensing, accrediting and certifying agencies, and the rights to
all data and records held by such permitting, licensing and certifying
agencies;
(xvii) all goodwill as a going concern and all other intangible properties;
(xviii) all telephone numbers (e.g. "800" numbers) used by Seller; and
(xix) except as specified in Section 2.1(b) below, all other assets
(excluding Owned Real Property) owned by Seller, or in which it has an
interest on the Closing Date, including, without limitation, all fixed assets
included on Seller's Latest Balance Sheet and any and all subsequent
improvements or additions thereon through the Closing Date.
(b) Excluded Assets. Notwithstanding Section 2.1(a) above, the following
assets are expressly excluded from the purchase and sale contemplated hereby
and, as such, are not Acquired Assets (collectively, the "Excluded Assets"):
(i) all monies to be received by Seller from Purchaser;
(ii) all rights of Seller under this Agreement;
(iii) all Cash
(iv) all Owned Real Property;
(v) all qualifications to do business as a foreign corporation;
(vi) all arrangements with registered agents relating to foreign
qualifications;
(vii) all taxpayer and other identification numbers; and
(viii) all seals, minute books, stock transfer books, blank stock
certificates, and other documents relating to the organization, maintenance,
and existence of Seller as a corporation.
(c) Assumed Liabilities. Subject to Section 2.1(d) below, as additional
consideration for the Acquired Assets, at the Closing Purchaser will assume all
current liabilities and obligations of Seller which arise after March 31, 1997
in the ordinary course of the Business and consistent with Seller's past
practice (none of which is a liability resulting from breach of contract, breach
of warranty, tort, infringement, claim or lawsuit).
(d) Excluded Liabilities. Except as set forth in Section 2.1(c) above,
Purchaser shall not assume or become liable for, and shall not be deemed to have
assumed or have become liable for, any of Seller's liabilities and obligations
not expressly assumed by Purchaser pursuant to Section 2.1(c) above, whether
accrued, absolute or contingent, whether known or unknown, whether disclosed or
undisclosed, whether due or to become due, whether or not showing on Seller's
balance sheet and whether related to the Acquired Assets or otherwise, and
regardless of
11
<PAGE>
when asserted (the "Excluded Liabilities"). Seller hereby acknowledges that it
is retaining the Excluded Liabilities and Seller and the Bronken jointly and
severally agree to promptly pay and discharge all such liabilities and
obligations when due; provided that, with respect to accrued expenses and
accounts payable of the Seller that relate to the Acquired Assets (it being
understood that all such accrued expenses and accounts payable are included
within the definition of Excluded Liabilities and are therefore the obligation
of Seller) Purchaser shall have the right, but not the obligation, to pay any
such accrued expenses or accounts payable and to receive immediate reimbursement
for such payment from Seller or Bronken.
(e) Purchase Price for Acquired Assets. The purchase price for the Acquired
Assets (the "Purchase Price") will consist of the assumption by Purchaser of the
Assumed Liabilities and the payment of an aggregate of $15,939,000 which is to
be paid as follows: (i) the Purchaser shall deliver $15,439,000 (as adjusted
pursuant to Section 2.2 below) in cash to Seller (the "Cash Purchase Price") and
(ii) Purchaser shall maintain $500,000 in a book entry account of Purchaser (the
"Holdback"). The Holdback shall be available to satisfy any amounts owing to
Purchaser pursuant to Section 2.3 and/or Section 8.2.
2.2 PURCHASE PRICE ADJUSTMENTS.
(a) Closing Date Adjustment. At the Closing, the Cash Purchase Price will be
adjusted dollar-for-dollar as set forth in this Section 2.2(a).
(i) Not more than ten (10) Business Days, but in no event less than five
(5) Business Days, before the Closing Date, Seller and Purchaser will, in good
faith, jointly estimate the book value of the Acquired Assets (calculated in
accordance with Schedule 2.2(a)(i) - Accounting Methodology attached hereto)
(the "Asset Book Value") as of the close of business on the day before the
Closing Date on a reasonable basis using the Companies' then available
financial information; provided, however, that if Seller and Purchaser cannot
agree on an estimate of the Asset Book Value such estimate will be deemed to
be equal to the average of Seller's and Purchaser's good faith determinations
thereof. The Asset Book Value as finally estimated pursuant to this Section
2.2(a) is referred to herein as the "Estimated Asset Book Value."
(ii) At the Closing, if the Estimated Asset Book Value is less than
$10,629,988, then the Cash Purchase Price will be decreased by the amount of
such deficit (the "Deficit");
(b) Post-Closing Determination. Within 90 days after the Closing Date,
Purchaser and its auditors will conduct a review (the "Closing Review") of the
Asset Book Value as of the close of business on the day before the Closing Date
and will prepare and deliver to Seller a computation of the amount of the Asset
Book Value as of the close of business on the day before the Closing Date (the
"Draft Worksheet"). Purchaser and its auditors will give Seller and its
auditors an opportunity to observe the Closing Review and will make available to
such Persons all records and work papers used in preparing the Draft Worksheet.
If Seller disagrees with the computation of the Asset Book Value reflected on
the Draft Worksheet, Seller may, within thirty (30) days after receipt of the
Draft Worksheet, deliver a notice (an "Objection Notice") to Purchaser setting
forth Seller's calculation of the Asset Book Value as of the close of business
on the day before the Closing Date. Seller and Purchaser will use reasonable
efforts to resolve any disagreements as to the computation of the Asset Book
Value, but if they do not obtain a final resolution within thirty (30) days
after Purchaser has received the Objection Notice, Seller and Purchaser will
jointly retain an independent accounting firm of recognized national standing
(the "Firm") to resolve any remaining disagreements. If Seller and Purchaser
are unable to agree on the choice of the Firm, the Firm will be a "big-six"
accounting firm selected by lot (after excluding one firm designated by
Purchaser and one firm designated by Seller). Seller and Purchaser will direct
the Firm to render a determination within fifteen (15) days of its retention and
Purchaser, Seller and their respective agents will cooperate with the Firm
during its engagement. The Firm will consider only those items and amounts in
the Draft Worksheet set forth in the Objection Notice which Seller and Purchaser
are unable to resolve. The Firm's determination will be based on the definition
of the Asset Book Value included herein. The determination of the Firm will be
conclusive and binding upon Seller and Purchaser. Seller and Purchaser shall
bear the costs and expenses of the Firm based on the percentage which the
portion of the contested amount not awarded to each party bears to the amount
actually contested by such party. The amount of the Asset Book Value, as
finally determined pursuant to this Section 2.2(b), is referred to herein as the
"Actual Asset Book Value."
12
<PAGE>
(c) Post-Closing Adjustment.
(i) Payment by Seller. If the Actual Asset Book Value is less than the
Estimated Asset Book Value, Seller will, within five (5) Business Days after
the determination thereof, pay to Purchaser an amount equal to the Estimated
Asset Book Value minus the Actual Asset Book Value. Such payment will be made
by wire transfer or delivery of other immediately available funds.
(ii) Payment by Purchaser. If the Actual Asset Book Value is greater than
the Estimated Asset Book Value, Purchaser will, within five (5) Business Days
after the determination thereof, pay to Seller an amount equal to the Actual
Asset Book Value minus the Estimated Asset Book Value; provided that such
payment is no greater than the Deficit. Such payment will be made by wire
transfer or delivery of other immediately available funds.
(iii) Dispute. If, pursuant to Section 2.2(b) above, there is a dispute as
to the final determination of the Actual Asset Book Value, Seller or Purchaser
shall promptly pay to the other, as appropriate, such amounts as are not in
dispute, pending final determination of such dispute pursuant to Section
2.2(b).
2.3 ACCOUNTS RECEIVABLE GUARANTEE. Notwithstanding anything herein to the
contrary, the Purchase Price will be reduced dollar-for-dollar by the aggregate
amount of the accounts receivable of Seller in existence as of the Closing, all
of which accounts receivable are listed on Schedule 2.3 - Accounts Receivable
(the "Accounts Receivable"), which are uncollected by Purchaser (the
"Uncollected Receivables Amount") as of the 90th day following the Closing Date
(the "Receivables Determination Date"). If there is an Uncollected Receivables
Amount, Purchaser shall be entitled to receive the Uncollected Receivables
Amount from the Holdback within two (2) Business Days after the Receivables
Determination Date; provided, however, that if the amount then left in the
Holdback is less than the amount of the Uncollected Receivables Amount, Seller
shall pay to Purchaser, within two (2) Business Days after the Receivables
Determination Date, the amount by which the Holdback is less than Uncollected
Receivables Amount by wire transfer or delivery of other immediately available
funds. For the purpose of determining amounts collected by Purchaser with
respect to the Accounts Receivable, (i) in the absence of a bona fide dispute
between an account debtor and Purchaser regarding receivables of such account
debtor accrued prior to the Closing Date, all payments by an account debtor
shall first be applied to the oldest outstanding invoice due from that account
debtor, and (ii) in the case of a dispute between Purchaser and an account
debtor with respect to a particular invoice, all payments shall be first applied
to the next oldest invoice due from that account debtor. Purchaser shall make
every reasonable effort to collect the Accounts Receivable after the Closing
Date; provided that Purchaser shall not be required to retain a collection
agency, bring any suit, or take any other action out of the ordinary course of
business to collect any of the Accounts Receivable. To the extent that
Purchaser has not collected the full amount of the Accounts Receivable and
Purchaser has been compensated therefor in accordance with this Section,
Purchaser shall assign any such uncollected Accounts Receivable to Seller by the
fifth day following the Receivables Determination Date, and Purchaser shall also
deliver to Seller the records of all such uncollected Accounts Receivable
assigned.
2.4 THE CLOSING. The closing of the purchase and sale of the Acquired Assets
and the assumption of the Assumed Liabilities, and the transactions relating
thereto (the "Closing") will take place at the offices of Clark, Greene &
Associates, Ltd., 3770 Howard Hughes Parkway, Las Vegas, Nevada, or at such
other place as is mutually agreeable to the Parties, commencing at 10:00 a.m.
local time on such day as Purchaser may specify on three days prior written
notice to Seller or such other date as the Parties may mutually determine;
provided that such date shall not be later than 60 days from the date hereof,
except upon the written agreement of the Parties. The date and time of the
Closing are herein referred to as the "Closing Date." At the Closing, subject
to the satisfaction or waiver of each of the conditions specified in Sections
9.1 and 9.2 below:
13
<PAGE>
(a) Seller will convey to Purchaser good title to all of the Acquired Assets,
free and clear of all Liens, and deliver to Purchaser warranty deeds, bills of
sale, assignments of leases and contracts and all other instruments of
conveyance which are necessary or desirable to effect transfer of the Acquired
Assets, including the Bill of Sale, Assignment and Assumption Agreement ("Bill
of Sale") substantially in the form attached hereto as Exhibit A (the "Sale");
(b) Purchaser will deliver to Seller such instruments of assumption as are
required in order for Purchaser to assume the Assumed Liabilities, including the
Bill of Sale (the "Assumption");
(c) Purchaser will deliver to Seller (or, at Seller's direction, to lenders or
other third parties) the Cash Purchase Price by wire transfer of immediately
available funds; and
(d) there shall be delivered to Purchaser and Seller the opinions,
certificates and other documents and instruments provided to be delivered under
Article 9 hereof.
2.5 DISTRIBUTION OF HOLDBACK. On the 90th day after the Closing Date,
Purchaser shall pay to Seller an amount equal to the amount of the Holdback
(together with all accrued but undistributed interest thereon paid at an annual
interest rate of 8.5%), if any, remaining after (i) all amounts owing to
Purchaser pursuant to Section 2.3 have been satisfied and (ii) all claims of
Purchaser under Section 8.2 which have theretofore been finally resolved have
been satisfied (the "Remaining Holdback") less any amount for which Purchaser
claims, prior to such 90th day, that it is entitled to receive indemnification
pursuant to Section 8.2 (each, a Pending Claim"); provided that Purchaser shall
not be obligated to make such payment to Seller until Seller has provided to
Purchaser evidence that all of the Lien Releases (as defined in Section 10.7)
have been obtained. As soon as practicable following final resolution of all
Pending Claims, Purchaser shall pay to Seller an aggregate amount equal to the
portion, if any, of the Holdback (together with all accrued but undistributed
interest thereon) which remains after payment of the Remaining Holdback and
final resolution of all Pending Claims.
ARTICLE 3
TRANSITIONAL ARRANGEMENTS
3.1 SELLER'S NAME CHANGE. Within five days after the Closing, Seller will
change its corporate name to a name which is not (and which is not confusingly
similar to) "BAT Rentals, Inc.," it being the intent of the Parties that from
and after the Closing Purchaser will have the sole right as against Seller and
all other Persons to conduct business under such name and that Purchaser will
commence doing so at the time of the Closing.
ARTICLE 4
CONFIDENTIALITY
4.1 CONFIDENTIALITY OBLIGATIONS OF SELLER.
(a) Confidential Treatment. Seller and the Bronken will (and will cause each
of their Affiliates to) treat and hold as confidential all information
concerning the conduct or affairs of the Business (the "Confidential
Information"), refrain from using any Confidential Information, and, at
Purchaser's request, deliver to Purchaser or destroy all tangible embodiments
(and all copies) of any Confidential Information which are in Seller's,
Bronken's or any such Affiliate's possession. This Section 4.1(a) will not
apply to any Confidential Information which is generally available to the public
(other than by reason of any disclosure by Seller, Bronken or any Affiliate
thereof which constitutes or is the result of breach of this Section 4.1(a) or
any disclosure by any such Affiliate which would constitute a breach of this
Section 4.1(a) if such Affiliate were Seller) immediately prior to the time of
disclosure.
(b) Forced Disclosure. If Seller, Bronken or any Affiliate thereof is
requested or required (by oral question or request for information or documents
in any legal proceeding, interrogatory, subpoena, civil investigative demand, or
similar process) to disclose any Confidential Information, such Person will
notify Purchaser promptly of such
14
<PAGE>
request or requirement so that Purchaser may seek an appropriate protective
order or waive compliance with the provisions of this Section 4.1. If, in the
absence of such a protective order or waiver, such Seller, Bronken or Affiliate
thereof, on the advice of counsel, is compelled to disclose any Confidential
Information to any Government Entity, such Person will use his or its best
efforts to ensure that such disclosure is limited to Confidential Information
which is so required to be disclosed and obtain an order or other assurance that
confidential treatment will be accorded to any Confidential Information
disclosed.
4.2 CONFIDENTIALITY OBLIGATIONS OF THE PURCHASER.
(a) Confidential Treatment. From the date of this Agreement until the
Closing, Purchaser will (and will cause each of its Affiliates to) treat and
hold as confidential all Confidential Information, refrain from using any
Confidential Information (other than in preparation for the transactions
contemplated by this Agreement), and, at Seller's request after termination of
this Agreement, deliver to Seller or destroy all tangible embodiments (and all
copies) of any Confidential Information which are in Purchaser's or any such
Affiliate's possession. This Section 4.2(a) will not apply to any Confidential
Information which is generally available to the public (other than by reason of
any disclosure by Purchaser or any Affiliate of Purchaser which constitutes or
is the result of breach of this Section 4.2(a) or any disclosure by such an
Affiliate which would constitute a breach of this Section 4.2(a) if such
Affiliate were Purchaser) immediately prior to the time of disclosure.
(b) Forced Disclosure. If Purchaser or any Affiliate of Purchaser is
requested or required (by oral question or request for information or documents
in any legal proceeding, interrogatory, subpoena, civil investigative demand, or
similar process) to disclose any Confidential Information prior to the Closing,
Purchaser will notify Seller promptly of such request or requirement so that
Seller may seek an appropriate protective order or waive compliance with the
provisions of this Section 4.2. If, in the absence of such a protective order
or waiver, Purchaser or any Affiliate of Purchaser, on the advice of counsel, is
compelled to disclose any Confidential Information to any Government Entity,
Purchaser will use its best efforts to ensure that such disclosure is limited to
Confidential Information which is so required to be disclosed and obtain an
order or other assurance that confidential treatment will be accorded to any
Confidential Information disclosed.
ARTICLE 5
REPRESENTATIONS AND WARRANTIES OF PURCHASER AND NES
As a material inducement to Seller to enter into this Agreement, Purchaser
hereby represents and warrants that:
5.1 ORGANIZATION OF PURCHASER. Purchaser is a corporation duly organized,
validly existing and in good standing under the laws of the State of Delaware.
Purchaser has the requisite corporate power and authority and all licenses,
permits and authorizations necessary to enter into, deliver and carry out its
obligations pursuant to the Transaction Documents to which it is a party.
5.2 AUTHORIZATION; BINDING EFFECT; NO BREACH. Purchaser's execution, delivery
and performance of each Transaction Document to which Purchaser is a party has
been duly authorized by Purchaser. Each Transaction Document to which Purchaser
is a party constitutes a valid and binding obligation of Purchaser which is
enforceable in accordance with its terms. The execution, delivery and
performance by Purchaser of the Transaction Documents to which Purchaser is a
party do not and will not (i) conflict with or result in a breach of the terms,
conditions or provisions of, (ii) constitute a default under, (iii) result in a
violation of, or (iv) require any authorization, consent, approval, exemption or
other action by or declaration or notice to any Governmental Entity pursuant to,
the charter or bylaws of Purchaser or any agreement, instrument, or other
document, or any Legal Requirement, to which Purchaser or any of its assets is
subject.
5.3 BROKERAGE. There is no claim for brokerage commissions, finders' fees or
similar compensation in connection with the transactions contemplated by the
Transaction Documents based on any arrangement or agreement which is binding
upon Purchaser.
15
<PAGE>
5.4 INVESTMENT IN NES. The stockholders of NES will have invested at least
$5,000,000 in the equity of NES at or prior to the Closing.
5.5 INVESTMENT IN PURCHASER. NES will have invested at least $5,000,000 in
the equity of Purchaser at or prior to the Closing.
5.6 DISCLOSURE. Neither this Article 5 nor any certificate or other item
delivered to Seller by or on behalf of Purchaser with respect to the
transactions contemplated by the Transaction Documents contains any untrue
statement of a material fact or omits a material fact which is necessary to make
any statement contained herein or therein not misleading.
5.7 ACCURACY ON CLOSING DATE. Each representation and warranty set forth in
this Article 5 and all information contained in any certificate delivered by or
on behalf of Purchaser pursuant to this Agreement will be true and correct as of
the time of the Closing as though then made, except to the extent that Purchaser
has advised Seller otherwise in writing prior to the Closing.
ARTICLE 6
REPRESENTATIONS AND WARRANTIES OF SELLER
As a material inducement to Purchaser to enter into this Agreement, purchase
the Acquired Assets and assume the Assumed Liabilities, Seller hereby represents
and warrants that:
6.1 ORGANIZATION AND CORPORATE POWER. Seller is a corporation duly organized,
validly existing and in good standing under the laws of its state of
incorporation and is duly qualified to do business in each jurisdiction in which
its ownership of property or conduct of business requires it to so qualify.
Schedule 6.1 - Organization attached hereto lists every jurisdiction where
Seller is duly qualified to do business and its jurisdiction of incorporation.
Seller has the requisite corporate power necessary to own and operate its
properties, carry on the Business, and enter into, deliver and carry out the
transactions contemplated by the Transaction Documents. Bronken has the
requisite capacity necessary to enter into, deliver and carry out its
obligations pursuant to the Transaction Documents to which it is a party.
6.2 CAPITAL STOCK AND RELATED MATTERS. The authorized capital stock of Seller
consists of 1,000 shares of Common Stock, par value $10.00 per share, of which
300 shares are issued and outstanding. All of the issued and outstanding shares
of Seller have been duly authorized, are validly issued, fully paid, and
nonassessable, and are held of record and beneficially by the stockholders
listed on Schedule 6.2 - Capitalization, free and clear of any Lien, option or
other right of any nature. No class of capital stock of Seller is entitled to
contractual or other preemptive rights. Schedule 6.2 - Capitalization sets forth
the ownership of all of the outstanding shares of Seller's Common Stock. Except
as set forth on the attached Schedule 6.2 - Capitalization:
(a) there are no outstanding or authorized options, warrants, purchase rights,
subscription rights, conversion rights, exchange rights, or other contracts or
commitments that could require Seller to issue, sell, or otherwise cause to
become outstanding any of its capital stock;
(b) there are no outstanding or authorized stock appreciation, phantom stock,
profit participation, or similar rights with respect to Seller; and
(c) there are no voting trusts, proxies, or other agreements or understandings
with respect to the voting of the capital stock of Seller.
To the extent any of the rights described in clauses (a) and (b) above are in
existence, Schedule 6.2 - Capitalization sets forth a description of the nature
of such rights and the names of the Persons holding such rights and the amounts
thereof.
16
<PAGE>
6.3 AUTHORIZATION; BINDING EFFECT; NO BREACH. Seller's execution, delivery and
performance of each Transaction Document to which Seller is a party have been
duly authorized by Seller. Each Transaction Document to which Seller or Bronken
is a party constitutes a valid and binding obligation of such Person which is
enforceable in accordance with its terms. The execution, delivery and
performance of the Transaction Documents to which Seller or Bronken is a party
do not and will not (i) conflict with or result in a breach of the terms,
conditions or provisions of, (ii) constitute a default under, (iii) result in
the creation of any Lien upon any of the Acquired Assets under, (iv) give any
third party the right to modify, terminate or accelerate any Assumed Liability
or other liability or obligation of Seller or Bronken under, (v) result in a
violation of, or (vi) require any authorization, consent, approval, exemption or
other action by or declaration or notice to any Governmental Entity pursuant to,
the charter or bylaws of Seller or any agreement, instrument or other document,
or any Legal Requirement, to which Seller, Bronken or any of Seller's assets is
subject. Without limiting the generality of the foregoing neither Seller,
Bronken nor any Affiliate of either of them has entered into any agreement, or
is bound by any obligation of any kind whatsoever, directly or indirectly to
transfer or dispose of (whether by sale of stock or assets, assignment, merger,
consolidation or otherwise) the Business or the Acquired Assets (or any
substantial portion thereof) to any Person other than Purchaser, and neither
Seller nor Bronken has entered into any agreement, nor is it bound by any
obligation of any kind whatsoever, to issue any capital stock of Seller to any
Person.
6.4 SUBSIDIARIES; INVESTMENTS. Seller does not own or hold any rights to
acquire any capital stock or any other security, interest or Investment in any
other Person other than investments which constitute Cash. Seller does not
have, and has never had, a Subsidiary.
6.5 FINANCIAL STATEMENTS AND RELATED MATTERS.
(a) Financial Statements. Each of (i) the reviewed balance sheets of Seller
as of December 31, 1996, December 31, 1995 and December 31, 1994 and the
reviewed related statements of income and cash flows for the respective 12-month
periods then ended, and (ii) the unaudited balance sheet of Seller as of March
31, 1997 (the "Latest Balance Sheet") and the related unaudited statements of
income and cash flows for the 3-month period then ended (collectively, the
"Financial Statements") (including in all cases the notes thereto, if any) is
accurate and complete in all material respects, is consistent with the books and
records of Seller (which, in turn, are accurate and complete in all material
respects) and has been prepared in accordance with GAAP.
(b) Receivables. The notes and accounts receivable which are part of the
Acquired Assets are valid receivables, current, and are subject to no valid
counterclaims or setoffs, at the aggregate amount recorded on the Seller's books
and records as of the Closing, net of an amount of allowances for doubtful
accounts which relate to those receivables computed in a manner consistent with
GAAP and the accounting practices used in the preparation of the Latest Balance
Sheet.
(c) Inventory. The inventory which is part of the Acquired Assets, net of the
reserves applicable to such inventory, consists of a quantity and quality which,
except as reflected in such reserve, is usable and saleable in the ordinary
course of the Business and the items of such inventory are not defective, slow-
moving, obsolete or damaged and are merchantable and fit for their particular
use.
6.6 ABSENCE OF UNDISCLOSED LIABILITIES. Except for Excluded Liabilities,
Seller does not have any liability (whether accrued, absolute, contingent,
unliquidated or otherwise, whether or not known to Seller or Bronken, whether
due or to become due, and regardless of when asserted) other than: (a) the
liabilities set forth on the face of the Latest Balance Sheet, (b) current
liabilities which have arisen after the date of the Latest Balance Sheet, in the
ordinary course of the Business and consistent with Seller's past practice (none
of which is a liability resulting from breach of contract, breach of warranty,
tort, infringement, claim or lawsuit) and (c) other liabilities and obligations
expressly disclosed and quantified in the other Schedules to this Agreement.
6.7 ACQUIRED ASSETS.
(a) The Acquired Assets constitute all of the assets and rights (other than
the Excluded Assets) which are necessary for the conduct of the Business as
currently conducted and presently proposed to be conducted;
17
<PAGE>
(b) Seller has good and marketable title to, or a valid leasehold interest
in, all properties and assets used by it, located on its premises, or shown on
the Latest Balance Sheet or acquired by it since the date of the Latest Balance
Sheet in each case free and clear of all Liens, other than (i) properties and
assets disposed of in the ordinary course of business and consistent with its
past practice since the date of the Latest Balance Sheet and (ii) Liens
disclosed on the Latest Balance Sheet (including any notes thereto); and
(c) Seller's equipment and other tangible assets are in good operating
condition and fit for use in the ordinary course of business and consistent with
its past practice.
6.8 ABSENCE OF CERTAIN DEVELOPMENTS. Since January 24, 1997, there has been
no adverse change in the Acquired Assets, the Assumed Liabilities, or the
financial condition, operating results, assets, customer or supplier relations,
employee relations or business prospects of the Business. Without limiting the
generality of the preceding sentence, except as expressly contemplated by this
Agreement, since January 24, 1997, Seller has not:
(a) engaged in any activity which has resulted in the acceleration or delay
of the collection of its accounts or notes receivable or any delay in the
payment in its accounts payable, in each case as compared with its custom and
practice in the conduct of the Business immediately prior to January 24, 1997;
(b) discharged or satisfied any Lien or paid any obligation or liability
which would not constitute an Assumed Liability, if it were unpaid on the
Closing Date, other than current liabilities paid in the ordinary course of the
Business and consistent with Seller's past practice;
(c) except with respect to purchase money security interests arising in
connection with equipment acquired by the Seller in the ordinary course of
business, mortgaged or pledged any Acquired Asset or subjected any Acquired
Asset to any Lien;
(d) sold, assigned, conveyed, transferred, canceled or waived any property,
tangible asset, Proprietary Right of Seller or other intangible asset or right
which, if it were held by Seller on the Closing Date, would constitute an
Acquired Asset other than in the ordinary course of the Business and consistent
with Seller's past practice;
(e) disclosed any Confidential Information to any Person other than Purchaser
and Purchaser's representatives, agents, attorneys, accountants and present and
proposed financing sources;
(f) waived any right other than in the ordinary course of the Business or
consistent with Seller's past practice;
(g) made commitments for capital expenditures which, in the aggregate, would
exceed $500,000;
(h) made any loan or advance to, or guarantee for the benefit of, or any
Investment (other than Investments which constitute Excluded Assets) in, any
other Person;
(i) granted any bonus or any increase in wages, salary or other compensation
to any employee (other than any increase in wages or salaries granted in the
ordinary course of the Business and consistent with Seller's past practice
granted to any employee who is not affiliated with Seller other than by reason
of such Person's employment by Seller);
(j) suffered damages, destruction or casualty losses which, in the aggregate,
exceed $10,000 (whether or not covered by insurance) to any Acquired Asset, or
any other property or asset which, if it existed and was held by Seller on the
Closing Date, would constitute an Acquired Asset;
(k) entered into any transaction other than in the ordinary course of the
Business, and consistent with Seller's past practice, or entered into any other
material transaction, whether or not in the ordinary course of the Business
which may adversely affect the Business, the Acquired Assets, or the Assumed
Liabilities; or
18
<PAGE>
(l) agreed to do any act described in any of clauses 6.8(a) through (k)
above.
6.9 TAX MATTERS.
(a) Seller has filed all Tax returns and other reports which it was required
to file and each such return or other report was correct and complete in all
respects, and Seller has paid all Taxes due and owing by it (whether or not
shown on any Tax return or other report) and has withheld and paid over all
Taxes which it is obligated to withhold from amounts paid or owing to any
employee, independent contractor, stockholder, creditor or other third party;
(b) no Tax audits are pending or being conducted with respect to Seller;
(c) there are no Liens on any of the assets of Seller that arose in
connection with any failure (or alleged failure) to pay any Tax;
(d) no information related to Tax matters has been requested by any Taxing
authority and Seller has not received notice indicating an intent to open an
audit or other review from any Taxing authority;
(e) there are no unresolved disputes or claims concerning Seller's Tax
liability;
(f) no claim has ever been made by any jurisdiction in which Seller does not
file Tax returns to the effect that Seller is or may be subject to any Tax
imposed by that jurisdiction;
(g) a valid election to be an S Corporation (as defined in Section 1361(d) of
the Code and any corresponding provision of state, local or foreign law) has
been in effect with respect to Seller at all times since May 1, 1987;
(h) Seller has not waived any statute of limitations in respect of Taxes or
agreed to an extension of time with respect to any Tax assessment or deficiency;
and
(i) Seller is not a party to any Tax sharing or allocation agreement, and
Seller does not have any liability for the Taxes of any person under Section
1.1502-6 of the Treasury Regulations (or any similar provision of state, local
or foreign law), as a transferee or successor, by contract, or otherwise.
6.10 CONTRACTS AND COMMITMENTS.
(a) Contracts Schedule. Other than this Agreement or as described on the
attached Schedule 6.10 - Contracts, Seller is not a party to any written or
oral:
(i) pension, profit sharing, stock option, employee stock purchase or
other plan or arrangement providing for deferred or other compensation to
employees or any other employee benefit, welfare or stock plan or arrangement
which is not described on the attached Schedule 6.15 - Employee Benefits, or
any contract with any labor union, or any severance agreement;
(ii) contract for the employment or engagement as an independent
contractor of any Person on a full-time, part-time, consulting or other basis;
(iii) contract pursuant to which Seller has advanced or loaned funds, or
agreed to advance or loan funds, to any other Person;
(iv) contract or indenture relating to any Indebtedness or the mortgaging,
pledging or otherwise placing a Lien on any of the Acquired Assets, other than
with respect to Liens arising out of Indebtedness of less than $25,000;
(v) contract pursuant to which Seller is the lessee of, or holds or
operates, any real or personal property owned by any other Person;
19
<PAGE>
(vi) contract pursuant to which Seller is the lessor of, or permits any
third party to hold or operate, any real or personal property owned by Seller
or of which Seller is a lessee (provided that this subsection (vi) shall not
apply to contracts pursuant to which Seller leases personal property to its
customers);
(vii) assignment, license, indemnification or other contract with respect
to any intangible property (including any Proprietary Right of Seller);
(viii) contract or agreement with respect to services rendered or goods sold
or leased to or from others, other than any customer purchase order accepted
in the ordinary course of business and in accordance with Seller's past
practice which both (1) does not require delivery after the date which is six
months after to Closing Date and (2) does not involve a sale price by more
than $25,000;
(ix) contract prohibiting it from freely engaging in any business anywhere
in the world; or
(x) any other contract which is material to the Business or involves a
consideration in excess of $25,000.
(b) Enforceability. Each item described on the attached Schedule 6.10 -
Contracts (the "Contracts") is valid, binding and enforceable in accordance with
its terms, except as such enforceability may be limited by (a) applicable
insolvency, bankruptcy, reorganization, moratorium or other similar laws
affecting creditors' rights generally and (b) applicable equitable principles
(whether considered in a proceeding at law or in equity).
(c) Compliance. Seller has performed all obligations required to be performed
by it under each Contract to which it is a party, and, to the best of Seller's
Knowledge, Seller is not in default under or in breach in any material respect
of (nor is it in receipt of any claim of default or breach under) any such
obligation. No event has occurred which with the passage of time or the giving
of notice (or both) would result in a default, breach or event of noncompliance
in any material respect under any obligation of Seller pursuant to any Contract
to which it is a party. Seller has no present expectation or intention of not
fully performing any obligation of Seller pursuant to any Contract to which it
is a party, and Seller has no Knowledge of any breach or anticipated breach by
any other party to any Contract.
(d) Leases. With respect to each Contract which is a lease of personal
property, Seller holds a valid and existing leasehold interest under such lease
for the term set forth with respect to such lease on the attached Schedule 6.10
- - Contracts.
(e) Affiliated Transactions. Except for indebtedness owing to Bronken and to
Larry Butler, all of which is to be paid off by the Seller as of the Closing, no
officer, director, stockholder or Affiliate of Seller (and no individual related
by blood or marriage to any such Person, and no entity in which any such Person
or individual owns any beneficial interest) is a party to any agreement,
contract, commitment or transaction with Seller (other than this Agreement) or
has any material interest in any material property used by Seller.
(f) Copies. A true and correct copy of each written Contract, each as
currently in effect, has been made available to Purchaser and are currently
located on Seller's premises.
6.11 CERTAIN LITIGATION. There is no action, suit, proceeding, order,
investigation or claim pending (or, to the best of Seller's Knowledge,
threatened) against or affecting Seller, the Business (or to the best of
Seller's Knowledge, pending or threatened against or affecting any officer,
director or employee of Seller with respect to the Business, at law or in
equity, or before or by any Government Entity (a) with respect to the
transactions contemplated by the Transaction Documents, or (b) concerning the
design, manufacture, rendering or sale by Seller of product or service in the
course of the Business or otherwise concerning the conduct of the Business, and,
to the best of Seller's Knowledge, there is no basis for any of the foregoing.
20
<PAGE>
6.12 BROKERAGE. Except for James Briscoe, there is no claim for brokerage
commissions, finders' fees or similar compensation in connection with the
transactions contemplated by the Transaction Documents based on any arrangement
or agreement which may be binding upon Seller or to which Seller or any of the
Acquired Assets may be subject. The agreement with James Briscoe is identified
on Schedule 6.10 - Contracts.
6.13 INSURANCE. The attached Schedule 6.13 - Insurance contains a description
of each insurance policy maintained by Seller with respect to its properties,
assets or business, and each such policy is in full force and effect. Seller is
not in default on any obligation pursuant to any insurance policy maintained by
it.
6.14 EMPLOYEES.
(a) Continued Employment. To the best of Seller's Knowledge, no executive or
key employee of Seller or any group of employees of Seller has any plans to
terminate employment with Seller.
(b) Compliance and Restrictions. Seller has complied with all laws relating
to the employment of labor in connection with the Business, including provisions
of such laws relating to wages, hours, equal opportunity, collective bargaining
and the payment of social security and other taxes, and Seller has no material
labor relations problem (including any union organization activities, threatened
or actual strikes or work stoppages or material grievances). Neither Seller nor
any of its employees is subject to any noncompete, nondisclosure,
confidentiality, employment, consulting or similar agreement relating to,
affecting, or in conflict with, the Business activities.
6.15 ERISA. Except as set forth on the attached Schedule 6.15 - Employee
Benefits:
(a) with respect to all current employees (including those on lay-off,
disability or leave of absence), former employees, and retired employees of
Seller (the "Seller Employees"), Seller does not maintain or contribute to any
(a) employee welfare benefit plans (as defined in Section 3(1) of ERISA)
("Employee Welfare Plans"), or (b) any plan, policy or arrangement which
provides nonqualified deferred compensation, bonus or retirement benefits,
severance or "change of control" (as set forth in Code Section 280G) benefits,
or life, disability accident, vacation, tuition reimbursement or other material
fringe benefits ("Other Plans");
(b) Seller does not, and has not during the past six (6) years, maintained,
contributed to, or participated in any defined benefit plan or defined
contribution plan which are employee pension benefit plans (as defined in
Section 3(2) of ERISA) ("Employee Pension Plans");
(c) Seller does not, and never has, contributed to or participated in any
multiemployer plan (as defined in Section 3(37) of ERISA) (a "Multiemployer
Plan");
(d) Seller does not maintain or have any obligation to contribute to or
provide any post-retirement health, accident or life insurance benefits to any
Seller Employee, other than limited medical benefits required to be provided
under Code Section 4980B;
(e) all Plans (and all related trusts and insurance contracts) comply in form
and in operation in all respects with the applicable requirements of ERISA and
the Code;
(f) all required reports and descriptions (including all Form 5500 Annual
Reports, Summary Annual Reports, PBGC-1s and Summary Plan Descriptions) with
respect to all Plans have been properly filed with the appropriate government
agency or distributed to participants, and Seller has complied with the
requirements of Code Section 4980B;
(g) with respect to each Plan, all contributions, premiums or payments which
are due on or before the Closing Date have been paid to such Plan; and
(h) Seller has not incurred, and has no reason to believe that it will incur,
any liability to the Pension Benefit Guaranty Corporation (the "PBGC"), the
United States Internal Revenue Service, any multiemployer plan or
21
<PAGE>
otherwise with respect to any employee pension benefit plan or with respect to
any employee pension benefit plan currently or previously maintained by members
of the controlled group of companies (as defined in Sections 414(b) and (c) of
the Code) that includes Seller (the "Controlled Group") that has not been
satisfied in full, and no condition exists that presents a material risk to
Seller or any member of the Controlled Group of incurring such a liability
(other than liability for premiums due the PBGC) which could reasonably be
expected to have any adverse effect on Purchaser or any of the Acquired Assets
after the Closing.
The "Plans" means all Employee Pension Plans, Employee Welfare Plans, Other
Plans and Multiemployer Plans to which Seller contributes or is a party.
6.16 REAL ESTATE.
(a) Owned Properties. The attached Schedule 6.16 - Real Estate lists and
describes briefly all real property that Seller owns (the "Owned Real
Property"). Except as otherwise described on Schedule 6.16 - Real Estate, with
respect to each such parcel of Owned Real Property:
(i) Seller has good and marketable fee simple title to each such parcel
free and clear of any Lien, except for (1) statutory liens for current taxes
or other governmental charges with respect to the Owned Real Property not yet
due and payable or the amount or validity of which is being contested in good
faith by appropriate proceedings by Seller, and with respect to which all
reserves required by GAAP have been established; (2) mechanics, carriers
workers, repairers and similar statutory liens arising or incurred in the
ordinary course of business for amounts which are not delinquent and which are
not, individually or in the aggregate, material to the Business; (3) zoning,
entitlement, building and other land use regulations imposed by governmental
agencies having jurisdiction over the Owned Real Property which are not
violated by the current use and operation of the Owned Real Property; and (d)
covenants, conditions, restrictions, easements and other matters of record
affecting title to the Owned Real Property which do not materially impair the
use or value of the Owned Real Property for the purposes for which it is used
in connection with the Business (collectively, the "Permitted Liens");
(ii) there are no pending (or, to the best of the Seller's Knowledge,
threatened) condemnation proceedings, lawsuits, or administrative actions
relating to the Owned Real Property or other matters affecting adversely the
current use, occupancy, or value of the Owned Real Property;
(iii) the Owned Real Property does not serve any adjoining property for
any purpose inconsistent with the use of the Owned Real Property, and the
Owned Real Property is not located within any flood plain or subject to any
similar type restriction for which any permits or licenses necessary to the
use thereof have not been obtained;
(iv) there are no leases, subleases, licenses, concessions, or other
agreements, written or oral, granting to any Person the right of use or
occupancy of any portion of the Owned Real Property;
(v) there are no outstanding options or rights of first refusal to
purchase any of the Owned Real Property, or any portion thereof or interest
therein;
(vi) no Person (other than Seller which owns such parcel) is in
possession of any of the Owned Real Property;
(vii) the current use of the Owned Real Property and the operation of the
Business does not violate any instrument of record or agreement affecting the
Owned Real Property or any applicable Legal Requirements except for such
violations which, individually and in the aggregate, could not reasonably be
foreseen to have a material adverse affect on the Business;
(viii) to Seller's knowledge, all buildings, structures and other
improvements located on the Owned Real Property, including all material
components thereof, are in good operating condition and repair, subject only
to
22
<PAGE>
the provision of usual and customary maintenance provided in the ordinary
course of business with respect to buildings, structures and improvements of
like age and construction and all water, gas, electrical, steam, compressed
air, telecommunication, sanitary and storm sewage lines and other utilities
and systems serving the Owned Real Property are sufficient to enable the
continued operation of the Owned Real Property as it is now operated in
connection with the conduct of the Business; and
(ix) all certificates of occupancy, permits, licenses, approvals and
other authorizations required in connection with the operation of the Business
on the Owned Real Property required to have been issued to enable the Owned
Real Property to be lawfully occupied and used for all of the purposes for
which it is currently occupied and used in connection with the operation of
the Business, have been lawfully issued and are, as of the date, hereof, in
full force and effect.
(b) Leased Property. The Owned Real Property includes all of the real
property used by Seller in the operation of the Business, and Seller does not
use or occupy any real property pursuant to any lease, sublease, license,
concession, or other agreement (written or oral).
6.17 COMPLIANCE WITH LAWS.
(a) Generally. Seller has not violated any Legal Requirement the violation of
which could have an adverse effect on the Acquired Assets, the Assumed
Liabilities, or the financial condition, operating results, assets, customer or
supplier relations, employee relations or business prospects of the Business,
and Seller has not received notice alleging any such violation.
(b) Required Permits. Seller has complied with (and is in compliance with)
all permits, licenses and other authorizations required for the occupation of
Seller's facilities and the operation of the Business. The items described on
the attached Schedule 6.17(b) - Permits constitute all of the permits, filings,
notices, licenses, consents, authorizations, accreditation, waivers, approvals
and the like of, to or with any Government Entity which are required for the
consummation of the Sale, the Assumption or any other transaction contemplated
by the Transaction Documents or the ownership of the Acquired Assets or
Purchaser's conduct of the Business (as such is presently conducted by Seller)
thereafter.
(c) Environmental and Safety Matters. Without limiting the generality of
Section 6.17(a) and (b) above, except as set forth on the attached Schedule
6.17(c) - Environmental Matters, Seller and all of Seller's Environmental
Affiliates have complied (and are in compliance, in all respects) with all
applicable Environmental and Safety Requirements, and neither Seller nor any of
Seller's Environmental Affiliates has received any notice, report or information
regarding any liabilities (whether accrued, absolute, contingent, unliquidated
or otherwise), or any corrective, investigatory or remedial obligations, arising
under any Environmental and Safety Requirement. Without limiting the generality
of the preceding sentence, except as set forth on the attached Schedule 6.17(c)
- - Environmental Matters:
(i) no underground storage tank, asbestos-containing material in any
form or condition, or PCB-containing materials or equipment, exists at any
property owned or occupied by Seller or any of its Environmental Affiliates;
(ii) the transactions contemplated to be consummated pursuant to the
Transaction Documents will not result in the imposition of any obligations
under Environmental and Safety Requirements for site investigation, cleanup or
notification to or consent of any government agency or third party;
(iii) no equipment, facts, events, conditions, conduct or methods
relating to the past or present facilities, properties or operations of Seller
or any of its Environmental Affiliates will prevent, hinder or limit continued
compliance with any Environmental and Safety Requirement, give rise to or
result in any corrective, investigatory or remedial obligation pursuant to
Environmental and Safety Requirements, or give rise to or result in any other
liability (including any liability relating to onsite or offsite hazardous or
non-hazardous substance
23
<PAGE>
releases, personal injury, cleanup, remediation, property damage or natural
resources damage) pursuant to any Environmental and Safety Requirement; and
(iv) no Environmental Lien has attached to any property of Seller or any of
its Environmental Affiliates.
6.18 PRODUCT WARRANTY. All products leased, serviced, distributed, sold or
delivered by Seller in connection with the Business have been serviced,
distributed, sold and/or delivered in conformity with all applicable contractual
commitments and all express and implied warranties. No material liability of
Seller exists for replacement or other damages in connection with any such
product.
6.19 DISCLOSURE. Neither this Article 6 nor any schedule, attachment, written
statement, document, certificate or other item supplied to Purchaser by or on
behalf of Seller with respect to the transactions contemplated by the
Transaction Documents contains any untrue statement of a material fact or omits
a material fact necessary to make each statement contained herein or therein not
misleading. There is no fact which Seller has not disclosed to Purchaser in
writing and of which any officer, director or executive employee of Seller is
aware (other than matters of a general economic nature) and which has had or
could reasonably be expected to have a material adverse effect upon the Acquired
Assets, the Assumed Liabilities, or the financial condition, operating results,
assets, employee relations or business prospects of the Business.
6.20 ACCURACY ON CLOSING DATE. Each representation and warranty set forth in
this Article 6 and all information contained in any exhibit, schedule or
attachment to this Agreement or in any certificate or other writing delivered
by, or on behalf of, Seller to Purchaser will be true and correct as of the time
of the Closing as though then made, except (i) as affected by the transactions
expressly contemplated by the Transaction Documents, (ii) to the extent that
such representation or warranty relates solely to an earlier date and (iii) to
the extent that Seller has advised Purchaser otherwise in writing prior to the
Closing.
ARTICLE 7
ACCESS TO RECORDS
7.1 ACCESS TO RECORDS. To the extent reasonably required for any bona fide
business purpose, each Party will allow, and will use its best efforts to cause
its Affiliates to allow, the other Parties (and the other Parties' agents,
representatives and Affiliates) access to all business records and files
concerning the Business, the Acquired Assets, or the Assumed Liabilities which
relate to the period prior to the Closing Date and will permit such Persons to
make copies of the same. Such access will be granted upon reasonable advance
notice, during normal business hours, and in such a manner so as not to
interfere unreasonably with the operations of the Person affording such access.
Without limiting the generality of the foregoing, if any Party or any of its
Affiliates actively is contesting or defending against any charge, complaint,
action, suit, proceeding, hearing, investigation, claim, or demand in connection
with (a) any transaction contemplated by the Transaction Documents, or (b) any
fact, situation, circumstance, status, condition, activity, practice, plan,
occurrence, event, incident, action, failure to act, or transaction on or prior
to the Closing relating to the Business, then the other Parties will cooperate,
and use their best efforts to cause their Affiliates to cooperate, with the
contesting or defending Person and its counsel in such contest or defense, make
available such other Parties' and their Affiliates' personnel and provide such
testimony and access to books and records as are reasonably requested in
connection with such contest or defense, all at the contesting or defending
Person's expense (unless the contesting or defending Person is entitled to
indemnification therefor pursuant to Section 8.2 or 8.3). No provision of this
Article 7 will be construed so as to limit Seller's obligation to transfer to
Purchaser all Books and Records which are part of the Acquired Assets.
24
<PAGE>
ARTICLE 8
SURVIVAL AND INDEMNIFICATION
8.1 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All representations and
warranties contained herein or made in writing by any Party in connection
herewith shall survive the execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby, regardless of any
investigation made by any Party or on its behalf; provided that Seller's and
Bronken's obligation to indemnify Purchaser in respect of breaches thereof shall
be subject to the limitations set forth in Section 8.2 below; and provided
further that Purchaser's obligation to indemnify Seller in respect of breaches
thereof shall be subject to the limitation set forth in Section 8.3 below.
Neither a Party's participation in the consummation of any transaction pursuant
to any Transaction Document nor any waiver of any condition to such
participation (including any condition that a representation or warranty of any
other Party be true and correct) will constitute a waiver by such participating
Party of any representation or warranty of any Party or otherwise affect the
survival of any such representation or warranty.
8.2 INDEMNIFICATION OBLIGATIONS OF SELLER AND BRONKEN.
(a) In addition to any other right or remedy available to Purchaser at law or
in equity, Seller and Bronken will jointly and severally indemnify Purchaser and
its Affiliates, stockholders, officers, directors, employees, agents,
representatives and permitted successors and assigns (collectively, the
"Purchaser Indemnitees") in respect of, and save and hold each Purchaser
Indemnitee harmless against and pay on behalf of or reimburse each Purchaser
Indemnitee as and when incurred, any Loss which any Purchaser Indemnitee
suffers, sustains or becomes subject to as a result of, in connection with,
relating or incidental to or by virtue of, without duplication:
(i) any misrepresentation or breach of any representation or warranty
by Seller set forth in this Agreement or any Schedule, Exhibit, certificate or
other instrument or document furnished to Purchaser by Seller or Bronken
pursuant to any Transaction Document;
(ii) any nonfulfillment or breach of any covenant or agreement of Seller
or Bronken set forth in any Transaction Document;
(iii) any facts, events, circumstances or conditions existing or
occurring at or prior to the Closing, including, without limitation, the
Excluded Liabilities, but excluding the Assumed Liabilities; or
(iv) any Excluded Asset.
The Purchaser Indemnitees may proceed against Seller and/or Bronken, at the
Purchaser Indemnitees' option.
(b) The Indemnification provided for in this Section 8.2 is subject to the
following limitations:
(i) Seller and Bronken will be liable to Purchaser Indemnitees with
respect to claims referred to in Section 8.2(a)(i) above only if such
Purchaser Indemnitee gives written notice to Bronken and the Seller:
(A) within three years after the Closing Date for claims arising
from breaches of the representations and warranties set forth in Sections
6 (except Sections 6.1, 6.2, 6.3, 6.4 6.7, 6.9, 6.15 and 6.17(c));
(B) prior to 60 days following the expiration of the applicable
statute of limitations for claims by governmental authorities or third
parties against the Seller which relate to breaches of the representations
and warranties set forth in Sections 6.9, 6.15 and 6.17(c); and
(C) at any time after the Closing Date for claims arising from
breaches of the representations and warranties set forth in Sections 6.1,
6.2, 6.3, 6.4, and 6.7.
25
<PAGE>
(ii) No amount of indemnity shall be payable to a Purchaser Indemnitee
pursuant to Section 8.2(a)(i) unless, until and only to the extent that all
Purchaser Indemnitees have collectively suffered or incurred Losses
aggregating in excess of $50,000 as a result of or arising out of the matters
described in Section 8.2.
8.3 INDEMNIFICATION OBLIGATIONS OF PURCHASER.
(a) Purchaser will indemnify Bronken, Seller and its Affiliates, stockholders,
officers, directors, employees, agents, representatives and permitted successors
and assigns (collectively, the "Seller Indemnitees") and hold each of them
harmless against any Loss which such Seller Indemnitee suffers, sustains or
becomes subject to as a result of, in connection with, relating to or by virtue
of, without duplication:
(i) any misrepresentation or breach of any representation or warranty
by Purchaser set forth in this Agreement or any certificate delivered by
Purchaser to Seller pursuant to any Transaction Document;
(ii) any nonfulfillment or breach of any covenant or agreement of
Purchaser set forth in any Transaction Document;
(iii) any Assumed Liability; or
(iv) any liability or obligation of the Purchaser arising out of the
operation of the Acquired Assets after the Closing (provided that this clause
(d) shall not include any Excluded Liabilities);
(b) The Indemnification provided for in this Section 8.3 is subject to the
limitation that Purchaser will be liable to Seller Indemnitees with respect to
claims referred to in Section 8.3(a) above only if such Seller Indemnitee gives
written notice to Purchaser:
(i) within three years after the Closing Date for claims arising from
breaches of the representations and warranties set forth in Sections 5.3, 5.4,
5.5 and 5.6; and
(ii) at any time after the Closing Date for claims arising from breaches
of the representations and warranties set forth in Sections 5.1 and 5.2.
8.4 INDEMNIFICATION PROCEDURES.
(a) Notice of Claim. Any Person making a claim for indemnification pursuant
to Section 8.2 or 8.3 above (an "Indemnified Party") must give the Party from
whom indemnification is sought (an "Indemnifying Party") written notice of such
claim (an "Indemnification Claim Notice") promptly after the Indemnified Party
receives any written notice of any action, lawsuit, proceeding, investigation or
other claim (a "Proceeding") against or involving the Indemnified Party by a
Government Entity or other third party or otherwise discovers the liability,
obligation or facts giving rise to such claim for indemnification; provided that
the failure to notify or delay in notifying an Indemnifying Party will not
relieve the Indemnifying Party of its obligations pursuant to Section 8.2 or
8.3, as applicable, except to the extent that such failure actually harms the
Indemnifying Party. Such notice must contain a description of the claim and the
nature and amount of such Loss (to the extent that the nature and amount of such
Loss is known at such time).
(b) Control of Defense: Conditions. With respect to the defense of any
Proceeding against or involving an Indemnified Party in which the Government
Entity or other third party in question seeks only the recovery of a sum of
money for which indemnification is provided in Section 8.2 or 8.3, at its option
an Indemnifying Party may appoint as lead counsel of such defense any legal
counsel selected by the Indemnified Party; provided that before the Indemnifying
Party assumes control of such defense it must first
(i) enter into an agreement with the Indemnified Party (in form and
substance satisfactory to the Indemnified Party) pursuant to which the
Indemnifying Party agrees to be fully responsible (with no reservation of any
rights other than the right to be subrogated to the rights of the Indemnified
Party) for all Losses relating to such
26
<PAGE>
Proceeding and unconditionally guarantees the payment and performance of any
liability or obligation which may arise with respect to such Proceeding or the
facts giving rise to such claim for indemnification, and
(ii) furnish the Indemnified Party with evidence that the Indemnifying
Party, in the Indemnified Party's sole judgment, is and will be able to
satisfy any such liability.
(c) Control of Defense: Exceptions, etc. Notwithstanding Section 8.4(b), the
Indemnified Party will be entitled to participate in the defense of such claim
and to employ counsel of its choice for such purpose at its own expense;
provided that the Indemnifying Party will bear the reasonable fees and expenses
of such separate counsel incurred prior to the date upon which the Indemnifying
Party effectively assumes control of such defense. The Indemnifying Party will
not be entitled to assume control of the defense of such claim, and will pay the
reasonable fees and expenses of legal counsel retained by the Indemnified Party,
if
(i) the Indemnified Party reasonably believes that an adverse
determination of such Proceeding could be detrimental to or injure the
Indemnified Party's reputation or future business prospects,
(ii) the Indemnified Party reasonably believes that there exists or
could arise a conflict of interest which, under applicable principles of legal
ethics, could prohibit a single legal counsel from representing both the
Indemnified Party and the Indemnifying Party in such Proceeding, or
(iii) a court of competent jurisdiction rules that the Indemnifying Party
has failed or is failing to prosecute or defend vigorously such claim; and
The Indemnifying Party must obtain the prior written consent of the
Indemnified Party (which the Indemnified Party will not unreasonably withhold)
prior to entering into any settlement of such claim or Proceeding or ceasing to
defend such claim or Proceeding.
8.5 TREATMENT OF INDEMNIFICATION PAYMENTS. Amounts paid to or on behalf of
Purchaser or Seller as indemnification hereunder shall be treated as adjustments
to the Purchase Price. If any Tax authority asserts that an indemnification
payment is not an adjustment to the Purchase Price, the Indemnifying Party will
indemnify the Indemnified Party against any Tax imposed on the receipt of such
indemnification payment pursuant to Section 8.2 or 8.3, including any Tax
imposed on any payment pursuant to this Section 8.6.
8.6 PAYMENT. Subject to Section 2.5, the Indemnifying Party shall pay the
Indemnified Party to the extent the Indemnified Party is entitled to payment
hereunder in immediately available funds promptly after the Indemnified Party
provides the Indemnifying Party with notice of a claim hereunder and the parties
reasonably agree that there is a reasonable basis for such claim, or a final
result, determination, finding, judgment and/or award is made with respect to
such claim by any court of competent jurisdiction.
ARTICLE 9
CONDITIONS TO THE CLOSING
9.1 CONDITIONS OF PURCHASER'S OBLIGATION. Purchaser's obligation to effect
the Sale and the Assumption at the Closing is subject to the satisfaction as of
the Closing of the following conditions precedent:
(a) Representations and Warranties. Each representation and warranty set
forth in Article 6 will be true and correct in all material respects at and as
of the Closing as though then made (without giving effect to any disclosure made
by Seller pursuant to Section 6.20 above), except to the extent of any change
solely caused by the transactions expressly contemplated by the Transaction
Documents.
(b) Covenants. Seller and Bronken will have performed and observed each
covenant or other obligation required to be performed or observed by them
pursuant to the Transaction Documents prior to the Closing.
27
<PAGE>
(c) Compliance with Applicable Laws. The consummation of the transactions
contemplated by the Transaction Documents will not be prohibited by any Legal
Requirement or subject Purchaser, the Business or the Acquired Assets to any
penalty, liability or other onerous condition arising under any applicable Legal
Requirement or imposed by any Government Entity.
(d) Proceedings. No action, suit or proceeding will be pending or threatened
before any Government Entity the result of which could prevent or prohibit the
consummation of any transaction pursuant to the Transaction Documents, cause any
such transaction to be rescinded following consummation, or adversely affect
Purchaser's right to acquire or hold the Acquired Assets or conduct the Business
or Seller's performance or its obligations pursuant to the Transaction
Documents, and no judgment, order, decree, stipulation, injunction or charge
having any such effect will exist.
(e) Consents. All filings, notices, licenses, consents, authorizations,
accreditation, waivers, approvals and the like of, to or with any Government
Entity or any other Person that are required for the consummation of the Sale,
the Assumption or any other transaction contemplated by the Transaction
Documents or the ownership of the Acquired Assets or the conduct of the Business
by Purchaser thereafter (the "Consents") will have been duly made or obtained.
(f) Opinion of Counsel. Purchaser will have received from Clark, Greene &
Associates, legal counsel for Seller, an opinion with respect to the matters set
forth in Exhibit B attached hereto addressed to Purchaser. Such opinion will be
dated the Closing Date and will be in form satisfactory to Purchaser's special
legal counsel.
(g) Lease. Seller shall have executed and delivered a Lease Agreement with
Purchaser for the real properties owned by Seller at 2735 South Industrial Road,
Las Vegas, Nevada 89109-1199 and 2771 South Industrial Road, Las Vegas, Nevada
89109-1199 in substantially the form of Exhibit C attached hereto.
(h) Title Insurance. Purchaser shall have obtained, at Purchaser's sole cost
and expense: with respect to each parcel of Leased Real Property reasonably
requested by Purchaser or require by any lender to Purchaser in connection with
the sale, an ALTA leasehold policy of title insurance Form B-1990 with deletion
or creditor's rights exception issued by a title insurer (the "Title Company")
in such amount as Purchaser reasonably determine insuring title to the Leasehold
estate in such Parcel of Leased Real Property in Purchaser subject only to
Permitted Liens ("Title Policies"). The Title Policies shall contain: (i) an
"Extended Coverage Endorsement" insuring over the general exceptions contained
in such policies; (ii) an ALTA Zoning Endorsement 3.1 (or equivalent); (iii) an
endorsement insuring that the Leased Real Property, as the case may be,
described in such Title Policy is the parcel shown on the survey received
pursuant to Section 9.1(j) below with respect to such Leased Real Property; (iv)
an endorsement insuring that each street adjacent to such Leased Real Property
is a public street and that there is direct and unencumbered access, ingress and
egress to such street from such Leased Real Property; (v) an Owner's
Comprehensive Endorsement; (vii) a tax parcel endorsement and such other
endorsements as shall be reasonably requested by Purchaser or required by any
Lender to Purchaser in connection with the sale.
(i) Surveys. Purchaser shall have received, at Purchaser's sole cost and
expense, a current ALTA/ACSM survey of each parcel of Leased Real Property with
respect to which a Title Policy is required made in accordance with the 1992
ALTA/ACSM standards including items 1 through 13 of Table A thereof made by a
surveyor licensed in the jurisdiction in which such parcel of Leased Real
Property is located and certified to Purchaser, Purchaser's lender and the Title
Company as having been so made, disclosing the location of all improvements,
easements, party-walls, sidewalks, roadways, utility lines and other matters
required to be shown on the surveys and showing each such parcel of Leased Real
Property to be free from encroachments of improvements located thereon onto
adjacent property and to be free from encroachments of improvements located on
property adjacent onto such parcel of Leased Real Property.
(j) Sellers' Closing Documents. Seller will have delivered to Purchaser the
following documents:
(i) an Officer's Certificate of Seller, dated the Closing Date, stating
that the conditions specified in Sections 9.1(a) through (g), inclusive, have
been fully satisfied;
28
<PAGE>
(ii) a copy of the resolutions duly adopted by Seller's board of
directors and stockholders authorizing Seller's execution, delivery and
performance of the Transaction Documents to which Seller is a party and the
consummation of the Sale and all other transactions contemplated by the
Transaction Documents, as in effect as of the Closing, certified by an officer
of Seller;
(iii) a certificate (dated not earlier than five business days prior to
the Closing) of the Secretary of State of the state of incorporation of Seller
as to the good standing of Seller in such state;
(iv) a certificate (dated not earlier than five business days prior to
the Closing) of the Secretary of State of each state wherein Seller has
qualified to do business as a foreign corporation as to the good standing of
Seller in such state ;
(v) the Books and Records;
(vi) such a bill of sale, warranty deeds, warranty assignments of leases
and all other instruments of conveyance which are necessary or desirable to
effect the Sale, including documents acceptable for recordation in the United
States Patent and Trademark Office, the United States Copyright Office and any
other similar Government Entity;
(vii) copies of the Consents; and
(viii) such other documents relating to the transactions contemplated by
the Transaction Documents as Purchaser reasonably requests.
(k) Allocation of Purchase Price. Purchaser and Seller reasonably and in good
faith will have allocated the Purchase Price among the Acquired Assets in
accordance with Section 1060 of the Code and applicable Treasury Regulations
thereunder; provided that in any event $3,000,000 shall be allocated to
goodwill.
All corporate and other proceedings or actions taken or required to be taken
by Seller or the stockholders of Seller in connection with the transactions
contemplated by the Transaction Documents, and all documents incident thereto,
must be reasonably satisfactory in form and substance to Purchaser and its
special legal counsel. Any condition set forth in this Section 9.1 may be
waived only in a writing executed by Purchaser.
9.2 CONDITIONS OF SELLER'S OBLIGATION. Seller's obligation to effect the Sale
at the Closing is subject to the satisfaction as of the Closing of the following
conditions precedent:
(a) Representations and Warranties. Each representation and warranty set
forth in Article 5 will be true and correct in all material respects at and as
of the Closing as though then made (without giving effect to any disclosure made
by Purchaser pursuant to Section 5.5 above), except to the extent of any change
solely caused by the transactions expressly contemplated by the Transaction
Documents.
(b) Covenants. Purchaser will have performed each covenant or other
obligation required to be performed by it pursuant to the Transaction Documents
prior to the Closing.
(c) Compliance with Applicable Laws. The consummation of the transactions
contemplated by the Transaction Documents will not be prohibited by any Legal
Requirement or subject Seller to any penalty or liability arising under any
Legal Requirement or imposed by any Government Entity.
(d) Proceedings. No action, suit or proceeding will be pending or threatened
before any Government Entity the result of which could prevent or prohibit the
consummation of any transaction pursuant to the Transaction Documents, cause any
such transaction to be rescinded following such consummation or adversely affect
Purchaser's performance of its obligations pursuant to the Transaction
Documents, and no judgment, order, decree, stipulation, injunction or charge
having any such effect will exist.
29
<PAGE>
(e) Opinion of Counsel. Seller will have received from Kirkland & Ellis,
legal counsel for Purchaser, an opinion addressed to Seller in a form
satisfactory to Seller's legal counsel.
(f) Purchaser Closing Documents. Purchaser will have delivered to Seller the
following documents:
(i) an Officer's Certificate of Purchaser, dated the Closing Date,
stating that the conditions specified in Sections 9.2(a) through (e),
inclusive, have been fully satisfied;
(ii) all instruments which are necessary or desirable to effect the
Assumption; and
(iii) such other documents relating to the transactions contemplated by
the Transaction Documents to be consummated at the Closing as Seller
reasonably requests.
(g) Allocation of Purchase Price. Purchaser and Seller reasonably and in good
faith will have allocated the Purchase Price among the Acquired Assets in
accordance with Section 1060 of the Code and applicable Treasury Regulations
thereunder; provided that in any event $3,000,000 shall be allocated to
goodwill.
(h) Financial Information. Purchaser will have delivered to Seller such
financial information of Purchaser and NES as Seller has reasonably requested.
All corporate and other proceedings or actions taken or required to be taken
by Purchaser in connection with the transactions contemplated by the Transaction
Documents, and all documents incident thereto, must be reasonably satisfactory
in form and substance to Seller and its legal counsel. Any condition set forth
in this Section 9.2 may be waived only in a writing executed by Seller.
ARTICLE 10
OTHER COVENANTS
10.1 INTERIM AGREEMENTS OF SELLER AND BRONKEN. Seller and Bronken each
covenants and agrees that prior to the Closing, unless Purchaser agrees
otherwise in writing, or as otherwise expressly contemplated or permitted by the
Transaction Documents, Seller will conduct the Business in, and Seller will not
take any action with respect to the Business, other than in, the ordinary
course, on an arm's-length basis and in accordance in all material respects with
all Legal Requirements and Seller's past custom and practice. Without limiting
the generality of the preceding sentence, Seller and Bronken each covenant that:
(a) Seller will not, directly or indirectly
(i) sell, pledge, dispose of or encumber any Acquired Asset or, other
than sales of inventory in the ordinary course of the Business,
(ii) engage in any activity which would accelerate the collection of its
accounts or notes receivable, delay the payment of its accounts payable, or
reduce or otherwise restrict the amount of inventory (including raw material,
packaging, work-in-process, or finished goods) on hand, in each case, other
than in the ordinary course of the conduct of the Business,
(iii) acquire (by merger, exchange, consolidation, acquisition of stock
or assets or otherwise) any corporation, partnership, joint venture or other
business organization or division or material assets thereof,
(iv) incur any Indebtedness or issue any debt securities which (if such
Indebtedness existed, or such debt securities were outstanding, on the Closing
Date) would constitute Assumed Liabilities,
30
<PAGE>
(v) take any action with respect to the grant of any bonuses, salary
increases, severance or termination pay (except for in the ordinary course of
business and after notification of Purchaser in writing),
(vi) not take any action which would render, or which could reasonably
be expected to render, any representation or warranty made by Seller in this
Agreement untrue at (or at any time prior to) the Closing;
(vii) adopt or amend any employee benefit or welfare plan, or
(viii) enter into or modify, or propose to enter into or modify, any
agreement, arrangement or understanding with respect to any of the matters
referred to in clauses (i) through (vii) above;
(b) Seller will use its best efforts to cause its current insurance policies
not to be canceled or terminated, and not to permit any of the coverage pursuant
to any such policy to lapse, unless at the time of such termination,
cancellation or lapse there is in full force and effect a replacement policy
which provides coverage in an amount which is not less than the amount of the
coverage pursuant to the canceled, terminated or lapsed policy;
(c) Seller will
(i) insofar as such matters relate to the Acquired Assets, the Assumed
Liabilities, or the Business, use its best efforts to (1) preserve intact the
organization and goodwill of the Business, (2) keep available the services of
its officers and employees as a group, and (3) maintain satisfactory
relationships with its material financing sources, suppliers and customers and
other Persons having business relationships with it,
(ii) upon reasonable request, confer with representatives of Purchaser
and Purchaser's present and proposed financing sources regarding the Acquired
Assets, the Assumed Liabilities, and the Business,
(iii) upon reasonable request, arrange meetings with such customers of,
and suppliers to, Seller as Purchaser shall reasonably designate in order that
Seller and Purchaser may confer with such customers and suppliers regarding
the Business, and the nature of the transactions contemplated by this
Agreement,
(iv) maintain its facilities and assets in good condition, and
(v) notify Purchaser of any emergency or other change in the normal
course of the Business, or in the condition of the Acquired Assets, or the
operation of the Business, and any governmental or third party complaint,
investigation or hearing (or communication indicating that such a complaint,
investigation or hearing is or may be contemplated) if such emergency, change,
complaint, investigation or hearing could reasonably be expected to be
material, individually or in the aggregate, to the Acquired Assets, the
Assumed Liabilities, or the financial condition, operating results, assets,
customer or supplier relations, employee relations or business prospects of
the Business;
(d) Seller promptly will notify Purchaser if it discovers that any
representation or warranty by Seller set forth in this Agreement was untrue when
made or subsequently has become untrue; and
(e) Seller will permit representatives of Purchaser and Purchaser's present
and proposed financing sources to have full access (at reasonable times and in a
manner so as not to unreasonably interfere with Seller's normal business
operations) to all Seller's personnel and all premises, properties, books,
records, contracts, Tax records and other documents of Seller pertaining to the
Business and will allow such Persons to make and retain copies of such
documents.
10.2 EXCLUSIVITY. During the period from the date hereof through and
including the Closing Date, neither Seller nor Bronken will (i) solicit,
initiate, or encourage the submission of any proposal or offer from any Person
relating to the acquisition of any capital stock or other voting securities, or
any substantial portion of the assets, of Seller (including any acquisition
structured as a merger, consolidation, or share exchange) or (ii) participate in
any discussions or negotiations regarding, furnish any information with respect
to, assist or participate in, or facilitate in
31
<PAGE>
any other manner any effort or attempt by any Person to do or seek any of the
foregoing. Bronken will not vote any shares of Seller in favor of any such
acquisition structured as a merger, consolidation, or share exchange. Seller
will notify Purchaser immediately if any Person makes any proposal, offer,
inquiry, or contact with respect to any of the foregoing.
10.3 NOTICE BY PURCHASER. From the date of this Agreement until the Closing,
Purchaser promptly will notify Seller if any representation or warranty of
Purchaser set forth in this Agreement was untrue when made or subsequently has
become untrue.
10.4 ADDITIONAL INTERIM AGREEMENTS. Each Party will use reasonable efforts to:
(a) take or cause to be taken all actions, and do or cause to be done all
things, which are necessary, proper or advisable to cause any other Party's
conditions set forth in Sections 9.1 and 9.2 to be fully satisfied, and
(b) consummate and make effective as promptly as practicable the transactions
contemplated by the Transaction Documents, including using reasonable efforts to
obtain the Consents.
10.5 TRANSACTION EXPENSES. Purchaser will be responsible for all costs and
expenses incurred by Purchaser in connection with the negotiation, preparation
and entry into the Transaction Documents and the consummation of the
transactions to be consummated pursuant to the Transaction Documents; provided
that if Seller or Bronken terminates this Agreement or fails to proceed toward
the Closing in good faith, Seller will reimburse Purchaser for all such costs
and expenses. In addition, Purchaser will pay all transfer, sales and use Taxes
imposed by reason of the transactions contemplated by this Agreement. Seller
will pay all other costs and expenses incurred by Seller in connection with the
negotiation, preparation and entry into the Transaction Documents, the audit of
the Sellers' financial statements for periods ending on or prior to the Closing,
and the consummation of the transactions to be consummated pursuant to the
Transaction Documents.
10.6 SPECIAL LEASING ARRANGEMENT. At the Closing, Seller and Purchaser shall
enter into a real estate lease substantially in the form of Exhibit C attached
hereto.
10.7 PREPAYMENT OF CERTAIN OBLIGATIONS. Within 30 days after the Closing Date,
Seller or Bronken shall prepay all other third party Indebtedness for borrowed
money secured by any of the Acquired Assets and all accounts payable relating to
the Acquired Assets. Within 90 days after the Closing Date, Bronken or Seller
shall have secured complete releases of all security interests third parties may
have in any of the Acquired Assets (the "Lien Releases") and provided to
Purchaser, at Seller's or Bronken's sole cost and expense, evidence satisfactory
to Purchaser of the Lien Releases.
10.8 NONSOLICITATION.
(a) Nonsolicitation. For the period commencing on the Closing Date and ending
on the third anniversary of the Closing Date, Bronken shall not directly or
indirectly through another entity (i) induce or attempt to induce any employee
of Seller or any of its Affiliates to leave the employ of Seller or such
Affiliate, or in any way interfere with the relationship between Seller or any
such Affiliate and any employee thereof, (ii) hire any person who was an
employee of Seller or any of its Affiliates at any time after the date which is
one year prior to the Closing Date, or (iii) induce or attempt to induce any
customer, supplier, licensee or other business relation of Seller or any of its
Affiliates to cease doing business with Seller or such Affiliate, or in any way
interfere with the relationship between any such customer, supplier, licensee or
business relation and Seller or any of its Affiliates.
(b) Enforcement. If, at the time of enforcement of Section 10.8, a court
holds that the restrictions stated herein are unreasonable under circumstances
then existing, the Parties agree that the maximum duration, scope or
geographical area reasonable under such circumstances shall be substituted for
the stated period, scope or area and that the court shall be allowed to revise
the restrictions contained herein to cover the maximum duration, scope and area
permitted by law. Because Bronken has had access to Confidential Information,
the Parties agree that money damages would be an inadequate remedy for any
breach of this Section 10.8. Therefore, in the event of a breach or
32
<PAGE>
threatened breach of this Section 10.8, Purchaser or its successors or assigns
may, in addition to other rights and remedies existing in their favor, apply to
any court of competent jurisdiction for specific performance and/or injunctive
or other relief in order to enforce, or prevent any violations of, the
provisions of this Section 10.8 (without posting a bond or other security).
10.9 FURTHER ASSURANCES. From and after the Closing, Seller will execute all
documents and take any other action which it is reasonably requested to execute
or take to further effectuate the transactions contemplated by the Transaction
Documents.
10.10 ANNOUNCEMENTS. Prior to the Closing, Purchaser will not make any public
announcement of or regarding the transactions contemplated by this Agreement
without the prior approval of Seller as to the timing and content of such
announcement (which approval Seller may not unreasonably withhold or delay).
Neither Seller nor Bronken will make any public announcement of or regarding the
transactions contemplated by this Agreement without the prior approval of
Purchaser as to the timing and content of such announcement (which approval
Purchaser may not unreasonably withhold or delay).
10.11 EMPLOYEES.
(a) Seller has provided Purchaser with a true, correct and complete list of
all of Seller's employees indicating the rate of pay of each such employee
during the twelve months preceding the date hereof and the location of such
employee. Seller shall pay all amounts of wages, bonuses and other remuneration
(including, without limitation, discretionary benefits and bonuses) payable to
such employees with respect to the period ending on the day prior to the Closing
Date, together with any worker's compensation claims or amounts payable on an
ongoing basis to such employees in connection with events occurring prior to the
Closing Date.
(b) Purchaser will offer employment to all Persons employed as of the Closing
Date (the "Continuing Employees") on terms and conditions which are in the
aggregate substantially equivalent to those applicable to such Persons'
employment with Seller as of the Closing Date. Nothing in this Section 10.11
shall obligate Purchaser to continue to employ any Continuing Employee for any
period of time.
(c) Seller will be responsible for and shall pay to the Continuing Employees
within 30 days following the Closing Date all vacation pay, sick leave pay and
floating holiday pay earned or accrued by the Continuing Employees as of the
close of business on the Closing Date, including any related payroll burden
(FICA and other employment taxes) with respect thereto, whether or not such pay
is vested or has been accrued on the books of Seller at such close of business,
based upon the remuneration of such Continuing Employees, normally used in
computing such vacation pay, sick leave pay and floating holiday pay and (ii) to
the appropriate Continuing Employee, all severance payments (if any) due to
Continuing Employees as a result of the termination of their employment with
Seller.
(d) Seller has provided Purchaser with a true, correct and complete list of
all Continuing Employees employed by Seller indicating the amount of each such
Continuing Employee's severance payments (if any) and earned or accrued vacation
pay, sick leave pay and floating holiday pay.
10.12 EMPLOYEE BENEFIT PLANS. Seller shall be responsible for and shall pay,
all obligations to employees as they come due under any and all Plans or any
fringe benefit arrangements at any time maintained by Seller.
10.13 NECESSARY THIRD PARTY CONSENTS. Anything contained in this Agreement to
the contrary notwithstanding, this Agreement shall not constitute an agreement
to transfer or assign any right, title or interest in, to or under any contract,
license, lease, commitment, sales order, purchase order or other agreement, nor
any claim or right or any benefit arising thereunder or resulting therefrom, if
(i) an attempted transfer or assignment thereof, without the consent of a third
party thereto, would constitute a breach thereof or in any way adversely affect
the rights of Purchaser or Seller or any of their respective Affiliates
thereunder and (ii) such consent is not obtained (the "Unassignable Contracts").
Seller shall use all reasonable efforts to obtain the consent of all necessary
third parties
33
<PAGE>
to the transfer or assignment to Purchaser pursuant to this Agreement of all
Unassignable Contracts. With respect to each Unassignable Contract, until
consent to assign such contract is obtained, or in the event such consent is
never obtained, Seller and Purchaser shall cooperate in any reasonable
arrangements designed to provide for Purchaser, to the maximum extent possible,
the benefits thereunder, including, without limitation, enforcement for the
benefit of Purchaser of any and all rights of Seller against such third party
arising out of cancellation by such third party or otherwise.
ARTICLE 11
OTHER AGREEMENTS
11.1 TERMINATION. This Agreement may be terminated:
(a) at any time prior to the Closing by mutual agreement of Purchaser and
Seller,
(b) by Purchaser, at any time when any Party other than Purchaser is in breach
of any of its material obligations pursuant to this Agreement or if any
representation or warranty of any Party other than Purchaser is false or
misleading in any material respect (provided that such condition is not the
result of any breach of any covenant, representation or warranty of Purchaser
set forth in any Transaction Document),
(c) by Seller, at any time when Purchaser is in breach of any of its material
obligations pursuant to this Agreement or if any representation or warranty of
Purchaser is false or misleading in any material respect (provided that such
condition is not the result of any breach of any covenant, representation or
warranty of a Party other than Purchaser set forth in any Transaction Document),
or
(d) by Purchaser or Seller, at any time after 60 days from the date hereof, if
the Closing has not then occurred.
Any termination of this Agreement pursuant to any of clauses 11.1(b) through
(d) will be effected by written notice from the terminating Party to Purchaser
(if Seller is the terminating Party) or Seller (if Purchaser is the terminating
Party). Any termination of this Agreement pursuant to clause 11.1(b) or (c)
will not terminate the liability of any Party for any breach or default of any
representation, warranty, covenant or other agreement set forth in any
Transaction Document which exists at the time of such termination.
11.2 REMEDIES. No failure to exercise, and no delay in exercising, any right,
remedy, power or privilege under this Agreement by any Party will operate as a
waiver of such right, remedy, power or privilege, nor will any single or partial
exercise of any right, remedy, power or privilege under this Agreement preclude
any other or further exercise of such right, remedy, power or privilege or the
exercise of any other right, remedy, power or privilege. The rights, remedies,
powers and privileges provided pursuant to this Agreement are cumulative and not
exhaustive of any other rights, remedies, powers and privileges which may be
provided by law.
11.3 CONSENT TO AMENDMENTS. No waiver, amendment, modification or supplement
of this Agreement will be binding upon any Party unless such waiver, amendment,
modification or supplement is set forth in writing and is executed by such
Party. No other course of dealing between or among any of the Parties or any
delay in exercising any rights pursuant to this Agreement will operate as a
waiver of any rights of any Party.
34
<PAGE>
11.4 SUCCESSORS AND ASSIGNS. Except as otherwise expressly provided in this
Agreement, all covenants and agreements set forth in this Agreement by or on
behalf of the Parties will bind and inure to the benefit of the respective
successors and assigns of the Parties, whether so expressed or not, except that
neither this Agreement nor any of the rights, interests or obligations hereunder
may be assigned by Seller without Purchaser's prior written consent. Purchaser
may (at any time prior to the Closing) at its sole discretion, in whole or in
part assign its rights and delegate its obligations pursuant to this Agreement,
including the right to purchase the Acquired Assets and the obligation to assume
the Assumed Liabilities to one or more of its Affiliates, and Purchaser may, at
its sole discretion, direct Seller to convey the Acquired Assets, in whole or in
part, to one or more of Purchaser's Affiliates. Furthermore, Purchaser may
assign its rights under this Agreement for collateral security purposes to any
lenders providing financing to Purchaser or any of its Affiliates.
11.5 GOVERNING LAW. This Agreement will be governed by and construed in
accordance with the domestic laws of the State of Nevada, without giving effect
to any choice of law or conflict provision or rule (whether of the State of
Nevada or any other jurisdiction) that would cause the laws of any jurisdiction
other than the State of Nevada to be applied. In furtherance of the foregoing,
the internal law of the State of Nevada will control the interpretation and
construction of this Agreement, even if under such jurisdiction's choice of law
or conflict of law analysis, the substantive law of some other jurisdiction
would ordinarily apply.
11.6 NOTICES. All demands, notices, communications and reports provided for
in this Agreement will be in writing and will be either personally delivered,
mailed by first class mail (postage prepaid) or sent by reputable overnight
courier service (delivery charges prepaid) to any Party at the address specified
below, or at such address, to the attention of such other Person, and with such
other copy, as the recipient party has specified by prior written notice to the
sending Party pursuant to the provisions of this Section 11.6.
If to Seller or Bronken:
Before the Closing:
BAT Rentals, Inc.
2771 South Industrial Road
Las Vegas, Nevada 89109
Attn: Paul Bronken
After the Closing:
c/o Paul Bronken
1066 Vegas Valley Drive
Las Vegas, Nevada 89109
with a copy, which will not constitute
notice to Seller or Bronken, to:
Clark, Greene & Associates, Ltd.
3770 Howard Hughes Parkway, Suite #195
Las Vegas, Nevada 89109
Attn: Thomas L. Roberts
If to Purchaser:
BAT Acquisition Corp.
c/o National Equipment Services, Inc.
6100 Sears Tower
Chicago, Illinois 60606
Attn: Kevin P. Rodgers
35
<PAGE>
with a copy, which will not constitute notice to Purchaser, to:
Kirkland & Ellis
200 East Randolph Drive
Chicago, Illinois 60601
Attn: Sanford E. Perl
Any such demand, notice, communication or report will be deemed to have been
given pursuant to this Agreement when delivered personally, on the third
business day after deposit in the U.S. mail or on the business day after deposit
with a reputable overnight courier service, as the case may be.
11.7 SEVERABILITY OF PROVISIONS. If any covenant, agreement, provision or
term of this Agreement is held to be invalid for any reason whatsoever, then
such covenant, agreement, provision or term will be deemed severable from the
remaining covenants, agreements, provisions and terms of this Agreement and will
in no way affect the validity or enforceability of any other provision of this
Agreement.
11.8 SCHEDULES AND EXHIBITS. The Schedules and Exhibits constitute a part of
this Agreement and are incorporated into this Agreement for all purposes.
11.9 COUNTERPARTS. The Parties may execute this Agreement in two or more
counterparts (no one of which need contain the signatures of all Parties), each
of which will be an original and all of which together will constitute one and
the same instrument.
11.10 NO THIRD-PARTY BENEFICIARIES. Except as otherwise expressly provided in
this Agreement, no Person which is not a Party will have any right or obligation
pursuant to this Agreement.
11.11 HEADINGS. The headings used in this Agreement are for the purpose of
reference only and will not affect the meaning or interpretation of any
provision of this Agreement.
11.12 MERGER AND INTEGRATION. Except as otherwise provided in this Agreement,
this Agreement sets forth the entire understanding of the Parties relating to
the subject matter hereof, and all prior understandings, whether written or oral
are superseded by this Agreement.
11.13 ALLOCATION OF PURCHASE PRICE. The allocation of the Purchase Price
among the Acquired Assets, as mutually agreed to by Seller and Purchaser
pursuant to Section 9.1(m) and Section 9.2(f), shall be made in accordance with
Section 1060 of the Code and applicable Treasury Regulations thereunder. The
fair market value of the Acquired Assets shall be determined jointly by
Purchaser and Seller reasonably and in good faith, and such determination shall
be used by the parties in allocating the Purchase Price and in preparing (a)
Form 8594, Asset Acquisition Statement, for each of Purchaser and Seller, and
(b) all Tax Returns. Each of Purchaser and Seller shall file Form 8594,
prepared in accordance with this Section, with its federal income Tax Return for
its Tax period including the Closing Date.
11.14 CONSTRUCTION. Where specific language is used to clarify by example a
general statement contained herein, such specific language shall not be deemed
to modify, limit or restrict in any manner the construction of the general
statement to which it relates. The language used in this Agreement and in all
Exhibits and other documents related hereto shall be deemed to be the language
chosen by the Parties to express their mutual intent, and no rule of strict
construction shall be applied against any Party.
36
<PAGE>
IN WITNESS WHEREOF, the Parties have executed this Asset Purchase Agreement as
of the date first written above.
PURCHASER:
BAT ACQUISITION CORP.
By: /s/ Kevin Rodgers
-----------------------------------
Its: CEO
SELLER:
BAT RENTALS, INC.
By: /s/ Paul B. Bronken
-----------------------------------
Its: President
/s/ Paul B. Bronken
---------------------------------------
Paul B. Bronken
37
<PAGE>
EXHIBIT 10.19
ASSET PURCHASE AGREEMENT
BY AND AMONG
NES ACQUISITION CORP.
(THE "PURCHASER"),
SPRINT INDUSTRIAL SERVICES, INC.
(THE "SELLER")
AND
THE STOCKHOLDERS OF THE SELLER
(THE "STOCKHOLDERS")
Dated as of July 1, 1997
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
ARTICLE 1
<S> <C>
DEFINITIONS............................................................. 1
1.1 Definitions....................................................... 1
1.2 Other Definitional Provisions..................................... 6
1.3 Cross Reference of Other Definitions.............................. 6
ARTICLE 2
PURCHASE AND SALE; ASSUMPTION OF CERTAIN LIABILITIES; CLOSING........... 8
2.1 Purchase and Sale of Sprintank Division Assets.................... 8
2.2 The Closing....................................................... 12
2.3 Post Closing Purchase Price Adjustment............................ 12
2.4 Accounts Receivable Adjustment.................................... 14
2.5 Distribution of Holdbacks......................................... 16
ARTICLE 3
TRANSITIONAL ARRANGEMENTS............................................... 16
3.1 Seller's Use of Names.............................................. 16
ARTICLE 4
CONFIDENTIALITY......................................................... 17
4.1 Confidentiality Obligations of the Seller.......................... 17
4.2 Confidentiality Obligations of the Purchaser....................... 17
ARTICLE 5
REPRESENTATIONS AND WARRANTIES OF THE PURCHASER......................... 18
5.1 Organization of the Purchaser...................................... 18
5.2 Authorization; Binding Effect; No Breach........................... 18
5.3 Brokerage.......................................................... 19
5.4 Disclosure......................................................... 19
5.5 Accuracy on Closing Date........................................... 19
ARTICLE 6
REPRESENTATIONS AND WARRANTIES OF THE SELLER AND STOCKHOLDERS........... 19
6.1 Organization and Corporate Power................................... 19
6.2 Capital Stock and Related Matters.................................. 20
6.3 Authorization; Binding Effect; No Breach........................... 20
6.4 Subsidiaries; Investments.......................................... 20
6.5 Financial Statements and Related Matters........................... 21
6.6 Absence of Undisclosed Liabilities................................. 21
6.7 Acquired Assets.................................................... 22
6.8 Absence of Certain Developments.................................... 22
6.9 Tax Matters........................................................ 24
6.10 Contracts and Commitments.......................................... 24
6.11 Proprietary Rights................................................. 27
6.12 Certain Litigation................................................. 28
6.13 Brokerage.......................................................... 28
6.14 Insurance.......................................................... 28
6.15 Employees.......................................................... 28
6.16 ERISA.............................................................. 29
6.17 Real Estate........................................................ 30
6.18 Compliance with Laws............................................... 32
6.19 Disclosure......................................................... 34
6.20 Accuracy on Closing Date........................................... 34
ARTICLE 7
ACCESS TO RECORDS....................................................... 34
7.1 Access to Records.................................................. 34
</TABLE>
1
<PAGE>
<TABLE>
<CAPTION>
ARTICLE 8
<S> <C>
SURVIVAL AND INDEMNIFICATION.......................................................................... 35
8.1 Survival of Representations and Warranties.................................................... 35
8.2 Indemnification Obligations of the Seller and the Stockholders................................ 35
8.3 Indemnification Obligations of the Purchaser.................................................. 36
8.4 Indemnification Procedures.................................................................... 36
8.5 Limitations on Indemnification Obligations.................................................... 37
8.6 Payment....................................................................................... 37
8.7 Exclusive Remedies............................................................................ 38
ARTICLE 9
CONDITIONS TO THE CLOSING............................................................................. 38
9.1 Conditions of the Purchaser's Obligation...................................................... 38
9.2 Conditions of the Seller's Obligation......................................................... 40
ARTICLE 10
OTHER COVENANTS....................................................................................... 42
10.1 Interim Agreements of the Seller and the Stockholders......................................... 42
10.2 Exclusivity................................................................................... 44
10.3 Interim Agreements of the Purchaser........................................................... 45
10.4 Additional Interim Agreements................................................................. 45
10.5 Transaction Expenses.......................................................................... 45
10.6 Special Leasing Arrangements.................................................................. 46
10.7 Employment and Consulting Agreements.......................................................... 46
10.8 Prepayment of Certain Indebtedness............................................................ 46
10.9 Noncompetition and Nonsolicitation............................................................ 47
10.10 Further Assurances............................................................................ 48
10.11 Announcements................................................................................. 48
10.12 Employees..................................................................................... 48
10.13 Employee Benefit Plans........................................................................ 49
10.14 Payment of Account Payable and Accrued Expenses............................................... 49
ARTICLE 11
OTHER AGREEMENTS...................................................................................... 50
11.1 Termination................................................................................... 50
11.2 Remedies...................................................................................... 50
11.3 Consent to Amendments......................................................................... 51
11.4 Successors and Assigns........................................................................ 51
11.5 Governing Law................................................................................. 51
11.6 Notices....................................................................................... 51
11.7 Severability of Provisions.................................................................... 52
11.8 Schedules and Exhibits........................................................................ 53
11.9 Counterparts.................................................................................. 53
11.10 No Third-Party Beneficiaries.................................................................. 53
11.11 Headings...................................................................................... 53
11.12 Merger and Integration........................................................................ 53
11.13 Allocation of Purchase Price.................................................................. 53
11.14 Bulk Sales Law................................................................................ 53
</TABLE>
<TABLE>
<CAPTION>
EXHIBITS
<S> <C>
Exhibit A-1 - Form of Opinion of Seller's Counsel
Exhibit A-2 - Form of Opinion of Purchaser's Counsel
Exhibit B-1 - Form of Real Estate Lease for Corpus Christi Facility
Exhibit B-2 - Form of Real Estate Lease for Baton Rouge Facility
Exhibit B-3 - Form of Real Estate Lease for 1041 Conrad Sauer, Houston, Texas
Exhibit C-1 - Form of Employment Agreement with Jim O'Neil
Exhibit C-2 - Form of Employment Agreement with Sammy Sorsby
Exhibit C-3 - Form of Employment Agreement with J. D. Cox
Exhibit D - Form of Consulting Agreement with Joseph B. Swinbank
Exhibit E - Form of Noncompetition Agreement
</TABLE>
2
<PAGE>
PURCHASER'S DISCLOSURE SCHEDULES
Purchaser's Organization Schedule
SELLER'S DISCLOSURE SCHEDULES
Affiliated Transactions Schedule
Assets Schedule
Brokerage Schedule
Capitalization Schedule
Compliance Schedule
Consents Schedule
Developments Schedule
Employee Benefits Schedule
Employees Schedule
Environmental Matters Schedule
Excluded Assets Schedule
Insurance Schedule
Liabilities Schedule
Litigation Schedule
Organization Schedule
Permits Schedule
Permitted Liens Schedule
Proprietary Rights Schedule
Real Estate Schedule
Sprintank Contracts Schedule
Taxes Schedule
3
<PAGE>
ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT is made as of July 1, 1997, by and among NES
ACQUISITION CORP., a Delaware corporation (the "Purchaser"), SPRINT INDUSTRIAL
SERVICES, INC., a Texas corporation (the "Seller") and JOSEPH B. SWINBANK and
DONALD L. POARCH, the sole stockholders of the Seller (the "Stockholders"). The
Purchaser, the Seller and the Stockholders are collectively referred to herein
as the "Parties."
WHEREAS, upon the terms and subject to the conditions set forth in this
Agreement, the Purchaser desires to acquire from the Seller, and the Seller
desires to sell to the Purchaser, substantially all of the Seller's assets which
relate to the Seller's SPRINTANK division (the "Sprintank Division") (subject to
certain of the Sprintank Division's liabilities as specifically provided
herein), which assets include, among other things, substantially all of the
Seller's assets which relate to the Seller's tank and mobile storage business.
NOW, THEREFORE, the Parties agree as follows:
ARTICLE 1
DEFINITIONS
1.1 DEFINITIONS. For purposes hereof, the following terms, when used herein
with initial capital letters, shall have the respective meanings set forth
herein:
"Affiliate" of any Person means any other Person controlling, controlled by or
under common control with such first Person.
"Agreement" means this Asset Purchase Agreement, including all Exhibits and
Schedules hereto, as it may be amended from time to time in accordance with its
terms.
"Books and Records" means all lists, records and other information pertaining
to accounts, personnel and referral sources of the Seller, all lists and records
pertaining to suppliers and customers of the Seller, and all other books,
ledgers, files and business records of every kind relating or pertaining to the
Sprintank Division, in each case whether evidenced in writing, electronically
(including by computer) or otherwise.
"Code" means the United States Internal Revenue Code of 1986, as amended.
"Environmental Affiliates" of any Person means, with respect to any particular
matter, all other Persons whose liabilities or obligations with respect to that
particular matter have been assumed by, or are otherwise deemed by law to be
those of, such first Person.
"Environmental and Safety Requirements" means all federal, state, local and
foreign statutes, regulations, ordinances and similar provisions having the
force or effect of law, all judicial and administrative orders and
determinations, all contractual obligations and all common law concerning public
health and safety, worker health and safety and pollution or protection of the
environment, including all such standards of conduct relating to the presence,
use, production, generation, handling, transport, treatment, storage, disposal,
distribution, labeling, testing, processing, discharge, release, threatened
release, control, or cleanup of any hazardous materials, substances or wastes,
chemical substances or mixtures, pesticides, pollutants, contaminants, toxic
chemicals, petroleum products or by-products, asbestos, polychlorinated
biphenyls (or PCBs), noise or radiation.
"Environmental Lien" means any Lien, whether recorded or unrecorded, in favor
of any Government Entity relating to any liability of the Seller or any
Environmental Affiliate of the Seller arising under any Environmental and Safety
Requirement.
"ERISA" means the Employee Retirement Income Security Act of 1974, as amended.
4
<PAGE>
"GAAP" means, at a given time, United States generally accepted accounting
principles, consistently applied.
"Government Entity" means the United States of America or any other nation,
any state or other political subdivision thereof, or any entity exercising
executive, legislative, judicial, regulatory or administrative functions of
government.
"Indebtedness" of any Person means, without duplication: (a) indebtedness for
borrowed money or for the deferred purchase price of property or services in
respect of which such Person is liable, contingently or otherwise, as obligor or
otherwise and any commitment by which such Person assures a creditor against
loss, including contingent reimbursement obligations with respect to letters of
credit (other than trade payables and other current liabilities incurred in the
ordinary course of business); (b) indebtedness guaranteed in any manner by such
Person, including a guarantee in the form of an agreement to repurchase or
reimburse; (c) obligations under capitalized leases in respect of which such
Person is liable, contingently or otherwise, as obligor, guarantor or otherwise,
or in respect of which obligations such Person assures a creditor against loss;
and (d) any unsatisfied obligation of such Person for "withdrawal liability" to
a "multiemployer plan," as such terms are defined under ERISA.
"Investment" means, with respect to any Person, any direct or indirect
purchase or other acquisition by such Person of any notes, obligations,
instruments, stock, securities or other ownership or beneficial interest
(including partnership interests and joint venture interests) of any other
Person, and any capital contribution by such Person to any other Person.
"Knowledge" means, with respect to a Person, (a) the actual knowledge of a
director or senior executive officer of such Person and (b) the knowledge which
any such director or senior executive officer of such Person would have obtained
after making reasonable inquiry with respect to the particular matter in
question.
"Legal Requirement" means any requirement arising under any action, law,
treaty, rule or regulation, determination or direction of an arbitrator or
Government Entity, including any Environmental and Safety Requirement.
"Lien" means any mortgage, pledge, security interest, encumbrance, easement,
restriction, charge, or other lien.
"Loss" means, with respect to any Person, any diminution in value,
consequential or other damage, liability, demand, claim, action, cause of
action, cost, damage, deficiency, Tax, penalty, fine or other loss or expense,
whether or not arising out of a third party claim, including all interest,
penalties, reasonable attorneys' fees and expenses and all amounts paid or
incurred in connection with any action, demand, proceeding, investigation or
claim by any third party (including any Government Entity) against or affecting
such Person or which, if determined adversely to such Person, would give rise
to, evidence the existence of, or relate to, any other Loss and the
investigation, defense or settlement of any of the foregoing, together with
interest thereon from the later of (i) the date such Loss is actually paid (it
being understood and agreed that for purposes of this clause (i), any claim not
involving the actual expenditure of funds cannot be "paid"), and (ii) thirty
(30) days after the date on which such Person provides the written notice of the
related claim as described in Section 8.4 through and including the date on
which the total amount of the claim, including such interest, is recovered or
recouped pursuant to Article 8.
"Officer's Certificate" of any Person means a certificate signed by such
Person's president or chief financial officer (or an individual having
comparable responsibilities with respect to such Person) stating that (a) the
individual signing such certificate has made or has caused to be made such
investigations as are necessary and reasonable under the circumstances in order
to permit such individual to verify the accuracy of the information set forth in
such certificate and (b) such certificate does not misstate any material fact
and does not omit to state any fact necessary to make the facts stated therein
not misleading.
"Person" means an individual, a partnership, a corporation, an association, a
limited liability company, a joint stock company, a trust, a joint venture, an
unincorporated organization, a governmental entity or any department, agency or
political subdivision thereof and any other entity.
5
<PAGE>
"Permitted Liens" means (a) the leases of Sprintank Division equipment by the
Seller to customers of the Sprintank Division in the ordinary course of the
Sprintank Division's business and (b) the Liens listed on the attached Permitted
Liens Schedule, which will not be released at or prior to Closing.
"Proprietary Rights" means, with respect to the Seller, all of the following
owned by, issued to or licensed to the Seller and which relate to the Sprintank
Division: (a) all inventions (whether patentable or unpatentable and whether or
not reduced to practice), all improvements thereto, and all patents, patent
applications, and patent disclosures, together with all reissuances,
continuations, continuations-in-part, revisions, extensions, and reexaminations
thereof; (b) the names "Sprintank" and "Sprint Mobile Storage" and all
trademarks, service marks, trade dress, logos, trade names, associated with such
names, together with all translations, adaptations, derivations, and
combinations thereof and including all goodwill associated therewith, and all
applications, registrations, and renewals in connection therewith; (c) all
copyrightable works (including, without limitation, all software developed by
the Seller for use in the Business), all copyrights, and all applications,
registrations, and renewals in connection therewith; (d) all mask works and all
applications, registrations, and renewals in connection therewith; (e) all trade
secrets and confidential business information (including ideas, research and
development, know-how, formulas, compositions, manufacturing and production
processes and techniques, technical data, designs, drawings, specifications,
customer and supplier lists, pricing and cost information, and business and
marketing plans and proposals); (f) all computer software (including data and
related documentation); (g) all other proprietary rights; and (h) all copies and
tangible embodiments thereof (in whatever form or medium); provided, however,
that Proprietary Rights shall not include the name "Sprint" except when used as
part of "Sprintank" or "Sprint Mobile Storage" or any names confusingly similar
to "Sprintank" or "Sprint Mobile Storage" when such confusingly similar names
are used in connection with businesses the same as or substantially similar to
the Sprintank Business.
"Sprintank Business" means the business of the Sprintank Division as now
conducted.
"Sprintank Fixed Asset Amount" means (a) the book value of the Sprintank
Division's fixed assets determined in accordance with GAAP, applied on a basis
consistent with the Latest Balance Sheet (to the extent the Latest Balance Sheet
was prepared in accordance with GAAP), minus (b) the book value, determined in
accordance with GAAP, applied on a basis consistent with the Latest Balance
Sheet (to the extent the Latest Balance Sheet was prepared in accordance with
GAAP), of the Seller's (i) land and buildings in Corpus Christi, Texas, (ii)
land in Baton Rouge, Louisiana, (iii) furniture, fixtures, shop equipment and
office equipment located at 1041 Conrad Sauer, Houston, Texas, and (iv) assets
listed on the attached Excluded Assets Schedule; provided that in any event, for
purposes of this definition, no depreciation deductions will be taken against
any of the Sprintank Division's fixed assets for any period after December 31,
1996.
"Sprintank Inventory Amount" means the cost basis of the Sprintank Division's
parts and supply inventory.
"Sprintank Prepaid Expenses Amount" means the book value of the Sprintank
Division's prepaid expenses, determined in accordance with GAAP, applied on a
basis consistent with the Latest Balance Sheet (to the extent the Latest Balance
Sheet was prepared in accordance with GAAP); provided that in any event,
Sprintank Prepaid Expenses Amount shall only include those prepaid expenses the
benefits of which are useable by the Purchaser following the Closing.
"Subsidiary" means, with respect to any Person, any corporation a majority of
the total voting power of shares of stock of which is entitled (without regard
to the occurrence of any contingency) to vote in the election of directors,
managers or trustees thereof is at the time owned or controlled, directly or
indirectly, by that Person or one or more of the other Subsidiaries of that
Person or a combination thereof, or any partnership, association or other
business entity a majority of the partnership or other similar ownership
interest of which is at the time owned or controlled, directly or indirectly, by
that Person or one or more Subsidiaries of that Person or a combination thereof.
For purposes of this definition, a Person is deemed to have a majority ownership
interest in a partnership, association or other business entity if such Person
is allocated a majority of the gains or losses of such partnership, association
or other business entity or is or controls the managing director or general
partner of such partnership, association or other business entity.
6
<PAGE>
"Taxes" means any federal, state, local, or foreign income, gross receipts,
license, payroll, employment, excise, severance, stamp, occupation, premium,
windfall profits, environmental (including taxes imposed pursuant to Section 59A
of the Code), customs duties, capital stock, franchise, profits, withholding,
social security, unemployment, disability, real property, personal property,
sales, use, transfer, registration, value added, alternative or add-on minimum,
or other tax, fee, assessment or charge of any kind whatsoever, including any
interest, penalty, or addition thereto, whether disputed or not.
"Transaction Documents" means this Agreement, and all other agreements,
instruments, certificates and other documents to be entered into or delivered by
any Party in connection with the transactions contemplated to be consummated
pursuant to any of the foregoing.
"Treasury Regulations" means the United States Treasury Regulations
promulgated pursuant to the Code.
1.2 OTHER DEFINITIONAL PROVISIONS.
(a) Accounting Terms. Accounting terms which are not otherwise defined in
this Agreement have the meanings given to them under GAAP. To the extent that
the definition of accounting term that is defined in this Agreement is
inconsistent with the meaning of such term under GAAP, the definition set forth
in this Agreement will control.
(b) "Hereof," etc. The terms "hereof," "herein" and "hereunder" and terms of
similar import are references to this Agreement as a whole and not to any
particular provision of this Agreement. Section, clause, Schedule and Exhibit
references contained in this Agreement are references to Sections, clauses,
Schedules and Exhibits in or to this Agreement, unless otherwise specified.
(c) Successor Laws. Any reference to any particular Code section or any other
law or regulation will be interpreted to include any revision of or successor to
that section regardless of how it is numbered or classified.
1.3 CROSS REFERENCE OF OTHER DEFINITIONS. Each capitalized term listed below
is defined in the corresponding Section of this Agreement:
7
<PAGE>
<TABLE>
<CAPTION>
Term Section
- ---- -------
<S> <C>
Actual Sprintank Fixed Asset Amount...................... 2.3 (a)
Actual Sprintank Inventory Amount........................ 2.3 (a)
Actual Sprintank Prepaid Expenses Amount................. 2.3 (a)
Assumption............................................... 2.2 (c)
Closing.................................................. 2.2
Closing Accounts Receivable.............................. 2.4 (a)
Closing Accounts Receivable Amount....................... 2.4 (a)
Closing Date............................................. 2.2
Closing Review........................................... 2.3 (a)
Confidential Information................................. 4.1 (a)
Consents................................................. 9.1 (e)
Continuing Employees..................................... 10.12 (b)
Contracts................................................ 6.10 (b)
Controlled Group......................................... 6.16 (h)
Division Employees....................................... 10.12 (a)
Draft Computation........................................ 2.3 (a)
Employee Pension Plans................................... 6.16 (b)
Employee Welfare Plans................................... 6.16 (a)
Excess Collections....................................... 2.4 (b)
Financial Statements..................................... 6.5 (a)
Firm..................................................... 2.3 (a)
Holdback................................................. 2.1 (e)
Indemnification Claim Notice............................. 8.4 (a)
Indemnified Party........................................ 8.4 (a)
Indemnifying Party....................................... 8.4 (a)
Latest Balance Sheet..................................... 6.5 (a)
Leased Real Property..................................... 6.17 (b)
Leases................................................... 6.17 (b)
Multiemployer Plan....................................... 6.16 (c)
Noncompetition Period.................................... 10.9 (a)
Objection Notice......................................... 2.3 (a)
Other Plans.............................................. 6.16 (a)
Owned Real Property...................................... 6.17 (a)
Owned Real Property Leases............................... 10.6 (b)
Parties.................................................. Preface
PBGC..................................................... 6.16 (h)
Pending Claim............................................ 2.5
Plans.................................................... 6.16
Proceeding............................................... 8.4 (a)
Purchaser................................................ Preface
Purchaser Indemnitees.................................... 8.2
Remaining Holdback....................................... 2.5
Sale..................................................... 2.2 (a)
Seller................................................... Preface
Seller Confidential Information.......................... 4.2 (a)
Seller Employees......................................... 6.16 (a)
Seller Indemnitees....................................... 8.3
Sprintank Acquired Assets................................ 2.1 (a)
Sprintank Assumed Liabilities............................ 2.1 (c)
Sprintank Cash Purchase Price............................ 2.1 (e)
Sprintank Division....................................... Preface
Sprintank Excluded Assets................................ 2.1 (b)
Sprintank Excluded Liabilities........................... 2.1 (d)
Sprintank Purchase Price................................. 2.1 (e)
Stockholders............................................. Preface
Transition Period........................................ 10.13
Uncollected Receivables Amount........................... 2.4 (b)
</TABLE>
8
<PAGE>
ARTICLE 2
PURCHASE AND SALE; ASSUMPTION OF CERTAIN LIABILITIES; CLOSING
2.1 PURCHASE AND SALE OF SPRINTANK DIVISION ASSETS.
(a) Sprintank Acquired Assets. Upon the terms and subject to the conditions
set forth in this Agreement, at the Closing the Seller shall sell, assign,
transfer and deliver to the Purchaser free and clear of all Liens, and the
Purchaser shall purchase, all properties, assets, rights and interests of every
kind and nature, whether tangible or intangible, and wherever located and by
whomever possessed, owned by the Seller as of the Closing Date and relating to
the Sprintank Division, except as set forth in Section 2.1(b) below
(collectively, the "Sprintank Acquired Assets"), including, without limitation:
(i) all accounts receivables relating to the Sprintank Division
(whether current or noncurrent);
(ii) all Proprietary Rights, along with all income, royalties, damages
and payments due or payable as of the Closing or thereafter, including,
without limitation, damages and payments for past, present or future
infringements or misappropriations thereof, the right to sue and recover for
past infringements or misappropriations thereof and any and all corresponding
rights that, now or hereafter, may be secured throughout the world;
(iii) all of the Seller's rights existing under leases, contracts,
licenses, permits, distribution arrangements, sales and purchase agreements,
accounts receivable, other agreements and business arrangements, including,
without limitation, all contracts and agreements described on the Sprintank
Contracts Schedule attached hereto;
(iv) all leasehold interests in real estate, all leasehold improvements
and fixtures located thereon and all machinery, equipment (including all
transportation and office equipment), tools, dyes and furniture wherever
located, including, without limitation, all such items which are located in
any building, warehouse, office or other space leased, owned or occupied by
the Seller or used in connection with the Sprintank Division;
(v) all rental equipment of any kind, wherever located, rented by the
Seller to any Person as part of the Sprintank Business;
(vi) all inventories of work in process, semi-finished and finished
goods, stores, replacement and spare parts, packaging materials, operating
supplies, and fuels, wherever located;
(vii) all office supplies, production supplies, spare parts, other
miscellaneous supplies, and other tangible personal property of any kind
related to the Sprintank Division wherever located, including, without
limitation, all property of any kind located in any building, office or other
space leased, owned or occupied by the Seller or in any warehouse where any of
the Seller's properties and assets may be situated, other than furniture,
fixtures, and shop and office equipment located at 1041 Conrad Sauer, Houston,
Texas, and such other items as may be a Sprintank Excluded Asset;
(viii) all prepayments and prepaid expenses related to the Sprintank
Division which are included in the Sprintank Prepaid Expenses Amount;
(ix) all of the Seller's claims, causes of action, choses in action,
rights of recovery and rights of set-off of any kind relating to the Sprintank
Division;
(x) the right to receive and retain mail, accounts receivable payments
and other communications relating to the Sprintank Business;
(xi) the right to bill and receive payment for equipment leased,
products shipped or delivered and services performed but unbilled or unpaid as
of the Closing;
5
<PAGE>
(xii) all lists, records and other information pertaining to accounts,
personnel and referral sources, all lists and records pertaining to suppliers
and customers, and all books, ledgers, files and business records of every
kind, whether evidenced in writing, electronically (including, without
limitation, by computer) or otherwise;
(xiii) all advertising, marketing and promotional materials and all other
printed or written materials;
(xiv) all permits, licenses, certifications and approvals relating to
the Sprintank Business from all permitting, licensing, accrediting and
certifying agencies, and the rights to all data and records relating to the
Sprintank Business held by such permitting, licensing and certifying agencies;
(xv) all goodwill as a going concern and all other intangible
properties;
(xvi) all telephone numbers (e.g. "800" numbers) used by the Seller;
(xvii) the names "Sprintank" and "Sprint Mobile Storage" and any names
confusingly similar to "Sprintank" or "Sprint Mobile Storage" when such
confusingly similar names are used in connection with businesses the same as
or substantially similar to the Sprintank Business;
(xviii) all internet addresses, domain names and web sites, if any;
(xix) all cash received by the Seller as security deposits and as
payments for services or equipment to be provided after the Closing, if any,
in each case to the extent relating to the Sprintank Business; and
(xx) except as specified in Section 2.1(b) below, all other property
owned by the Seller, or in which it has an interest on the Closing Date,
relating to the Sprintank Division including, without limitation, all fixed
assets relating to the Sprintank Division included on the Latest Balance Sheet
and any and all subsequent improvements or additions thereon through the
Closing Date.
(b) Sprintank Excluded Assets. Notwithstanding Section 2.1(a) above, the
following assets relating to the Sprintank Division are expressly excluded from
the purchase and sale contemplated hereby and, as such, are not Sprintank
Acquired Assets (collectively, the "Sprintank Excluded Assets"):
(i) all cash (other than cash received by the Seller as security
deposits or as payments for services or equipment to be provided after the
Closing, if any, in each case to the extent relating to the Sprintank
Business), cash equivalents, bank accounts, investments, securities and
partnership interests, and all monies to be received by the Seller from the
Purchaser;
(ii) all rights of the Seller under this Agreement;
(iii) all qualifications to do business as a foreign corporation;
(iv) all arrangements with registered agents relating to foreign
qualifications;
(v) all taxpayer and other identification numbers;
(vi) all seals, minute books, stock transfer books, blank stock
certificates, and other documents relating to the organization, maintenance,
and existence of the Seller as a corporation;
(vii) the real property owned by the Seller in Corpus Christi, Texas and
Baton Rouge, Louisiana, and all plants, buildings, fixtures and other
improvements located on such property, and all easements, licenses, rights of
way, permits and all appurtenances to such property, including, without
limitation, all appurtenant rights in and to public streets, whether or not
vacated;
10
<PAGE>
(viii) the real property leased by Seller at 1041 Conrad Sauer, Houston,
Texas;
(ix) all furniture, fixtures, shop equipment and office equipment
located at 1041 Conrad Sauer, Houston, Texas;
(x) the name "Sprint" when used in tradenames or trademarks other than
"Sprintank," "Sprint Mobile Storage" or any names confusingly similar to
"Sprintank" or "Sprint Mobile Storage" when such confusingly similar names are
used in connection with businesses the same as or substantially similar to the
Sprintank Business;
(xi) all claims, causes of action, choses in action, rights of recovery
and rights of set-off to the extent any of the foregoing constitute defenses,
counterclaims or cross claims against any third parties with respect to
Sprintank Excluded Liabilities; and
(xii) the assets listed on the attached Excluded Assets Schedule.
(c) Sprintank Assumed Liabilities. Subject to Section 2.1(d) below, as
additional consideration for the Sprintank Acquired Assets, at the Closing the
Purchaser will assume all liabilities and obligations of the Seller pursuant to
executory contracts, orders and commitments covering the purchase of inventory
and/or supplies, the sale of merchandise or services or the lease of equipment
which are described on the attached Sprintank Contracts Schedule (including,
without limitation, the leases of Sprintank Division equipment by the Seller to
customers of the Sprintank Division in the ordinary course of the Sprintank
Division's business) (the "Sprintank Assumed Liabilities").
(d) Sprintank Excluded Liabilities. Except as set forth in Section 2.1(c)
above, the Purchaser shall not assume or become liable for, and shall not be
deemed to have assumed or have become liable for, any of the Seller's
liabilities or obligations not expressly assumed by the Purchaser pursuant to
Section 2.1(c) above, whether accrued, absolute or contingent, whether known or
unknown, whether disclosed or undisclosed, whether due or to become due and
whether related to the Sprintank Acquired Assets or otherwise, and regardless of
when asserted, including, without limitation, all Indebtedness, Taxes, accounts
payable, accrued expenses and loss contingencies (the "Sprintank Excluded
Liabilities"). The Seller hereby acknowledges that it is retaining the
Sprintank Excluded Liabilities and the Seller and the Stockholders jointly and
severally agree to promptly pay and discharge all such liabilities and
obligations when due.
(e) Purchase Price for Sprintank Acquired Assets. The purchase price for the
Sprintank Acquired Assets (the "Sprintank Purchase Price") will consist of the
assumption by the Purchaser of the Sprintank Assumed Liabilities and the payment
of an aggregate of $25,256,431, which shall be paid at the Closing as follows:
(i) the Purchaser shall deliver $24,756,431 in cash (the "Sprintank Cash
Purchase Price") and (ii) the Purchaser shall maintain $500,000 in a book entry
account of the Purchaser (the " Holdback"). The Holdback shall be available to
satisfy any amounts owing to the Purchaser pursuant to Section 2.3 (Post Closing
Purchase Price Adjustment), Section 2.4 (Accounts Receivable) and/or Section 8.2
(Indemnification).
2.2 THE CLOSING. The closing of the purchase and sale of the Sprintank
Acquired Asset, the assumption of the Sprintank Assumed Liabilities, and the
transactions relating thereto (the "Closing") will take place at the offices of
Kirkland & Ellis, 200 East Randolph Drive, Chicago, Illinois, at such other
place as is mutually agreeable to the Parties or at such place as is required by
the Purchaser's senior lenders, commencing at 10:00 a.m. local time on the date
hereof. The date and time of the Closing are herein referred to as the "Closing
Date." At the Closing, subject to the satisfaction or waiver of each of the
conditions specified in Sections 9.1 and 9.2 below:
(a) the Seller will convey to the Purchaser good and marketable title to all
of the Sprintank Acquired Assets free and clear of all Liens (other than
Permitted Liens), and deliver to the Purchaser bills of sale, assignments of
leases and contracts and all other instruments of conveyance which are necessary
or desirable to effect transfer of the Sprintank Acquired Assets (the "Sale");
11
<PAGE>
(b) the Purchaser will deliver to the Seller such instruments of assumption as
are required in order for the Purchaser to assume the Sprintank Assumed
Liabilities (the "Assumption");
(c) the Purchaser will deliver to the Seller (or, at the Seller's direction,
to lenders or other third parties) the Sprintank Cash Purchase Price by wire
transfer of immediately available funds; and
(d) there shall be delivered to the Purchaser and the Seller the opinions,
certificates and other documents and instruments provided to be delivered under
Article 9 hereof.
2.3 POST CLOSING PURCHASE PRICE ADJUSTMENT.
(a) Post-Closing Determination. Within 60 days after the Closing Date, the
Purchaser and its auditors will conduct a review (the "Closing Review") of (i)
the Sprintank Inventory Amount, (ii) the Sprintank Prepaid Expenses Amount and
(iii) the Sprintank Fixed Asset Amount, each as of the close of business on the
day before the Closing Date, and will prepare and deliver to the Seller a
computation of such amounts as of the close of business on the day before the
Closing Date (the "Draft Computation"). The Purchaser and its auditors will
give the Seller and its auditors an opportunity to observe the Closing Review
and will make available to such Persons all records and work papers used in
preparing the Draft Computation. If the Seller disagrees with the computation
of the Sprintank Inventory Amount, Sprintank Prepaid Expenses Amount and
Sprintank Fixed Asset Amount reflected on the Draft Computation, the Seller may,
within thirty (30) days after receipt of the Draft Computation, deliver a notice
(an "Objection Notice") to the Purchaser setting forth the Seller's calculation
of the amounts of the Sprintank Inventory Amount, Sprintank Prepaid Expenses
Amount and Sprintank Fixed Asset Amount as of the close of business on the day
before the Closing Date. The Purchaser and the Seller will use reasonable
efforts to resolve any disagreements as to the computation of the Sprintank
Inventory Amount, Sprintank Prepaid Expenses Amount and Sprintank Fixed Asset
Amount, but if they do not obtain a final resolution within 30 days after the
Purchaser has received the Objection Notice, the Purchaser and the Seller will
jointly retain an independent accounting firm of recognized national standing
(the "Firm") to resolve any remaining disagreements. If the Purchaser and the
Seller are unable to agree on the choice of the Firm, the Firm will be a "big-
six" accounting firm selected by lot (after excluding one firm designated by
each of the Purchaser and the Seller). The Purchaser and the Seller will direct
the Firm to render a determination within fifteen (15) days of its retention and
the Purchaser, the Seller and their respective agents will cooperate with the
Firm during its engagement. The Firm will consider only those items and amounts
in the Draft Computation set forth in the Objection Notice which the Purchaser
and the Seller are unable to resolve. The Firm's determination will be based on
the definitions of Sprintank Inventory Amount, Sprintank Prepaid Expenses Amount
and Sprintank Fixed Asset Amount included herein. The determination of the Firm
will be conclusive and binding upon the Purchaser and the Seller. The parties
shall bear the costs and expenses of the Firm based on the percentage which the
portion of the contested amount not awarded to each party bears to the amount
actually contested by such party. The amount of the Sprintank Inventory Amount,
as finally determined pursuant to this Section 2.3(a), is referred to herein as
the "Actual Sprintank Inventory Amount." The amount of the Sprintank Prepaid
Expenses Amount, as finally determined pursuant to this Section 2.3(a), is
referred to herein as the "Actual Sprintank Prepaid Expenses Amount." The
amount of the Sprintank Fixed Asset Amount, as finally determined pursuant to
this Section 2.3(a), is referred to herein as the "Actual Sprintank Fixed Asset
Amount."
(b) Post-Closing Adjustment.
(i) If the Actual Sprintank Fixed Asset Amount is greater than
$12,430,217, the Purchaser shall pay to the Seller, within two (2) business
days after determination thereof, the amount of such excess; provided that if
the Actual Sprintank Fixed Asset Amount is less than $12,430,217, the
Purchaser shall be entitled to receive from the Holdback, within two (2)
business days after the determination thereof, the amount of such shortfall
(provided, however, that if the Holdback is less than the amount of such
shortfall, the Seller shall pay to the Purchaser, within two (2) business days
after the determination of the Actual Sprintank Fixed Asset Amount, the amount
by which the Holdback is less than the amount of such shortfall) by wire
transfer or delivery of other immediately available funds. Such payment shall
be deemed to be an adjustment to the Sprintank Purchase Price.
12
<PAGE>
(ii) If the Actual Sprintank Prepaid Expenses Amount is greater than
$64,441, the Purchaser shall pay to the Seller, within two (2) business days
after determination thereof, the amount of such excess; provided that if the
Actual Sprintank Prepaid Expenses Amount is less than $64,441, the Purchaser
shall be entitled to receive from the Holdback, within two (2) business days
after the determination thereof, the amount of such shortfall (provided,
however, that if the Holdback is less than the amount of such shortfall, the
Seller shall pay to the Purchaser, within two (2) business days after the
determination of the Actual Sprintank Prepaid Expenses Amount, the amount by
which the Holdback is less than the amount of such shortfall) by wire transfer
or delivery of other immediately available funds. Such payment shall be
deemed to be an adjustment to the Sprintank Purchase Price.
(iii) If the Actual Sprintank Inventory Amount is less than $200,000, the
Purchaser shall be entitled to receive from the Holdback, within two (2)
business days after the determination thereof, the amount of such shortfall
(provided, however, that if the Holdback is less than the amount of such
shortfall, the Seller shall pay to the Purchaser, within two (2) business days
after the determination of the Actual Sprintank Inventory Amount, the amount
by which the Holdback is less than the amount of such shortfall) by wire
transfer or delivery of other immediately available funds. Such payment shall
be deemed to be an adjustment to the Sprintank Purchase Price.
2.4 ACCOUNTS RECEIVABLE ADJUSTMENT.
(a) Within ten (10) days after the Closing, the Seller and the Purchaser shall
jointly prepare a list of (i) the accounts receivable of the Seller relating to
the Sprintank Business in existence as of the Closing and (ii) all other amounts
owing to the Seller with respect to the Sprintank Business for services
previously rendered by the Seller which would have constituted accounts
receivable of the Seller if the Seller had billed such amounts prior to the
Closing (collectively, the "Closing Accounts Receivable"). The amount of such
listed Closing Accounts Receivable is referred to herein as the "Closing
Accounts Receivable Amount." If the Closing Accounts Receivable Amount is
greater than $2,225,773, the Sprintank Purchase Price shall be increased by the
amount of such excess and the Purchaser shall pay such excess to the Seller on
or before the fifteenth (15th) day following the Closing. If the Closing
Accounts Receivable Amount is less than $2,225,773, the Sprintank Purchase Price
shall be decreased by the amount of such shortfall and the Seller shall pay such
shortfall to the Purchaser on or before the fifteenth (15th) day following the
Closing. Such payment shall be made by wire transfer or delivery of other
immediately available funds and shall be deemed to be an adjustment to the
Sprintank Purchase Price.
(b) If collections by the Purchaser with respect to the Closing Accounts
Receivable during the 90-day period between the Closing Date and the 90th day
following the Closing Date are less than the Closing Accounts Receivable Amount
(such deficit is the "Uncollected Receivables Amount"), the Purchaser shall be
entitled to receive from the Holdback, within two (2) business days after the
determination thereof, an amount equal to the Uncollected Receivables Amount;
provided, however, that if the Holdback is less than the Uncollected Receivables
Amount, the Seller shall pay to the Purchaser, within two (2) business days
after the determination of the Uncollected Receivables Amount, the amount by
which the Holdback is less than the Uncollected Receivables Amount by wire
transfer or delivery of other immediately available funds; provided that if
collections by the Purchaser with respect to the Closing Accounts Receivable
during the 90-day period between the Closing Date and the 90th day following the
Closing Date are greater than the Closing Accounts Receivable Amount (such
excess is the "Excess Collections"), the Purchaser shall pay to the Seller,
within two (2) business days after the determination of the Excess Collections,
an amount equal to the Excess Collections by wire transfer or delivery of other
immediately available funds. Such payment shall be deemed to be an adjustment
to the Sprintank Purchase Price.
(c) The Purchaser agrees to use commercially reasonable efforts to collect all
of the Closing Accounts Receivable. The Purchaser shall furnish the Seller with
all such records and other information as the Seller may reasonably require to
verify the amounts collected by the Purchaser with respect to the Closing
Accounts Receivable. For the purpose of determining amounts collected by the
Purchaser with respect to the Closing Accounts Receivable, (i) in the absence of
a bona fide dispute between an account debtor and the Purchaser regarding
receivables of such account debtor accrued prior to the Closing Date, all
payments by an account debtor shall first be applied to the oldest outstanding
invoice due from that account debtor, and (ii) in the case of a dispute
13
<PAGE>
between the Purchaser and an account debtor with respect to a particular
invoice, all payments shall be first applied to the next oldest invoice due from
that account debtor. The Purchaser shall not be required to retain a collection
agency, bring any suit, or take any other action out of the ordinary course of
business as it was conducted prior to the Closing to collect any of the Closing
Accounts Receivable.
(d) To the extent that the Purchaser has not collected the full amount of the
Closing Accounts Receivable and has been paid by the Sellers in accordance with
Section 2.4(b), the Purchaser shall reassign any such uncollected Closing
Accounts Receivable to the Seller.
(e) In the event that after the Closing Date, the Seller shall receive any
remittance from or on behalf of any account debtor with respect to any accounts
receivable relating to the Sprintank Business (excluding any Closing Accounts
Receivable reassigned to the Seller or any Closing Accounts Receivable that have
already been paid in full), the Seller shall endorse without recourse such
remittance to the order of the Purchaser and forward same to the Purchaser
promptly upon receipt thereof.
(f) In the event that the Purchaser shall receive any remittance from or on
behalf of any account debtor with respect to any Closing Account Receivable
after such Closing Account Receivable has been reassigned to the Seller or with
respect to any Closing Accounts Receivable that have already been paid in full,
the Purchaser shall endorse such remittance to the order of the Seller and
forward the same to the Seller promptly upon receipt thereof.
2.5 DISTRIBUTION OF HOLDBACKS. On the 90th day after the Closing Date, the
Purchaser shall pay to the Seller an amount equal to the amount of the Holdback,
if any, remaining after (i) all amounts owing to the Purchaser pursuant to
Section 2.3 have been satisfied, (ii) all amounts owing to the Purchaser
pursuant to Section 2.4 have been satisfied, and (iii) all claims of the
Purchaser under Section 8.2 which have theretofore been finally resolved have
been satisfied (the "Remaining Holdback") less any amount for which the
Purchaser claims, prior to such 90th day, that it is entitled to receive
indemnification pursuant to Section 8.2 (each, a "Pending Claim"). As soon as
practicable following final resolution of all Pending Claims, the Purchaser
shall pay to the Sellers an aggregate amount equal to the portion, if any, of
the Holdback which remain after payment of the Remaining Holdback and final
resolution of all Pending Claims.
ARTICLE 3
TRANSITIONAL ARRANGEMENTS
3.1 SELLER'S USE OF NAMES. As of the Closing Date, the Seller will, and will
cause its Affiliates to, refrain from using the names "Sprintank" and "Sprint
Mobile Storage" (and any names which are confusingly similar to such names), it
being the intent of the Parties that from and after the Closing the Purchaser
will have the sole right as against the Seller and all other Persons to conduct
business under such names and that the Purchaser will commence doing so at the
time of the Closing.
ARTICLE 4
CONFIDENTIALITY
4.1 CONFIDENTIALITY OBLIGATIONS OF THE SELLER.
(a) Confidential Treatment. The Seller and the Stockholders will (and will
cause each of their Affiliates to) treat and hold as confidential all of the
Confidential Information (as such term is hereinafter defined), refrain from
using any Confidential Information, and, at the Purchaser's request, deliver to
the Purchaser or destroy all tangible embodiments (and all copies) of any
Confidential Information which are in the Seller's, Stockholders' or any of
their Affiliate's possession. As used herein the term "Confidential
Information" shall mean all information concerning the business and affairs of
the Sprintank Business which (i) is confidential and proprietary to the
Sprintank Business, (ii) confers a competitive advantage on the Sprintank
Business, or (iii) would be detrimental or embarrassing to the Sprintank
Business if disclosed; provided, however, that Confidential Information shall
not
14
<PAGE>
include information that is generally available to the public (other than by
reason of any disclosure by any of the Seller, the Stockholders or any Affiliate
thereof which constitutes or is the result of breach of this Section 4.1(a) or
any disclosure by any such Affiliate which would constitute a breach of this
Section 4.1(a) if such Affiliate were the Seller) immediately prior to the time
of disclosure.
(b) Forced Disclosure. If any of the Seller, the Stockholders or any
Affiliate thereof is requested or required (by oral question or request for
information or documents in any legal proceeding, interrogatory, subpoena, civil
investigative demand, or similar process) to disclose any Confidential
Information, such Person will use its reasonable best efforts to notify the
Purchaser promptly of such request or requirement so that the Purchaser may seek
an appropriate protective order or waive compliance with the provisions of this
Section 4.1. If, in the absence of such a protective order or waiver, such
Seller, Stockholder or Affiliate thereof is compelled to disclose any
Confidential Information, such Person will use his or its reasonable best
efforts to limit such disclosure to Confidential Information which is so
required to be disclosed and to obtain an order or other assurance that
confidential treatment will be accorded to any Confidential Information
disclosed.
4.2 CONFIDENTIALITY OBLIGATIONS OF THE PURCHASER.
(a) Confidential Treatment. From the date of this Agreement until the
Closing, the Purchaser will (and will cause each of its Affiliates to) treat and
hold as confidential all information it receives from the Seller ("Seller
Confidential Information") and refrain from using any Seller Confidential
Information (other than in preparation for the transactions contemplated by this
Agreement), and, at the Seller's request after termination of this Agreement,
deliver to the Seller or destroy all tangible embodiments (and all copies) of
any Seller Confidential Information which are in the Purchaser's or any such
Affiliate's possession. This Section 4.2(a) will not apply to any Seller
Confidential Information which is generally available to the public (other than
by reason of any disclosure by the Purchaser or any Affiliate of the Purchaser
which constitutes or is the result of breach of this Section 4.2(a) or any
disclosure by such an Affiliate which would constitute a breach of this Section
4.2(a) if such Affiliate were the Purchaser) immediately prior to the time of
disclosure.
(b) Forced Disclosure. If the Purchaser or any Affiliate of the Purchaser is
requested or required (by oral question or request for information or documents
in any legal proceeding, interrogatory, subpoena, civil investigative demand, or
similar process) to disclose any Seller Confidential Information prior to the
Closing, the Purchaser will use its reasonable best efforts to notify the Seller
promptly of such request or requirement so that the Seller may seek an
appropriate protective order or waive compliance with the provisions of this
Section 4.2. If, in the absence of such a protective order or waiver, the
Purchaser or any Affiliate of the Purchaser is compelled to disclose any Seller
Confidential Information, the Purchaser will use its reasonable best efforts to
limit such disclosure to Seller Confidential Information which is so required to
be disclosed and to obtain an order or other assurance that confidential
treatment will be accorded to any Confidential Information disclosed.
ARTICLE 5
REPRESENTATIONS AND WARRANTIES OF THE PURCHASER
As a material inducement to the Seller to enter into this Agreement, the
Purchaser hereby represents and warrants that:
5.1 ORGANIZATION OF THE PURCHASER. The Purchaser is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware. The Purchaser has the requisite corporate power and authority and all
licenses, permits and authorizations necessary to enter into, deliver and carry
out its obligations pursuant to the Transaction Documents to which it is a
party. The Purchaser's Organization Schedule attached hereto lists every
jurisdiction where the Purchaser is qualified to do business. The Purchaser has
the requisite corporate power necessary to own and operate its properties and
the Sprintank Acquired Assets, and to carry on its current business and the
Sprintank Business after Closing, and to enter into, deliver and carry out the
transaction contemplated by the Transaction Documents.
15
<PAGE>
5.2 AUTHORIZATION; BINDING EFFECT; NO BREACH. The Purchaser's execution,
delivery and performance of each Transaction Document to which the Purchaser is
a party has been duly authorized by the Purchaser. Each Transaction Document to
which the Purchaser is a party constitutes a valid and binding obligation of the
Purchaser which is enforceable in accordance with its terms. The execution,
delivery and performance by the Purchaser of the Transaction Documents to which
the Purchaser is a party do not and will not (i) conflict with or result in a
breach of the terms, conditions or provisions of, (ii) constitute a default
under, (iii) result in a violation of, or (iv) require any authorization,
consent, approval, exemption or other action by or declaration or notice to any
Governmental Entity pursuant to, the charter or bylaws of the Purchaser or any
agreement, instrument, or other document, or any Legal Requirement, to which the
Purchaser or any of its assets is subject.
5.3 BROKERAGE. There is no claim for brokerage commissions, finders' fees or
similar compensation in connection with the transactions contemplated by the
Transaction Documents based on any arrangement or agreement which is binding
upon the Purchaser.
5.4 DISCLOSURE. Neither this Article 5 nor any certificate or other item
delivered to the Seller or the Stockholders by or on behalf of the Purchaser
with respect to the transactions contemplated by the Transaction Documents
contains any untrue statement of a material fact or omits a material fact which
is necessary to make any statement contained herein or therein not misleading.
5.5 ACCURACY ON CLOSING DATE. Each representation and warranty set forth in
this Article 5 and all information contained in any certificate delivered by or
on behalf of the Purchaser pursuant to this Agreement will be true and correct
as of the time of the Closing as though then made, except to the extent that the
Purchaser has advised the Seller otherwise in writing prior to the Closing.
ARTICLE 6
REPRESENTATIONS AND WARRANTIES OF THE
SELLER AND STOCKHOLDERS
As a material inducement to the Purchaser to enter into this Agreement, purchase
the Sprintank Acquired Assets and assume the Sprintank Assumed Liabilities, the
Seller and the Stockholders hereby jointly and severally represent and warrant
that:
6.1 ORGANIZATION AND CORPORATE POWER. The Seller is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Texas and is duly qualified to do business in each jurisdiction in which its
ownership of property or conduct of business requires it to so qualify. The
Organization Schedule attached hereto lists every jurisdiction where the Seller
is duly qualified to do business. The Seller has the requisite corporate power
necessary to own and operate its properties, carry on the Sprintank Business and
enter into, deliver and carry out the transactions contemplated by the
Transaction Documents. Each Stockholder has the requisite capacity necessary to
enter into, deliver and carry out his obligations pursuant to the Transaction
Documents to which he is a party.
6.2 CAPITAL STOCK AND RELATED MATTERS. Except as set forth on the attached
Capitalization Schedule, no Person holds any rights to vote or control the
voting of any of the issued and outstanding shares of the Seller. Except for
agreements among and between the Stockholders or their Affiliates, no Person has
any rights to acquire any of the capital stock of the Seller.
6.3 AUTHORIZATION; BINDING EFFECT; NO BREACH. The Seller's execution, delivery
and performance of each Transaction Document to which the Seller is a party have
been duly authorized by the Seller. Each Transaction Document to which the
Seller or any of the Stockholders is a party constitutes a valid and binding
obligation of such Person which is enforceable in accordance with its terms.
Except as set forth on the attached Consents Schedule, the execution, delivery
and performance of the Transaction Documents to which such Seller or Stockholder
is a party do not and will not (i) conflict with or result in a breach of the
terms, conditions or provisions of, (ii) constitute a default under, (iii)
result in the creation of any Lien upon any of the Sprintank Acquired Assets
16
<PAGE>
under, (iv) give any third party the right to modify, terminate or accelerate
any Sprintank Assumed Liability or other liability or obligation of such Seller
or Stockholder under, (v) result in a violation of, or (vi)require any
authorization, consent, approval, exemption or other action by or declaration or
notice to any Governmental Entity pursuant to, the charter or bylaws of the
Seller or any agreement, instrument or other document, or any Legal Requirement,
to which such Seller, Stockholder or any of the Seller's assets is subject.
Without limiting the generality of the foregoing, except as set forth on the
attached Consents Schedule, neither such Seller, Stockholder nor any Affiliate
of any of them has entered into any agreement, or is bound by any obligation of
any kind whatsoever, directly or indirectly to transfer or dispose of (whether
by sale of stock or assets, assignment, merger, consolidation or otherwise) the
Sprintank Business or the Sprintank Acquired Assets(or any substantial portion
thereof) to any Person other than the Purchaser, and neither such Seller nor
Stockholder has entered into any agreement, nor is it bound by any obligation of
any kind whatsoever, to issue any capital stock of the Seller to any Person.
6.4 SUBSIDIARIES; INVESTMENTS. The Seller does not own or hold any rights to
acquire any capital stock or any other security, interest or Investment in any
other Person other than investments which constitute cash or cash equivalents.
The Seller does not have, and has never had, a Subsidiary.
6.5 FINANCIAL STATEMENTS AND RELATED MATTERS.
(a) Financial Statements. Each of (i) the audited balance sheet of the Seller
as of December 31, 1996 and the audited related statements of operations,
stockholders' equity and cash flows for the 12-month period then ended, (ii) the
unaudited balance sheets of the Seller as of December 31, 1995, December 31,
1994 and December 31, 1993 and the unaudited related income statements for the
respective 12-month periods then ended, and (iii) the unaudited balance sheet of
the Seller as of April 30, 1997 (the "Latest Balance Sheet") and the related
income statement for the four-month period then ended (collectively, the
"Financial Statements") (including in all cases the notes thereto, if any)
fairly presents the financial condition of the Seller and the results of its
operations as of the dates thereof and for the periods covered thereby and has
been prepared in accordance with GAAP.
(b) Receivables. The accounts receivable which are part of the Sprintank
Acquired Assets are valid receivables, current, and are subject to no valid
counterclaims or setoffs, at the aggregate amount recorded on the Seller's books
and records as of the Closing, net of an amount of allowances for doubtful
accounts which relate to those receivables computed in a manner consistent with
GAAP and the accounting practices used in the preparation of the Latest Balance
Sheet.
(c) Inventory. The inventory which is part of the Sprintank Acquired Assets
consists of a quantity and quality which is usable or saleable in the ordinary
course of the Sprintank Business. Except as expressly set forth in this
subsection (c), and except for any warranty of title set forth in this
Agreement, the inventory that is part of the Sprintank Acquired Assets is sold
AS IS, WHERE IS, AND WITH ALL FAULTS, ALL EXPRESS AND IMPLIED WARRANTIES OF
MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE BEING HEREBY EXPRESSLY
DISCLAIMED.
6.6 ABSENCE OF UNDISCLOSED LIABILITIES. Except as set forth on the attached
Liabilities Schedule, the Seller does not have any liability relating to the
Sprintank Business (whether accrued, absolute, contingent, unliquidated or
otherwise, whether or not known to the Seller or the Stockholders, whether due
or to become due, and regardless of when asserted) other than: (a) the
liabilities set forth on the face of the Latest Balance Sheet, (b) current
liabilities which have arisen after the date of the Latest Balance Sheet, in the
ordinary course of the Sprintank Business and consistent with the Seller's past
practice (none of which is a liability resulting from breach of contract, breach
of warranty, tort, infringement, claim or lawsuit) and (c) other liabilities and
obligations expressly disclosed or quantified in the other Schedules to this
Agreement.
6.7 ACQUIRED ASSETS. Except as set forth on the attached Assets Schedule:
17
<PAGE>
(a) the Sprintank Acquired Assets constitute all of the assets and rights
(other than the Sprintank Excluded Assets) which are necessary for the conduct
of the Sprintank Business as currently conducted and presently proposed to be
conducted;
(b) the Seller has good and marketable title to, or a valid leasehold interest
in, all properties and assets used by it, located on its premises, or shown on
the Latest Balance Sheet or acquired by it since the date of the Latest Balance
Sheet, in each case free and clear of all Liens, other than Permitted Liens or
Liens disclosed on the Latest Balance Sheet (including any notes thereto); and
(c) the Seller's equipment and other tangible assets are fit for use in the
ordinary course of the Seller's business consistent with its past practice.
Except as expressly set forth in this subsection (c), and except for any
warranty of title set forth in this Agreement, the tangible personal property
that is part of the Sprintank Acquired Assets is sold AS IS, WHERE IS, AND WITH
ALL FAULTS, ALL EXPRESS AND IMPLIED WARRANTIES OF MERCHANTABILITY AND FITNESS
FOR A PARTICULAR PURPOSE BEING HEREBY EXPRESSLY DISCLAIMED.
6.8 ABSENCE OF CERTAIN DEVELOPMENTS. Except as set forth on the attached
Developments Schedule, since December 31, 1996, there has been no material
adverse change in the Sprintank Acquired Assets, the Sprintank Assumed
Liabilities, or the financial condition, operating results, assets, customer or
supplier relations, employee relations or business prospects of the Sprintank
Business. Without limiting the generality of the preceding sentence, except as
expressly contemplated by this Agreement or as set forth on the attached
Developments Schedule, since December 31, 1996, the Seller has not:
(a) engaged in any activity which has resulted in any delay in the payment in
its accounts payable, or any delay in its capital expenditures, in each case as
compared with its custom and practice in the conduct of the Sprintank Business
immediately prior to December 31, 1996;
(b) mortgaged or pledged any Sprintank Acquired Asset or subjected any
Sprintank Acquired Asset to any Lien except Liens arising in connection with the
purchase of Sprintank Acquired Assets in the ordinary course of the Sprintank
Business;
(c) sold, assigned, conveyed, transferred, canceled or waived any property,
tangible asset, Proprietary Right of the Seller or other intangible asset or
right which, if it were held by the Seller on the Closing Date, would constitute
a Sprintank Acquired Asset, other than in the ordinary course of the Sprintank
Business consistent with the Seller's past practice;
(d) disclosed any Confidential Information to any Person other than (i) the
Purchaser, (ii) the Purchaser's representatives, agents, attorneys, accountants
and present and proposed financing sources and (iii) the Seller's
representatives, agents, attorneys and accountants;
(e) waived any right other than in the ordinary course of the Sprintank
Business consistent with the Seller's past practice;
(f) made commitments for capital expenditures which, in the aggregate, would
exceed $25,000 other than in the ordinary course of the Sprintank Business
consistent with the Seller's past practice;
(g) made any loan or advance to, or guarantee for the benefit of, or any
Investment (other than Investments which constitute Sprintank Excluded Assets or
guaranties that are included in the Sprintank Excluded Liabilities) in, any
other Person;
(h) granted any bonus or any increase in wages, salary or other compensation
to any employee (other than increases in wages or salaries or employee loans
granted in the ordinary course of the Sprintank Business consistent with the
Seller's past practice granted to any employee who is not affiliated with the
Seller other than by reason of such Person's employment by the Seller);
18
<PAGE>
(i) suffered damages, destruction or casualty losses which, in the aggregate,
exceed $50,000 (whether or not covered by insurance) to any Sprintank Acquired
Asset or any other property or asset which, if it existed and was held by the
Seller on the Closing Date, would constitute a Sprintank Acquired Asset;
(j) to the Seller's Knowledge, received any indication from any material
supplier of the Seller to the effect that such supplier will stop, or materially
decrease the rate of, supplying materials, products or services to the Seller
(or to the Purchaser, if the Sale is consummated), or, to the Seller's
Knowledge, received any indication from any material customer of the Seller to
the effect that such customer will stop, or materially decrease the rate of,
leasing equipment from the Seller (or from the Purchaser, if the Sale is
consummated);
(k) entered into any transaction other than in the ordinary course of the
Sprintank Business consistent with the Seller's past practice, or entered into
any other material transaction, whether or not in the ordinary course of the
Sprintank Business which reasonably would be expected to adversely affect the
Sprintank Business, the Sprintank Acquired Assets or the Sprintank Assumed
Liabilities; or
(l) agreed to do any act described in any of clauses 6.8(a) through (k) above.
6.9 TAX MATTERS. Except as set forth in the attached Taxes Schedule or
otherwise disclosed in writing to the Purchaser:
(a) the Seller has filed all Tax returns and other reports which it was
required to file and each such return or other report was correct and complete
in all respects, and the Seller has paid all Taxes due and owing by it (whether
or not shown on any Tax return or other report) and has withheld and paid over
all Taxes which it is obligated to withhold from amounts paid or owing to any
employee, independent contractor, stockholder, creditor or other third party;
(b) no Tax audits are pending or being conducted with respect to the Seller;
(c) there are no Liens on any of the assets of the Seller that arose in
connection with any failure (or alleged failure) to pay any Tax;
(d) to the Seller's Knowledge, no information related to Tax matters has been
requested by any Taxing authority and the Seller has not received notice
indicating an intent to open an audit or other review from any Taxing authority;
(e) there are no unresolved disputes or claims concerning the Seller's Tax
liability;
(f) to the Seller's Knowledge no claim has ever been made by any jurisdiction
in which the Seller does not file Tax returns to the effect that the Seller is
or may be subject to any Tax imposed by that jurisdiction;
(g) to the Seller's Knowledge the Seller has not waived any statute of
limitations in respect of Taxes nor has the Seller agreed to an extension of
time with respect to any Tax assessment or deficiency; and
(h) the Seller is not a party to any Tax sharing or allocation agreement, and
the Seller has no liability for the Taxes of any person under Section 1.1502-6
of the Treasury Regulations (or any similar provision of state, local or foreign
law), as a transferee or successor, by contract, or otherwise.
6.10 CONTRACTS AND COMMITMENTS.
(a) Contracts Schedule. Other than this Agreement or as described on the
attached Sprintank Contracts Schedule the Seller is not a party to any written
or oral:
19
<PAGE>
(i) pension, profit sharing, stock option, employee stock purchase or other
plan or arrangement providing for deferred or other compensation to employees
or any other employee benefit, welfare or stock plan or arrangement which is
not described on the attached Employee Benefits Schedule, or any contract with
any labor union, or any severance agreement;
(ii) contract for the employment or engagement as an independent contractor
of any Person on a full-time, part-time, consulting or other basis, other than
those which are not Sprintank Acquired Assets or Sprintank Assumed
Liabilities;
(iii) contract pursuant to which the Seller has advanced or loaned funds, or
agreed to advance or loan funds, to any other Person, other than those which
are not Sprintank Acquired Assets or Sprintank Assumed Liabilities;
(iv) contract or indenture relating to any Indebtedness or the mortgaging,
pledging or otherwise placing a Lien on any of the Sprintank Acquired Assets;
(v) contract pursuant to which the Seller is the lessee of, or holds or
operates, any real or personal property owned by any other Person;
(vi) contract pursuant to which the Seller is the lessor of, or permits any
third party to hold or operate, any real or personal property owned by the
Seller or of which the Seller is a lessee (other than leases of equipment to
customers in the ordinary course of business copies of which have previously
been made available to the Purchaser);
(vii) assignment, license, indemnification or other contract with respect to
any intangible property (including any Proprietary Right of the Seller) which
is not described on the attached Proprietary Rights Schedule;
(viii) contract or agreement with respect to services rendered or goods sold
or leased to or from others, other than any customer purchase order accepted
in the ordinary course of business and in accordance with the Seller's past
practice which both (1) does not require delivery after the date which is six
months after to Closing Date and (2) does not involve a sale price or rental
amount of more than $25,000;
(ix) contract prohibiting it from freely engaging in any business anywhere
in the world;
(x) independent sales representative or distributorship agreement with
respect to the Sprintank Business; or
(xi) any other contract which is material to the Sprintank Business or
involves consideration in excess of $25,000.
(b) Enforceability. Each item described on the attached Sprintank Contracts
Schedule (together with the leases of Sprintank Division equipment by the Seller
to customers of the Sprintank Division in the ordinary course of the Sprintank
Division's business, the "Contracts") is valid, binding and enforceable in
accordance with its terms, except as such enforceability may be limited by (a)
applicable insolvency, bankruptcy, reorganization, moratorium or other similar
laws affecting creditors' rights generally and (b) applicable equitable
principles (whether considered in a proceeding at law or in equity).
(c) Compliance. The Seller has performed all obligations required to be
performed by it under each Contract, and, to the best of the Seller's Knowledge,
the Seller is not in default under or in breach in any material respect of (nor
is it in receipt of any claim of default or breach under) any such obligation.
To the Seller's Knowledge, no event has occurred which with the passage of time
or the giving of notice (or both) would result in a default, breach or event of
noncompliance in any material respect under any obligation of the Seller
pursuant to any Contract. The Seller has no present expectation or intention of
not fully performing any of its obligations pursuant to any Contract, and the
Seller has no Knowledge of any breach or anticipated breach by any other party
to any Contract.
20
<PAGE>
(d) Leases. With respect to each Contract shown on the attached Sprintank
Contracts Schedule which is a lease of personal property under which the Seller
is the lessee, the Seller holds a valid and existing leasehold interest under
such lease for the term set forth with respect to such lease on the attached
Sprintank Contracts Schedule.
(e) Affiliated Transactions. Except as set forth on the attached Affiliated
Transactions Schedule, no officer, director, stockholder or Affiliate of the
Seller (and no individual related by blood or marriage to any such Person, and
no entity in which any such Person or individual owns any beneficial interest)
is a party to any material agreement, contract, commitment or transaction with
the Seller (other than this Agreement) or has any material interest in any
material property used by the Seller.
(f) Copies. The Purchaser's special legal counsel has been supplied with a
true and correct copy of each written Contract shown on the attached Sprintank
Contracts Schedule, each as currently in effect.
6.11 PROPRIETARY RIGHTS.
(a) Schedule. The attached Proprietary Rights Schedule contains a complete
and accurate list of the following items, in each case relating to the Sprintank
Business: (a) all patented or registered Proprietary Rights owned by the Seller
or used in connection with the Sprintank Business, (b) all pending patent
applications and applications for registrations of other Proprietary Rights of
the Seller filed by or on behalf of the Seller, (c) all trade names, corporate
names and unregistered trade names and service marks owned by the Seller or used
in connection with the Sprintank Business which are material to such business
and (d) all unregistered copyrights and computer software which are material to
the Sprintank Acquired Assets, the Sprintank Assumed Liabilities, or the
financial condition, operating results, assets, customer or supplier relations,
employee relations or business prospects of the Sprintank Business. The
attached Proprietary Rights Schedule also contains a complete and accurate list
of all licenses and other rights granted by the Seller to any third party, and
all licenses and other rights granted by any third party to the Seller, with
respect to any Proprietary Rights relating to the Sprintank Business other than
Proprietary Rights which individually or in the aggregate are not material to
the Sprintank Business. The Proprietary Rights listed on the Proprietary Rights
Schedule comprise all intellectual property rights which are necessary for the
operation of the Sprintank Business.
(b) Ownership; Claims. Except as set forth on the attached Proprietary Rights
Schedule, the Seller owns and possesses all right, title and interest in and to
(or has the right to use pursuant to a valid and enforceable license) all
Proprietary Rights necessary for the operation of the Sprintank Business as
presently conducted and as presently proposed to be conducted. Except as
indicated on the attached Proprietary Rights Schedule:
(i) the Seller owns all right, title, and interest in and to all of the
Proprietary Rights described on such Schedule and each other Proprietary Right
which is material to the conduct of the Sprintank Business (in each case free
and clear of all Liens),
(ii) there have been no claims made against the Seller asserting the
invalidity, misuse or unenforceability of any of such Proprietary Rights, and
to the Seller's Knowledge there are no grounds for any such claim,
(iii) the Seller has not received any notice of (nor is it aware of any
facts which indicate a likelihood of) any infringement or misappropriation by,
or conflict with, any Person with respect to the Proprietary Rights (including
any demand or request that the Seller license rights from any Person),
(iv) to the Seller's Knowledge, the conduct of the Sprintank Business has
not infringed or misappropriated, and does not infringe or misappropriate, any
proprietary right of any other Person, nor would the Purchaser's conduct of
the Sprintank Business as presently conducted infringe or misappropriate any
proprietary right of any other Person,
(v) to the best of the Seller's Knowledge, the Proprietary Rights used in
connection with the Sprintank Business have not been infringed or
misappropriated by any other Person, and
21
<PAGE>
(vi) the consummation of the transactions contemplated by this Agreement
will have no material adverse effect on any Proprietary Right of the Seller.
6.12 CERTAIN LITIGATION. Except as set forth on the attached Litigation
Schedule, there is no action, suit, proceeding, order, investigation or claim
pending (or, to the best of the Seller's Knowledge, threatened) against or
affecting the Seller or the Sprintank Business (or to the best of the Seller's
Knowledge, pending or threatened against or affecting any officer, director or
employee of the Seller with respect to the Sprintank Business), at law or in
equity, or before or by any Government Entity (a) with respect to the
transactions contemplated by the Transaction Documents, or (b) concerning the
design, manufacture, rendering or sale by the Seller of any product or service
in the course of the Sprintank Business or otherwise concerning the conduct of
the Sprintank Business, and, except for matters which if resolved unfavorably
would not have a material adverse effect on the Sprintank Business or the
Sprintank Acquired Assets after the Closing, to the best of the Seller's
Knowledge, there is no basis for any of the foregoing.
6.13 BROKERAGE. Except as set forth on the attached Brokerage Schedule, there
is no claim for brokerage commissions, finders' fees or similar compensation in
connection with the transactions contemplated by the Transaction Documents based
on any arrangement or agreement which may be binding upon the Seller or to which
the Seller or any of the Sprintank Acquired Assets may be subject.
6.14 INSURANCE. The attached Insurance Schedule contains a description of
each insurance policy maintained by the Seller with respect to its properties,
assets or business, and each such policy is in full force and effect. To its
Knowledge, the Seller is not in default on any obligation pursuant to any
insurance policy maintained by it.
6.15 EMPLOYEES.
(a) Continued Employment. Except as set forth on the attached Employees
Schedule, to the best of the Seller's Knowledge, no executive or key employee of
the Seller or any group of employees of the Seller has any plans to terminate
employment with the Seller.
(b) Compliance and Restrictions. The Seller has complied in all material
respects with all laws relating to the employment of labor in connection with
the Sprintank Business including provisions of such laws relating to wages,
hours, equal opportunity, collective bargaining and the payment of social
security and other taxes, and the Seller has no material labor relations problem
(including any union organization activities, threatened or actual strikes or
work stoppages or material grievances). Neither the Seller nor (to the Seller's
Knowledge) any of its employees is subject to any noncompete, nondisclosure,
confidentiality, employment, consulting or similar agreement relating to,
affecting, or in conflict with, the Sprintank Business.
6.16 ERISA. Except as set forth on the attached Employee Benefits Schedule:
(a) with respect to all current employees (including those on lay-off,
disability or leave of absence), former employees, and retired employees of the
Seller (the "Seller Employees"), the Seller does not maintain or contribute to
any (a) employee welfare benefit plans (as defined in Section 3(1) of ERISA)
("Employee Welfare Plans"), or (b) any plan, policy or arrangement which
provides nonqualified deferred compensation, bonus or retirement benefits,
severance or "change of control" (as set forth in Code Section 280G) benefits,
or life, disability accident, vacation, tuition reimbursement or other material
fringe benefits ("Other Plans");
(b) the Seller does not maintain, contribute to, or participate in any defined
benefit plan or defined contribution plan which are employee pension benefit
plans (as defined in Section 3(2) of ERISA) ("Employee Pension Plans");
(c) the Seller does not contribute to or participate in any multiemployer plan
(as defined in Section 3(37) of ERISA) (a "Multiemployer Plan");
22
<PAGE>
(d) the Seller does not maintain or have any obligation to contribute to or
provide any post-retirement health, accident or life insurance benefits to any
Seller Employee, other than limited medical benefits required to be provided
under Code Section 4980B;
(e) all Plans (and all related trusts and insurance contracts) comply in form
and in operation in all respects with the applicable requirements of ERISA and
the Code;
(f) all required reports and descriptions (including all Form 5500 Annual
Reports, Summary Annual Reports, PBGC-1s and Summary Plan Descriptions) with
respect to all Plans have been properly filed with the appropriate government
agency or distributed to participants, and the Seller has complied with the
requirements of Code Section 4980B;
(g) with respect to each Plan, all contributions, premiums or payments which
are due on or before the Closing Date have been paid to such Plan; and
(h) the Seller has not incurred any liability to the Pension Benefit Guaranty
Corporation (the "PBGC"), the United States Internal Revenue Service, any
multiemployer plan or otherwise with respect to any employee pension benefit
plan or with respect to any employee pension benefit plan currently or
previously maintained by members of the controlled group of companies (as
defined in Sections 414(b) and (c) of the Code) that includes the Seller (the
"Controlled Group") that has not been satisfied in full, and no condition exists
that presents a material risk to the Seller or any member of the Controlled
Group of incurring such a liability (other than liability for premiums due the
PBGC) which could reasonably be expected to have any adverse effect on the
Purchaser or any of the Sprintank Acquired Assets after the Closing.
The "Plans" means all Employee Pension Plans, Employee Welfare Plans, Other
Plans and Multiemployer Plans to which the Seller contributes or is a party.
6.17 REAL ESTATE.
(a) Owned Properties. The attached Real Estate Schedule lists and describes
briefly all real property relating to the Sprintank Business that the Seller
owns (the "Owned Real Property"). Except as otherwise described on the Real
Estate Schedule, with respect to each such parcel of Owned Real Property:
(i) there are no leases, subleases, licenses, concessions, or other
agreements, written or oral, granting to any Person the right of use or
occupancy of any portion of the Owned Real Property (other than the right of
the Purchaser pursuant to this Agreement and the rights of the Purchaser under
the Owned Real Property Leases (as such term is hereinafter defined) executed
between the Purchaser and the Seller with respect to such Owned Real
Property);
(ii) there are no outstanding options or rights of first refusal to purchase
any of the Owned Real Property (other than the right of the Purchaser pursuant
to this Agreement), or any portion thereof or interest therein, other than any
options or rights of first refusal which would not adversely affect the rights
of the Purchaser under the Owned Real Property Leases;
(iii) no Person (other than the Seller) is in possession of any of the Owned
Real Property;
(iv) the current use of the Owned Real Property and the operation of the
Sprintank Business thereon, does not violate any instrument of record or
agreement affecting the Owned Real Property or any applicable Legal
Requirements except for such violations which, individually and in the
aggregate, could not reasonably be foreseen to have a material adverse affect
on the Sprintank Business;
(v) all buildings, structures and other improvements located on the Owned
Real Property, including all material components thereof, are in a condition
sufficient to enable the continued operation of the Owned Real Property as it
is now operated in connection with the conduct of the Sprintank Business; and
23
<PAGE>
(vi) all certificates of occupancy, permits, licenses, approvals and other
authorizations required in connection with the operation of the Sprintank
Business on the Owned Real Property required to have been issued to enable the
Owned Real Property to be lawfully occupied and used for all of the purposes
for which it is currently occupied and used in connection with the operation
of the Sprintank Business have been lawfully issued and are, as of the date
hereof, in full force and effect.
(b) Leased Property. The attached Real Estate Schedule lists and describes
briefly all real property leased or subleased to the Seller and all other real
property which is used in the Sprintank Business and not owned by the Seller
(the "Leased Real Property"). The Seller has delivered to the Purchaser's
special legal counsel correct and complete copies of the leases and subleases
listed on the Real Estate Schedule (collectively, the "Leases"). Except as
otherwise disclosed on the attached Real Estate Schedule, with respect to the
Leased Real Property and each of the Leases:
(i) such Lease is legal, valid, binding, enforceable, and in full force and
effect;
(ii) such Lease is (either by its terms or as consented to in writing by the
other party thereto) fully assignable to the Purchaser and will continue to be
legal, valid, binding, enforceable, and in full force and effect on identical
terms following the consummation of the Sale and the Assumption and the
commencement of the operation of the Sprintank Business by the Purchaser;
(iii) to the Seller's Knowledge, no party to such Lease is in breach or
default, and no event has occurred which, with notice or lapse of time (or
both), would constitute a breach or default or permit termination,
modification, or acceleration of such lease or sublease;
(iv) no party to such Lease has repudiated in writing any provision thereof;
(v) to the Seller's Knowledge, there are no disputes, oral agreements, or
forbearance programs in effect as to such Lease;
(vi) in the case of each Lease which is a sublease, the representations and
warranties set forth in clauses 6.17(b)(i) through (v) are true and correct
with respect to the underlying lease;
(vii) the Seller has not assigned, transferred, conveyed, mortgaged, deeded
in trust, or encumbered any interest in the leasehold or subleasehold created
pursuant to such Lease;
(viii) none of the Leases has been modified in any respect, except to the
extent that such modifications are in writing and have been delivered or made
available to the Purchaser or except to the extent any such modifications
would not have an adverse effect on the use of the property covered thereby by
the Purchaser after the Closing;
(ix) to the Seller's Knowledge, all buildings, improvements and other
structures located upon the Leased Real Property have received all approvals
of governmental authorities, including licenses and permits, required in
connection with the operation of the Sprintank Business thereon and have been
operated and maintained in accordance with all material Legal Requirements and
all terms and conditions of the Leases; and
(x) all buildings, structures and other improvements located upon the Leased
Real Property, including, without limitation, all components thereof, are in a
condition sufficient to enable the continued operation of the Leased Real
Property in the manner currently being used in connection with the operation
of the Sprintank Business.
24
<PAGE>
6.18 COMPLIANCE WITH LAWS.
(a) Generally. Except as set forth on the attached Compliance Schedule, the
Seller has not violated any Legal Requirement the violation of which could have
an adverse effect on the Sprintank Acquired Assets, the Sprintank Assumed
Liabilities or the financial condition, operating results, assets, customer or
supplier relations, employee relations or business prospects of the Sprintank
Business, and the Seller has not received notice alleging any such violation.
(b) Required Permits. Except as set forth on the attached Compliance
Schedule, the Seller has complied in all material respects with (and is in
compliance with) all permits, licenses and other authorizations required for the
occupation of the Seller's facilities and the operation of the Sprintank
Business. The items described on the attached Permits Schedule constitute all
of the permits, filings, notices, licenses, consents, authorizations,
accreditation, waivers, approvals and the like of, to or with any Government
Entity which are required for the consummation of the Sale, the Assumption or
any other transaction contemplated by the Transaction Documents or the lack of
which would reasonably be expected to have a material adverse effect on the
ownership of the Sprintank Acquired Assets or the Purchaser's conduct of the
Sprintank Business (as such is presently conducted by the Seller) after the
Closing.
(c) Environmental and Safety Matters. Without limiting the generality of
Section 6.18(a) and (b) above, except as set forth on the attached Environmental
Matters Schedule, the Seller and all of the Seller's Environmental Affiliates
have complied (and are in compliance), in all material respects, with all
applicable Environmental and Safety Requirements, and neither the Seller nor any
of the Seller's Environmental Affiliates has received any written notice or
report regarding any liabilities (whether accrued, absolute, contingent,
unliquidated or otherwise), or any corrective, investigatory or remedial
obligations, arising under any Environmental and Safety Requirement. Without
limiting the generality of the preceding sentence, except as set forth on the
attached Environmental Matters Schedule:
(i) no underground storage tank or landfills exists at any property owned or
occupied by the Seller or any of its Environmental Affiliates;
(ii) no asbestos containing material in any form or condition, or PCB
containing materials or equipment, exist at any property owned or occupied by
the Seller which under current Environmental and Safety Requirements is
required to be remediated;
(iii) the transactions contemplated to be consummated pursuant to the
Transaction Documents will not result in the imposition of any obligations
under Environmental and Safety Requirements for site investigation, cleanup or
notification to or consent of any government agency or third party;
(iv) no equipment, facts, events, conditions, conduct or methods relating to
the past or present facilities, properties or operations of the Seller or any
of its Environmental Affiliates will give rise to or result in any corrective,
investigatory or remedial obligation to the Purchaser on or after the Closing
pursuant to Environmental and Safety Requirements, or give rise to or result
in any other liability (including any liability relating to onsite or offsite
hazardous or non-hazardous substance releases, personal injury, cleanup,
remediation, property damage or natural resources damage) to the Purchaser on
or after the Closing pursuant to any Environmental and Safety Requirement; and
(v) no Environmental Lien has attached to any property of the Seller or any
of its Environmental Affiliates.
6.19 DISCLOSURE. Neither this Article 6 nor any schedule, attachment, written
statement, document, certificate or other item supplied to the Purchaser by or
on behalf of the Seller with respect to the transactions contemplated by the
Transaction Documents contains any untrue statement of a material fact or omits
a material fact necessary to make each statement contained herein or therein not
misleading.
6.20 ACCURACY ON CLOSING DATE. Each representation and warranty set forth in
this Article 6 and all information contained in any exhibit, schedule or
attachment to this Agreement or in any certificate or other writing
25
<PAGE>
delivered by, or on behalf of, the Seller to the Purchaser will be true and
correct as of the time of the Closing as though then made, except (i) as
affected by the transactions expressly contemplated by the Transaction
Documents, (ii) to the extent that such representation or warranty relates
solely to an earlier date and (iii) to the extent that the Seller has advised
the Purchaser otherwise in writing prior to the Closing.
ARTICLE 7
ACCESS TO RECORDS
7.1 ACCESS TO RECORDS. To the extent reasonably required for any bona fide
business purpose, each Party will allow, and will use its best efforts to cause
its Affiliates to allow, the other Parties (and the other Parties' agents,
representatives and Affiliates) access to all business records and files
concerning the Sprintank Business, the Sprintank Acquired Assets or the
Sprintank Assumed Liabilities which relate to the period prior to the Closing
Date and will permit such Persons to make copies of the same. Such access will
be granted upon reasonable advance notice, during normal business hours, and in
such a manner so as not to interfere unreasonably with the operations of the
Person affording such access. Without limiting the generality of the foregoing,
if any Party or any of its Affiliates actively is contesting or defending
against any charge, complaint, action, suit, proceeding, hearing, investigation,
claim, or demand in connection with (a) any transaction contemplated by the
Transaction Documents, or (b) any fact, situation, circumstance, status,
condition, activity, practice, plan, occurrence, event, incident, action,
failure to act, or transaction on or prior to the Closing relating to the
Sprintank Business, then the other Parties will cooperate, and use their best
efforts to cause their Affiliates to cooperate, with the contesting or defending
Person and its counsel in such contest or defense, make available such other
Parties' and their Affiliates' personnel and provide such testimony and access
to books and records as are reasonably requested in connection with such contest
or defense, all at the contesting or defending Person's expense (unless the
contesting or defending Person is entitled to indemnification therefor pursuant
to Section 8.2 or 8.3). No provision of this Article 7 will be construed so as
to limit the Seller's obligation to transfer to the Purchaser all Books and
Records which are part of the Sprintank Acquired Assets.
ARTICLE 8
SURVIVAL AND INDEMNIFICATION
8.1 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All representations and
warranties contained herein or made in writing by any Party in connection
herewith shall survive the execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby, regardless of any
investigation made by any Party or on its behalf as hereinafter provided. A
Party's participation in the consummation of any transaction pursuant to any
Transaction Document will not constitute a waiver by such participating Party of
any representation or warranty of any Party or otherwise affect the survival of
any such representation or warranty. The representations and warranties made in
Section 6.9 and 6.16 (or Section 6.20 in respect of such matters) shall survive
for 30 days after the expiration of the applicable statute of limitations and
shall at that time terminate and be of no further force or effect. The
representations and warranties made in Sections 5.1, 5.2 and 6.1 through 6.3 (or
Sections 5.5 or 6.20 in respect of such matters) shall not terminate. The
representations and warranties made in Sections 6.5(c) and 6.7(c) (or Section
6.20 in respect of such matters) shall survive for 90 days after the Closing and
shall at that time terminate and be of no further force or effect. All other
representations and warranties not otherwise referred to in this Section 8.1
shall survive for one year after the Closing and shall at that time terminate
and be of no further force or effect.
8.2 INDEMNIFICATION OBLIGATIONS OF THE SELLER AND THE STOCKHOLDERS. The Seller
and the Stockholders will jointly and severally indemnify the Purchaser and its
Affiliates, stockholders, officers, directors, employees, agents,
representatives and permitted successors and assigns (collectively, the
"Purchaser Indemnitees") in respect of, and save and hold each Purchaser
Indemnitee harmless against and pay on behalf of or reimburse each Purchaser
Indemnitee as and when incurred, any Loss which any Purchaser Indemnitee
suffers, sustains or becomes subject to as a result of, in connection with,
relating or incidental to or by virtue of, without duplication:
26
<PAGE>
(a) any misrepresentation or breach of any representation or warranty by any
of the Seller or the Stockholders set forth in Article 6 of this Agreement;
(b) any misrepresentation, breach or nonfulfillment of any representation,
warranty, covenant or agreement of any of the Seller or the Stockholders set
forth in this Agreement (other than in Article 6 of this Agreement), any
Transaction Document or any Schedule, Exhibit, certificate or other instrument
or document furnished to the Purchaser by any of the Seller or the Stockholders
pursuant to any Transaction Document; or
(c) any Sprintank Excluded Liability.
The Purchaser Indemnitees may proceed against any or all of the Seller and/or
the Stockholders, at the Purchaser Indemnitees' option.
8.3 INDEMNIFICATION OBLIGATIONS OF THE PURCHASER. The Purchaser will
indemnify the Seller and its Affiliates, stockholders, officers, directors,
employees, agents, representatives and permitted successors and assigns
(collectively, the "Seller Indemnitees") and hold each of them harmless against
any Loss which such Seller Indemnitee suffers, sustains or becomes subject to as
a result of, in connection with, relating to or by virtue of, without
duplication:
(a) any misrepresentation or breach of any representation or warranty by the
Purchaser set forth in this Article 5 of this Agreement;
(b) any misrepresentation, breach or nonfulfillment of any representation,
warranty, covenant or agreement of the Purchaser set forth in this Agreement
(other than in Article 5 of this Agreement), any Transaction Document or any
Schedule, Exhibit, certificate or other instrument or document furnished to the
Seller by the Purchaser pursuant to any Transaction Document; or
(c) any Sprintank Assumed Liability.
8.4 INDEMNIFICATION PROCEDURES.
(a) Notice of Claim. Any Person making a claim for indemnification pursuant
to Section 8.2 or 8.3 above (an "Indemnified Party") must give the Party from
whom indemnification is sought (an "Indemnifying Party") written notice of such
claim (an "Indemnification Claim Notice") promptly after the Indemnified Party
receives any written notice of any action, lawsuit, proceeding, investigation or
other claim (a "Proceeding") against or involving the Indemnified Party by a
Government Entity or other third party or otherwise discovers the liability,
obligation or facts giving rise to such claim for indemnification; provided that
the failure to notify or delay in notifying an Indemnifying Party will not
relieve the Indemnifying Party of its obligations pursuant to Section 8.2 or
8.3, as applicable, except to the extent that such failure actually harms the
Indemnifying Party. Such notice must contain a description of the claim and the
nature and amount of such Loss (to the extent that the nature and amount of such
Loss is known at such time).
(b) Control of Defense: Conditions. With respect to the defense of any
Proceeding against or involving an Indemnified Party in which the Government
Entity or other third party in question seeks only the recovery of a sum of
money for which indemnification is provided in Section 8.2 or 8.3, at its option
an Indemnifying Party may appoint as lead counsel of such defense any legal
counsel selected by the Indemnifying Party; provided that before the
Indemnifying Party assumes control of such defense it must first
(i) enter into an agreement with the Indemnified Party (in form and
substance satisfactory to the Indemnified Party) pursuant to which the
Indemnifying Party agrees to be fully responsible (with no reservation of any
rights other than the right to be subrogated to the rights of the Indemnified
Party) for all Losses relating to such Proceeding and unconditionally
guarantees the payment and performance of any liability or obligation which
may arise with respect to such Proceeding or the facts giving rise to such
claim for indemnification, and
27
<PAGE>
(ii) furnish the Indemnified Party with evidence that the Indemnifying
Party, in the Indemnified Party's sole judgment, is and will be able to
satisfy any such liability.
(c) Control of Defense: Exceptions, etc. Notwithstanding Section 8.4(b), the
Indemnified Party will be entitled to participate in the defense of such claim
and to employ counsel of its choice for such purpose at its own expense;
provided that the Indemnifying Party will bear the reasonable fees and expenses
of such separate counsel incurred prior to the date upon which the Indemnifying
Party effectively assumes control of such defense.
The Indemnifying Party must obtain the prior written consent of the Indemnified
Party (which the Indemnified Party will not unreasonably withhold) prior to
entering into any settlement of such claim or Proceeding or ceasing to defend
such claim or Proceeding.
8.5 LIMITATIONS ON INDEMNIFICATION OBLIGATIONS. Notwithstanding anything in
this Article 8 to the contrary, neither the Purchaser nor the Seller shall be
entitled to assert any claims for indemnification under Sections 8.2(a) or
8.3(a) unless and until such Person has incurred Losses in excess of $50,000,
and then such Person may only assert a claim for indemnification to the extent
of such excess. The foregoing limitation shall not apply to indemnification
regarding any Sprintank Excluded Liability or any Sprintank Assumed Liability.
It is also agreed that no claims for indemnification under Sections 8.2(a) or
8.3(a) may be asserted with respect to the breach of any representation or
warranty after it has terminated as provided in Section 8.1, unless notice of
such claim has been given to the Indemnifying Party prior to the termination of
the relevant representation or warranty.
8.6 PAYMENT. Subject to Section 2.5, the Indemnifying Party shall pay the
Indemnified Party to the extent the Indemnified Party is entitled to payment
hereunder in immediately available funds promptly after the Indemnified Party
provides the Indemnifying Party with notice of a claim hereunder and the parties
reasonably agree that there is a reasonable basis for such claim, or a final
result, determination, finding, judgment and/or award is made with respect to
such claim.
8.7 EXCLUSIVE REMEDIES. Except for the rights and remedies set forth in
Sections 10.9 the rights and remedies set forth in this Article 8 shall be the
only rights and remedies available to the Purchaser or the Seller with regard to
any breach by the other party of any representation, warranty, covenant or
provision contained in this Agreement.
ARTICLE 9
CONDITIONS TO THE CLOSING
9.1 CONDITIONS OF THE PURCHASER'S OBLIGATION. The Purchaser's obligation to
effect the Sale and the Assumption at the Closing is subject to the satisfaction
as of the Closing of the following conditions precedent:
(a) Representations and Warranties. Each representation and warranty set
forth in Article 6 will be true and correct in all material respects at and as
of the Closing as though then made (without giving effect to any disclosure made
by the Sellers pursuant to Section 6.20 above), except to the extent of any
change solely caused by the transactions expressly contemplated by the
Transaction Documents.
(b) Covenants. The Seller and the Stockholders will have performed and
observed each covenant or other obligation required to be performed or observed
by them pursuant to the Transaction Documents prior to the Closing.
(c) Compliance with Applicable Laws. The consummation of the transactions
contemplated by the Transaction Documents will not be prohibited by any Legal
Requirement or subject the Purchaser, the Sprintank Business or the Sprintank
Acquired Assets to any penalty, liability or other onerous condition arising
under any applicable Legal Requirement or imposed by any Government Entity.
28
<PAGE>
(d) Proceedings. No action, suit or proceeding will be pending or threatened
before any Government Entity the result of which could prevent or prohibit the
consummation of any transaction pursuant to the Transaction Documents, cause any
such transaction to be rescinded following consummation, or adversely affect the
Purchaser's right to acquire or hold the Sprintank Acquired Assets or conduct
the Sprintank Business or the Seller's performance or its obligations pursuant
to the Transaction Documents, and no judgment, order, decree, stipulation,
injunction or charge having any such effect will exist.
(e) Consents. All filings, notices, licenses, consents, authorizations,
accreditation, waivers, approvals and the like of, to or with any Government
Entity or any other Person that are required for the consummation of the Sale,
the Assumption or any other transaction contemplated by the Transaction
Documents or the ownership of the Sprintank Acquired Assets or the conduct of
the Sprintank Business by the Purchaser after Closing (the "Consents") will have
been duly made or obtained.
(f) Opinion of Counsel. The Purchaser will have received from Broocks Baker &
Lange, legal counsel for the Seller, an opinion with respect to the matters set
forth in Exhibit A-1 attached hereto addressed to the Purchaser and the
Purchaser's lenders. Such opinion will be dated the Closing Date and will be in
form satisfactory to the Purchaser's special legal counsel.
(g) Financing. The Purchaser shall have obtained on terms and conditions
satisfactory to it all of the debt and equity financing it needs in order to
consummate the transactions contemplated hereby and fund the working capital
requirements of the Sprintank Business after the Closing.
(h) Due Diligence. The Purchaser shall be satisfied with the results of its
legal, accounting, business, environmental and other due diligence review of the
Sprintank Business.
(i) Prepayment of Certain Indebtedness. The Seller will have prepaid, or will
have caused to be prepaid, all third party Indebtedness and all other
liabilities or obligations of the Sprintank Division which are secured by any of
the Sprintank Acquired Assets pursuant to Section 10.8 below, and the Purchaser
shall have received, at the Seller's sole cost and expense, evidence
satisfactory to the Purchaser of the release of all Liens (other than Permitted
Liens) any third parties may have in any of the Sprintank Acquired Assets.
(j) Other Agreements. The agreements referred to in Sections 10.6, 10.7 and
10.9 below shall have been duly executed and delivered to the Purchaser and
shall be in full force and effect.
(k) Seller's Closing Documents. The Seller will have delivered to the
Purchaser the following documents:
(i) an Officer's Certificate of the Seller, dated the Closing Date,
stating that the conditions specified in Sections 9.1(a) through (e) inclusive
and Section 9.1(i) have been fully satisfied;
(ii) a copy of the resolutions duly adopted by the Seller's board of
directors and stockholders authorizing the Seller's execution, delivery and
performance of the Transaction Documents to which the Seller is a party and
the consummation of the Sale and all other transactions contemplated by the
Transaction Documents, as in effect as of the Closing, certified by an officer
of the Seller;
(iii) a certificate (dated not earlier than ten business days prior to the
Closing) of the Secretary of State of Texas as to the good standing of the
Seller in such state;
(iv) a certificate (dated not earlier than ten business days prior to the
Closing) of the Secretary of State of each state wherein the Seller has
qualified to do business as a foreign corporation as to the good standing of
the Seller in such state;
(v) the Books and Records at the Seller's office;
29
<PAGE>
(vi) a bill of sale, warranty deeds, warranty assignments of leases and
all other instruments of conveyance which are necessary or reasonably
desirable to effect the Sale, including documents acceptable for recordation
in the United States Patent and Trademark Office, the United States Copyright
Office and any other similar Government Entity;
(vii) copies of the Consents; and
(viii) such other documents relating to the transactions contemplated by
the Transaction Documents as the Purchaser reasonably requests.
All corporate and other proceedings or actions taken or required to be taken by
the Seller or the Stockholders in connection with the transactions contemplated
by the Transaction Documents, and all documents incident thereto, must be
reasonably satisfactory in form and substance to the Purchaser and its special
legal counsel. Any condition set forth in this Section 9.1 may be waived only
in a writing executed by the Purchaser.
9.2 CONDITIONS OF THE SELLER'S OBLIGATION. The Seller's obligation to effect
the Sale at the Closing is subject to the satisfaction as of the Closing of the
following conditions precedent:
(a) Representations and Warranties. Each representation and warranty set
forth in Article 5 will be true and correct in all material respects at and as
of the Closing as though then made (without giving effect to any disclosure made
by the Purchaser pursuant to Section 5.5 above), except to the extent of any
change solely caused by the transactions expressly contemplated by the
Transaction Documents.
(b) Covenants. The Purchaser will have performed each covenant or other
obligation required to be performed by it pursuant to the Transaction Documents
prior to the Closing.
(c) Compliance with Applicable Laws. The consummation of the transactions
contemplated by the Transaction Documents will not be prohibited by any Legal
Requirement or subject the Seller to any penalty or liability arising under any
Legal Requirement or imposed by any Government Entity.
(d) Proceedings. No action, suit or proceeding will be pending or threatened
before any Government Entity the result of which could prevent or prohibit the
consummation of any transaction pursuant to the Transaction Documents, cause any
such transaction to be rescinded following such consummation or adversely affect
the Purchaser's performance of its obligations pursuant to the Transaction
Documents, and no judgment, order, decree, stipulation, injunction or charge
having any such effect will exist.
(e) Other Agreements. The Stock Purchase Agreement dated as of July 1, 1997
by and among the Stockholders, National Equipment Services, Inc. and others and
the agreements referred to in Sections 10.6, 10.7 and 10.9 below shall have been
duly executed and delivered by the Purchaser or National Equipment Services,
Inc., as applicable, and upon execution by the other parties thereto shall be in
full force and effect.
(f) Consents. All Consents shall have been duly made or obtained.
(g) Opinion of Counsel. The Seller will have received from Kirkland & Ellis,
special legal counsel for the Seller, an opinion with respect to the matters set
forth in Exhibit A-2 attached hereto addressed to the Seller and the
Stockholders. Such opinion will be dated the Closing Date and will be in form
satisfactory to the Seller's legal counsel.
(h) Purchaser Closing Documents. The Purchaser will have delivered to the
Seller the following documents:
(i) an Officer's Certificate of the Purchaser, dated the Closing Date,
stating that the conditions specified in Sections 9.2(a) through (d),
inclusive, have been fully satisfied;
30
<PAGE>
(ii) a copy of the resolutions duly adopted by the Purchaser's board of
directors authorizing the Purchaser's execution, delivery and performance of
the Transaction Documents to which the Purchaser is a party and the
consummation of the Sale and all other transactions contemplated by the
Transaction Documents, as in effect as of the Closing, certified by an officer
of the Purchaser;
(iii) a certificate (dated not earlier than ten business days prior to
Closing) of the Secretary of State of Delaware as to the good standing of the
Purchaser in that state;
(iv) all instruments which are necessary or desirable to effect the
Assumption; and
(v) such other documents relating to the transactions contemplated by
the Transaction Documents to be consummated at the Closing as the Seller
reasonably requests.
All corporate and other proceedings or actions taken or required to be taken by
the Purchaser in connection with the transactions contemplated by the
Transaction Documents, and all documents incident thereto, must be reasonably
satisfactory in form and substance to the Seller and its legal counsel. Any
condition set forth in this Section 9.2 may be waived only in a writing executed
by the Seller.
ARTICLE 10
OTHER COVENANTS
10.1 INTERIM AGREEMENTS OF THE SELLER AND THE STOCKHOLDERS. The Seller and
each Stockholder covenants and agrees that prior to the Closing, unless the
Purchaser agrees otherwise in writing, or as otherwise expressly contemplated or
permitted by the Transaction Documents, the Seller will conduct the Sprintank
Business in, and the Seller will not take any action with respect to the
Sprintank Business other than in, the ordinary course, on an arm's-length basis
and in accordance in all material respects with all Legal Requirements and the
Seller's past custom and practice. Without limiting the generality of the
preceding sentence, the Seller and each Stockholder covenant that:
(a) the Seller will not, directly or indirectly
(i) sell, pledge, dispose of or encumber any Sprintank Acquired Asset
other than sales of inventory and dispositions of surplus, obsolete or
unusable equipment in the ordinary course of the Sprintank Business,
(ii) engage in any activity which would accelerate the collection of its
accounts or notes receivable, delay the payment of its accounts payable, delay
its capital expenditures or reduce or otherwise restrict the amount of
inventory (including raw material, packaging, work-in- process, or finished
goods) on hand, in each case, other than in the ordinary course of the conduct
of the Sprintank Business,
(iii) acquire (by merger, exchange, consolidation, acquisition of stock
or assets or otherwise) any corporation, partnership, joint venture or other
business organization or division or material assets thereof,
(iv) incur any Indebtedness or issue any debt securities which will not
be fully repaid on or prior to Closing,
(v) take any action with respect to the grant of any bonuses, salary
increases, severance or termination pay,
(vi) take any action which would render, or which could reasonably be
expected to render, any representation or warranty made by the Seller in this
Agreement untrue at (or at any time prior to) the Closing;
(vii) adopt or amend any employee benefit or welfare plan, or
(viii) enter into or modify, or propose to enter into or modify, any
agreement, arrangement or understanding with respect to any of the matters
referred to in clauses (i) through (vii) above;
31
<PAGE>
(b) the Seller will use its best efforts to cause its current insurance
policies not to be canceled or terminated, and not to permit any of the coverage
pursuant to any such policy to lapse, unless at the time of such termination,
cancellation or lapse there is in full force and effect a replacement policy
which provides coverage in an amount which is not less than the amount of the
coverage pursuant to the canceled, terminated or lapsed policy;
(c) the Seller will
(i) insofar as such matters relate to the Sprintank Acquired Assets,
the Sprintank Assumed Liabilities or the Sprintank Business use its reasonable
best efforts to (1) preserve intact the organization and goodwill of the
Sprintank Business, (2) keep available the services of its officers and
employees as a group, and (3) maintain satisfactory relationships with its
material financing sources, suppliers and customers and other Persons having
business relationships with it,
(ii) upon reasonable request, confer with representatives of the
Purchaser and the Purchaser's present and proposed financing sources regarding
the Sprintank Acquired Assets, the Sprintank Assumed Liabilities and the
Sprintank Business,
(iii) upon reasonable request, arrange meetings with such customers of,
and suppliers to, the Seller as the Purchaser shall reasonably designate in
order that the Seller and the Purchaser may confer with such customers and
suppliers regarding the Sprintank Business and the nature of the transactions
contemplated by this Agreement,
(iv) maintain its facilities and assets in their present condition
consistent with the Seller's past maintenance practices, and
(v) notify the Purchaser of any emergency or other material change in
the normal course of the Sprintank Business or in the condition of the
Sprintank Acquired Assets or the operation of the Sprintank Business and any
governmental or third party complaint, investigation or hearing (or
communication indicating that such a complaint, investigation or hearing is or
may be contemplated) if such emergency, change, complaint, investigation or
hearing could reasonably be expected to be material, individually or in the
aggregate, to the Sprintank Acquired Assets, the Sprintank Assumed Liabilities
or the financial condition, operating results, assets, customer or supplier
relations, employee relations or business prospects of the Sprintank Business;
(d) the Seller promptly will notify the Purchaser if it discovers that any
representation or warranty by the Seller set forth in this Agreement was untrue
when made or subsequently has become untrue; and
(e) the Seller will permit representatives of the Purchaser and the
Purchaser's present and proposed financing sources to have full access (at
reasonable times and in a manner so as not to unreasonably interfere with the
Seller's normal business operations) to all of the Seller's personnel and all
premises, properties, books, records, contracts, Tax records and other documents
of the Seller pertaining to the Sprintank Business and will allow such Persons
to make and retain copies of such documents.
10.2 EXCLUSIVITY. Neither the Seller nor the Stockholders will (i) solicit,
initiate, or encourage the submission of any proposal or offer from any Person
relating to the acquisition of any capital stock or other voting securities, or
any substantial portion of the assets, of the Seller (including any acquisition
structured as a merger, consolidation, or share exchange) or (ii) participate in
any discussions or negotiations regarding, furnish any information with respect
to, assist or participate in, or facilitate in any other manner any effort or
attempt by any Person to do or seek any of the foregoing. The Stockholders will
not vote any shares of the Seller in favor of any such acquisition structured as
a merger, consolidation, or share exchange. The Seller will notify the Purchaser
immediately if any Person makes any proposal, offer, inquiry, or contact with
respect to any of the foregoing.
10.3 INTERIM AGREEMENTS OF THE PURCHASER. From the date of this Agreement
until the Closing, the Purchaser promptly will notify the Seller (i) if any
representation or warranty of the Purchaser set forth in this
32
<PAGE>
Agreement was untrue when made or subsequently has become untrue and (ii) of any
emergency or other material change in the normal course of the Purchaser's
business or in the Purchaser's financial condition, and any governmental or
third party complaint, investigation or hearing (or communication indicating
that such a complaint, investigation or hearing is or may be contemplated) if
such emergency, change, complaint, investigation or hearing could reasonably be
expected to be material, individually or in the aggregate, to the Purchaser, its
business or its financial condition.
10.4 ADDITIONAL INTERIM AGREEMENTS. Each Party will use reasonable efforts to:
(a) take or cause to be taken all actions, and do or cause to be done all
things, which are necessary, proper or advisable to cause any other Party's
conditions set forth in Sections 9.1 and 9.2 to be fully satisfied, and
(b) consummate and make effective as promptly as practicable the transactions
contemplated by the Transaction Documents, including using reasonable efforts to
obtain the Consents; provided, however, that reasonable efforts shall not
require or involve the payment of funds (other than valid payments of
indebtedness and related prepayment penalties and premiums) in order to obtain
the Consents.
10.5 TRANSACTION EXPENSES. The Purchaser will bear its own costs and expenses
(including, without limitation, all Taxes and all legal, accounting, consulting
and other fees and expenses) incurred in connection with this Agreement and the
transactions contemplated hereby. The Seller will pay all costs and expenses
incurred by the Seller or the Stockholders in connection with the negotiation,
preparation and entry into the Transaction Documents and the consummation of the
transactions to be consummated pursuant to the Transaction Documents. The
Purchaser shall pay all transfer, sales, use and similar Taxes imposed by reason
of the transactions contemplated by this Agreement. The Purchaser and the
Seller shall each pay one-half of all stamp and recording taxes, fees and
expenses, settlement fees, escrow fees and other miscellaneous closing fees or
costs associated with the transactions contemplated by this Agreement.
10.6 SPECIAL LEASING ARRANGEMENTS.
(a) Corpus Christi Facility. At the Closing, the Seller and the Purchaser
shall enter into a real estate lease for the Corpus Christi, Texas facility,
substantially in the form of Exhibit B-1 attached hereto.
(b) Baton Rouge Facility. At the Closing, the Seller and the Purchaser shall
enter into a real estate lease for the Baton Rouge, Louisiana facility,
substantially in the form of Exhibit B-2 attached hereto. The lease described
in this clause (b) and the lease described in clause (a) above are referred to
herein as the "Owned Real Property Leases."
(c) Conrad Sauer, Houston Facility. At the Closing, the Purchaser shall enter
into and the Seller shall cause Conrad Sauer, Ltd. to enter into a real estate
lease for the facility located at 1041 Conrad Sauer, Houston, Texas,
substantially in the form of Exhibit B-3 attached hereto.
10.7 EMPLOYMENT AND CONSULTING AGREEMENTS.
(a) Employment of Jim O'Neil. At the Closing, the Purchaser and Jim O'Neil
shall enter into an employment agreement substantially in the form of Exhibit C-
1 attached hereto.
(b) Employment of Sammy Sorsby. At the Closing, the Purchaser and Sammy
Sorsby shall enter into an employment agreement substantially in the form of
Exhibit C-2 attached hereto.
(c) Employment of J. D. Cox. At the Closing, the Purchaser and J. D. Cox
shall enter into an employment agreement substantially in the form of Exhibit C-
3 attached hereto.
(d) Consulting Arrangement with Joseph B. Swinbank. At the Closing, the
Purchaser and Joseph B. Swinbank shall enter into a consulting agreement
substantially in the form of Exhibit D attached hereto.
33
<PAGE>
10.8 PREPAYMENT OF CERTAIN INDEBTEDNESS. At the Closing, the Seller will
prepay all third party Indebtedness and all other liabilities or obligations of
the Sprintank Division which are secured by any of the Sprintank Acquired
Assets, other than any liability or obligation which is a Sprintank Assumed
Liability (whether or not secured by any of the Sprintank Acquired Assets), and
shall secure complete releases of any Liens any third parties may have in any of
the Sprintank Acquired Assets.
10.9 NONCOMPETITION AND NONSOLICITATION.
(a) Noncompetition. Each of the Seller and the Stockholders acknowledges that
in the course of his or its affiliation with the Sprintank Business he or it has
become familiar with trade secrets of the Sprintank Business and with other
Confidential Information. Therefore, each of the Seller and the Stockholders
agrees that for the period commencing on the Closing Date and ending on the
fifth anniversary of the Closing Date (the "Noncompetition Period"), the Seller
shall not directly or indirectly own, manage, control, participate in, consult
with, render services for, or in any manner engage in any business competing
with the businesses of the Purchaser or its Affiliates which are substantially
the same as the Sprintank Business as it is conducted by the Seller immediately
prior to the Closing Date within Texas, Louisiana, Mississippi and Alabama,
which are the states in which the Seller currently engages in such business.
Each of the Seller and the Stockholders agrees that the provisions of this
Section 10.9(a) are reasonable with respect to their duration, geographical area
and scope.
(b) Nonsolicitation. During the Noncompetition Period, the Seller shall not
directly or indirectly through another entity (i) induce or attempt to induce
any employee Purchaser or any of its Affiliates to leave the employ of the
Purchaser or such Affiliate, or in any way interfere with the relationship
between the Purchaser or any such Affiliate and any employee thereof, or (ii)
induce or attempt to induce any customer, supplier, licensee or other business
relation of the Purchaser or any of its Affiliates to cease doing business with
the Purchaser or such Affiliate, or in any way interfere with the relationship
between any such customer, supplier, licensee or business relation and the
Purchaser or any of its Affiliates; provided that the provisions of this Section
10.9(b) shall in no apply to any action taken by or on behalf of the Purchaser.
(c) Enforcement. If, at the time of enforcement of Section 10.9, a court
holds that the restrictions stated herein are unreasonable under circumstances
then existing, the Parties agree that the maximum duration, scope or
geographical area reasonable under such circumstances shall be substituted for
the stated period, scope or area and that the court shall be allowed to revise
the restrictions contained herein to cover the maximum duration, scope and area
permitted by law. Because the Seller and the Stockholders have had access to
Confidential Information, the Parties agree that money damages would be an
inadequate remedy for any breach of this Section 10.9. Therefore, in the event
of a breach or threatened breach of this Section 10.9, the Purchaser or its
successors or assigns may, in addition to other rights and remedies existing in
their favor, apply to any court of competent jurisdiction for specific
performance and/or injunctive or other relief in order to enforce, or prevent
any violations of, the provisions of this Section 10.9.
(d) Noncompetition Agreements. Each of the Stockholders shall enter into, and
shall cause each of the Sprintank Division's senior management members to enter
into, a Noncompetition Agreement substantially in the form of Exhibit E attached
hereto.
10.10 FURTHER ASSURANCES. From and after the Closing, the Seller and the
Stockholders will execute all documents and take any other action which they are
reasonably requested to execute or take to further effectuate the transactions
contemplated by the Transaction Documents.
10.11 ANNOUNCEMENTS. Prior to the Closing, the Purchaser will not make any
public announcement of or regarding the transactions contemplated by this
Agreement without the prior approval of the Seller as to the timing and content
of such announcement (which approval the Seller may not unreasonably withhold or
delay). Neither the Seller nor the Stockholders will make any public
announcement of or regarding the transactions contemplated by this Agreement
without the prior approval of the Purchaser as to the timing and content of such
announcement (which approval the Purchaser may not unreasonably withhold or
delay).
34
<PAGE>
10.12 EMPLOYEES.
(a) The Seller has provided the Purchaser with a true, correct and complete
list of all of the Seller's employees employed in the Sprintank Division (the
"Division Employees") indicating the rate of pay of each such employee during
the twelve months preceding the date hereof and the location of such employee.
The Seller shall pay all amounts of wages, bonuses and other remuneration
(including, without limitation, discretionary benefits and bonuses) payable to
such employees with respect to the period ending on the day prior to the Closing
Date, together with any worker's compensation claims or amounts payable on an
ongoing basis to such employees in connection with events occurring prior to the
Closing Date.
(b) The Purchaser will offer employment to all Division Employees employed as
of the Closing Date (the Division Employees who accept the Purchaser's
employment offer and become actively employed by the Purchaser are referred to
herein as the "Continuing Employees") on terms and conditions which are in the
aggregate substantially equivalent to those applicable to such Division
Employee's employment with the Seller as of the Closing Date. Nothing in this
Section 10.12 shall obligate the Purchaser to continue to employ any Continuing
Employee for any period of time.
(c) The Seller will be responsible for and shall pay (i) to the Division
Employees at Closing an amount equal to all vacation pay, sick leave pay and
floating holiday pay earned or accrued by the Division Employees as of the close
of business on the Closing Date, including any related payroll burden (FICA and
other employment taxes) with respect thereto, whether or not such pay is vested
or has been accrued on the books of the Seller at such close of business, based
upon the remuneration of such Division Employees, normally used in computing
such vacation pay, sick leave pay and floating holiday pay and (ii) to the
appropriate Division Employees, all severance payments (if any) due to Division
Employees as a result of the termination of their employment with the Seller.
(d) The Seller has provided the Purchaser with a true, correct and complete
list of all Division Employees indicating the amount of each such Division
Employee's severance payments (if any) and earned or accrued vacation pay, sick
leave pay and floating holiday pay.
10.13 EMPLOYEE BENEFIT PLANS. The Seller shall be responsible for and shall
pay, all obligations to employees as they come due under any and all employee
welfare benefit plans, employee pension benefit plans or any fringe benefit
arrangements at any time maintained by the Seller; provided, however, that it is
understood and agreed that the Seller intends and has the full right and option
to terminate any such employee welfare benefit plans on or after the Closing (at
its sole cost and expense) to the extent that they can be terminated lawfully in
accordance with the express requirements of ERISA and the terms of any such
plan. The Seller agrees to continue to cover (or cause to continue to be
covered) the Continuing Employees (and their eligible dependents) under the
Employee Welfare Plans continuously after the Closing Date up to and including
July 31, 1997 (the "Transition Period") as if such Continuing Employees had
continued to be actively employed by the Seller throughout the Transition
Period. The Purchaser shall reimburse the Seller for the insurance premium with
respect to each Continuing Employee for such continued coverage under such
Employee Welfare Plans, provided the Seller delivers a written invoice to the
Purchaser accurately setting forth the amount of insurance premium due from the
Purchaser with respect to the Continuing Employees promptly after the end of the
Transition Period. The Seller agrees to make available for the Purchaser's
inspection such data as the Purchaser may reasonably request concerning the
computation of any insurance premium with respect to the Continuing Employees.
The Purchaser shall indemnify and hold harmless the Seller for any Losses (other
than Losses resulting from a breach by the Seller of the provisions of this
Agreement) suffered by the Seller as a result of the Seller's continued coverage
of the Continuing Employees under the Employee Welfare Plans during the
Transition Period pursuant to this Section 10.13.
10.14 PAYMENT OF ACCOUNT PAYABLE AND ACCRUED EXPENSES. The Seller shall pay
all accounts payable and accrued expenses relating to the Sprintank Business in
the Seller's ordinary course of business; provided that all such amounts (other
than in the case of a bona fide dispute between the Seller and an account
creditor with respect to a particular invoice) shall in any event be paid by the
Seller prior to date which is 30 days after the Closing Date. With respect to
any such bona fide dispute, the Seller (a) will use its best efforts to amicably
35
<PAGE>
resolve such dispute as expeditiously as possible, and (b) immediately pay the
amount determined to be due upon resolution of such dispute.
ARTICLE 11
OTHER AGREEMENTS
11.1 TERMINATION. This Agreement may be terminated:
(a) at any time prior to the Closing by mutual agreement of the Purchaser and
the Seller,
(b) by the Purchaser, at any time when any Party other than the Purchaser is
in breach of any of its material obligations pursuant to this Agreement or if
any representation or warranty of any Party other than the Purchaser is false or
misleading in any material respect (provided that such condition is not the
result of any breach of any covenant, representation or warranty of the
Purchaser set forth in any Transaction Document),
(c) by the Seller, at any time when the Purchaser is in breach of any of its
material obligations pursuant to this Agreement or if any representation or
warranty of the Purchaser is false or misleading in any material respect
(provided that such condition is not the result of any breach of any covenant,
representation or warranty of a Party other than the Purchaser set forth in any
Transaction Document), or
(d) by the Purchaser or the Seller, at any time after the date hereof, if the
Closing has not then occurred; provided, however, that neither the Purchaser nor
the Seller shall be entitled to terminate this Agreement pursuant to this
Section 11.1(d) if such Party's willful or knowing breach of this Agreement has
prevented the consummation of the transactions contemplated hereby at or prior
to such time.
Any termination of this Agreement pursuant to any of clauses 11.1(b) through (d)
will be effected by written notice from the Seller to the Purchaser (if the
Seller is the terminating Party) or from the Purchaser to the Seller (if the
Purchaser is the terminating Party). Any termination of this Agreement pursuant
to clauses 11.1(b) or (c) will not terminate the liability of any Party for any
breach or default of any representation, warranty, covenant or other agreement
set forth in any Transaction Document which exists at the time of such
termination.
11.2 REMEDIES. No failure to exercise, and no delay in exercising, any right,
remedy, power or privilege under this Agreement by any Party will operate as a
waiver of such right, remedy, power or privilege, nor will any single or partial
exercise of any right, remedy, power or privilege under this Agreement preclude
any other or further exercise of such right, remedy, power or privilege or the
exercise of any other right, remedy, power or privilege provided herein. The
rights, remedies, powers and privileges provided pursuant to this Agreement are
exclusive and exhaustive of any other rights, remedies, powers and privileges
which may be provided by law.
11.3 CONSENT TO AMENDMENTS. No waiver, amendment, modification or supplement
of this Agreement will be binding upon any Party unless such waiver, amendment,
modification or supplement is set forth in writing and is executed by such
Party. No other course of dealing between or among any of the Parties or any
delay in exercising any rights pursuant to this Agreement will operate as a
waiver of any rights of any Party.
11.4 SUCCESSORS AND ASSIGNS. Except as otherwise expressly provided in this
Agreement, all covenants and agreements set forth in this Agreement by or on
behalf of the Parties will bind and inure to the benefit of the respective
successors and assigns of the Parties, whether so expressed or not, except that
neither this Agreement nor any of the rights, interests or obligations hereunder
may be assigned by the Seller without the Purchaser's prior written consent. The
Purchaser may (at any time prior to the Closing) at its sole discretion, in
whole or in part assign its rights and delegate its obligations pursuant to this
Agreement, including the right to purchase the Sprintank Acquired Assets and the
obligation to assume the Sprintank Assumed Liabilities to one or more of its
Affiliates, and the Purchaser may, at its sole discretion, direct the Seller to
convey the Sprintank Acquired Assets, in whole or in part, to one or more of the
Purchaser's Affiliates. Furthermore, the Purchaser may assign its rights under
this
36
<PAGE>
Agreement for collateral security purposes to any lenders providing financing to
the Purchaser or any of its Affiliates.
11.5 GOVERNING LAW. This Agreement will be governed by and construed in
accordance with the domestic laws of the State of Texas, without giving effect
to any choice of law or conflict provision or rule (whether of the State of
Texas or any other jurisdiction) that would cause the laws of any jurisdiction
other than the State of Texas to be applied. In furtherance of the foregoing,
the internal law of the State of Texas will control the interpretation and
construction of this Agreement, even if under such jurisdiction's choice of law
or conflict of law analysis, the substantive law of some other jurisdiction
would ordinarily apply.
11.6 NOTICES. All demands, notices, communications and reports provided for
in this Agreement will be in writing and will be either personally delivered,
mailed by first class mail (postage prepaid) or sent by reputable overnight
courier service (delivery charges prepaid) to any Party at the address specified
below, or at such address, to the attention of such other Person, and with such
other copy, as the recipient party has specified by prior written notice to the
sending Party pursuant to the provisions of this Section 11.6.
If to the Seller or the Stockholders:
Sprint Industrial Services, Inc.
1041 Conrad Sauer
Houston, Texas 77043
Attn: Joseph B. Swinbank
with a copy, which will
not constitute notice to
the Seller or the Stockholders, to:
Broocks Baker & Lange
808 Travis Street, Suite 1700
Houston, Texas 77002
Attn: B. John Lange, III
If to the Purchaser:
NES Acquisition Corp.
1800 Sherman, Suite 100
Evanston, Illinois 60201
Attn: Kevin P. Rodgers
with a copy, which will
not constitute notice to
the Purchaser, to:
Kirkland & Ellis
200 East Randolph Drive
Chicago, Illinois 60601
Attn: Sanford E. Perl
Any such demand, notice, communication or report will be deemed to have been
given pursuant to this Agreement when delivered personally, on the third
business day after deposit in the U.S. mail or on the business day after deposit
with a reputable overnight courier service, as the case may be.
11.7 SEVERABILITY OF PROVISIONS. If any covenant, agreement, provision or
term of this Agreement is held to be invalid for any reason whatsoever, then
such covenant, agreement, provision or term will be deemed
37
<PAGE>
severable from the remaining covenants, agreements, provisions and terms of this
Agreement and will in no way affect the validity or enforceability of any other
provision of this Agreement.
11.8 SCHEDULES AND EXHIBITS. The Schedules and Exhibits constitute a part of
this Agreement and are incorporated into this Agreement for all purposes.
11.9 COUNTERPARTS. The Parties may execute this Agreement in two or more
counterparts (no one of which need contain the signatures of all Parties), each
of which will be an original and all of which together will constitute one and
the same instrument.
11.10 NO THIRD-PARTY BENEFICIARIES. Except as otherwise expressly provided in
this Agreement, no Person which is not a Party will have any right or obligation
pursuant to this Agreement.
11.11 HEADINGS. The headings used in this Agreement are for the purpose of
reference only and will not affect the meaning or interpretation of any
provision of this Agreement.
11.12 MERGER AND INTEGRATION. Except as otherwise provided in this Agreement,
this Agreement sets forth the entire understanding of the Parties relating to
the subject matter hereof, and all prior understandings, whether written or oral
are superseded by this Agreement.
11.13 ALLOCATION OF PURCHASE PRICE. The allocation of the Sprintank Purchase
Price among the various Sprintank Acquired Assets shall be made in accordance
with Section 1060 of the Code and applicable Treasury Regulations thereunder.
The fair market value of the Sprintank Acquired Assets shall be determined
jointly by the Purchaser and the Seller reasonably and in good faith, and such
determination shall be used by the parties in allocating the Sprintank Purchase
Price and in preparing (a) Form 8594, Asset Acquisition Statement, for each of
the Purchaser and the Seller, and (b) all Tax returns. Each of the Purchaser
and the Seller shall file Form 8594, prepared in accordance with this Section
11.13, with its federal income Tax return for its Tax period including the
Closing Date.
11.14 BULK SALES LAW. The Seller will bear any loss, liability, obligation or
cost suffered by the Seller or the Purchaser as a result of the Seller's
noncompliance with any provision of any bulk sales law which may be applicable
to the transfer of the Sprintank Acquired Assets pursuant to this Agreement.
38
<PAGE>
IN WITNESS WHEREOF, the Parties have executed this Asset Purchase Agreement as
of the date first written above.
PURCHASER:
NES ACQUISITION CORP.
By: /s/ Kevin Rodgers
------------------------------
Its: CEO
SELLER:
SPRINT INDUSTRIAL SERVICES, INC.
By: /s/ J. W. O'Neil
------------------------------
Its: President
STOCKHOLDERS:
/s/ Joseph B. Swinbank
---------------------------------
JOSEPH B. SWINBANK
/s/ Donald L. Poarch
---------------------------------
DONALD L. POARCH
39
<PAGE>
EXHIBIT 10.20
================================================================================
STOCK PURCHASE AGREEMENT
BY AND AMONG
MST ENTERPRISES, INC.
(D/B/A EQUIPCO SALES & RENTALS),
THE STOCKHOLDERS OF MST ENTERPRISES, INC.,
AND
NATIONAL EQUIPMENT SERVICES, INC.
DATED AS OF JULY 18, 1997
================================================================================
1
<PAGE>
TABLE OF CONTENTS
<TABLE>
PAGE
<S> <C>
ARTICLE I--DEFINITIONS.................................................................................................. 1
1.1 Definitions........................................................................................................ 1
1.2 Other Definitional Provisions...................................................................................... 5
1.3 Cross Reference of Other Definitions............................................................................... 5
ARTICLE II--PURCHASE AND SALE OF STOCK 6
2.1 Stock Purchase..................................................................................................... 6
2.2 Purchase Price for Company Stock................................................................................... 6
2.3 Purchase Price Adjustments......................................................................................... 6
2.4 Distribution of Holdback........................................................................................... 8
2.5 Closing Transactions............................................................................................... 8
ARTICLE III--CONDITIONS TO CLOSING 9
3.1 Conditions to the Purchaser's Obligations.......................................................................... 9
3.2 Conditions to Each Seller's Obligations............................................................................ 11
ARTICLE IV--COVENANTS PRIOR TO CLOSING 13
4.1 Affirmative Covenants of the Company and Each Seller............................................................... 13
4.2 Negative Covenants of the Company and Each Seller................................................................. 14
4.3 Covenants of the Purchaser 15
ARTICLE V--REPRESENTATIONS AND WARRANTIES CONCERNING THE COMPANY........................................................ 15
5.1 Organization and Corporate Power................................................................................... 15
5.2 Authorization of Transactions...................................................................................... 16
5.3 Capitalization..................................................................................................... 16
5.4 Subsidiaries; Investments.......................................................................................... 16
5.5 Absence of Conflicts............................................................................................... 16
5.6 Financial Statements and Related Matters........................................................................... 17
5.7 Absence of Undisclosed Liabilities................................................................................. 17
5.8 Absence of Certain Developments.................................................................................... 18
5.9 Title to Properties................................................................................................ 19
5.10 Taxes............................................................................................................. 20
5.11 Contracts and Commitments......................................................................................... 21
5.12 Proprietary Rights................................................................................................ 22
5.13 Litigation; Proceedings........................................................................................... 22
5.14 Brokerage......................................................................................................... 22
5.15 Governmental Licenses and Permits................................................................................. 22
5.16 Employees......................................................................................................... 23
5.17 Employee Benefit Matters.......................................................................................... 23
5.18 Insurance......................................................................................................... 24
5.19 Officers and Directors; Bank Accounts............................................................................. 24
5.20 Affiliate Transactions............................................................................................ 24
5.21 Compliance with Laws.............................................................................................. 24
5.22 Environmental Matters............................................................................................. 24
5.23 Disclosure........................................................................................................ 25
5.24 Closing Date...................................................................................................... 25
ARTICLE VI--REPRESENTATIONS AND WARRANTIES CONCERNING
THE SELLERS............................................................................................................ 26
6.1 Authorization of Transactions...................................................................................... 26
6.2 Absence of Conflicts............................................................................................... 26
6.3 Brokerage.......................................................................................................... 26
6.4 Shares............................................................................................................. 26
6.5 Closing Date....................................................................................................... 26
ARTICLE VII--LIMITATIONS ON REPRESENTATIONS AND WARRANTIES
CONCERNING THE COMPANY AND THE SELLERS................................................................................. 27
ARTICLE VIII--REPRESENTATIONS AND WARRANTIES CONCERNING
THE PURCHASER 27
8.1 Organization and Corporate Power................................................................................... 27
8.2 Authorization...................................................................................................... 27
8.3 No Violation....................................................................................................... 27
</TABLE>
2
<PAGE>
<TABLE>
<S> <C>
8.4 Governmental Authorities and Consents............................................................................. 28
8.5 Litigation........................................................................................................ 28
8.6 Brokerage......................................................................................................... 28
8.7 Closing Date...................................................................................................... 28
ARTICLE IX--TERMINATION.................................................................................................. 28
9.1 Termination....................................................................................................... 28
9.2 Effect of Termination............................................................................................. 29
ARTICLE X--INDEMNIFICATION AND RELATED MATTERS 29
10.1 Survival.......................................................................................................... 29
10.2 Indemnification................................................................................................... 30
ARTICLE XI--ADDITIONAL AGREEMENTS........................................................................................ 33
11.1 Continuing Assistance............................................................................................. 33
11.2 Tax Matters....................................................................................................... 34
11.3 Press Releases and Announcements.................................................................................. 34
11.4 Further Transfers................................................................................................. 34
11.5 Specific Performance.............................................................................................. 34
11.6 Transition Assistance............................................................................................. 35
11.7 Expenses.......................................................................................................... 35
11.8 Exclusivity....................................................................................................... 35
11.9 Books and Records................................................................................................. 35
11.10 Appointment of Representative..................................................................................... 35
11.11 Confidentiality................................................................................................... 37
ARTICLE XII--MISCELLANEOUS............................................................................................... 38
12.1 Amendment and Waiver.............................................................................................. 38
12.2 Notices........................................................................................................... 38
12.3 Binding Agreement; Assignment..................................................................................... 39
12.4 Severability...................................................................................................... 40
12.5 No Strict Construction............................................................................................ 40
12.6 Captions.......................................................................................................... 40
12.7 Entire Agreement.................................................................................................. 40
12.8 Counterparts...................................................................................................... 40
12.9 Governing Law..................................................................................................... 40
12.10 Parties in Interest............................................................................................... 40
12.11 Escrow Agent...................................................................................................... 40
12.12 Attorney's Fees................................................................................................... 41
12.13 Schedules......................................................................................................... 41
</TABLE>
INDEX OF EXHIBITS
Exhibit A - Form of Employment Agreement
Exhibit B - Form of Noncompetition Agreement
Exhibit C - Form of Stock Transfer Agreement
Exhibit D - Form of Lease
Exhibit E - Form of Opinion of Counsel to the Company and the Sellers
3
<PAGE>
INDEX OF SCHEDULES
Schedule of Stockholders
Excluded Assets Schedule
Organization Schedule
Conflicts Schedule
Financial Statements Schedule
Liabilities Schedule
Developments Schedule
Leased Real Property Schedule
Taxes Schedule
Contracts Schedule
Proprietary Rights Schedule
Litigation Schedule
Brokerage Schedule
Permits Schedule
Employees Schedule
Benefit Plans Schedule
Insurance Schedule
Officers, Directors and Bank Accounts Schedule
Affiliated Transactions Schedule
Environmental Schedule
4
<PAGE>
STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT is made as of July 18, 1997, by and among MST
ENTERPRISES, INC. (D/B/A EQUIPCO SALES & RENTALS), a Virginia corporation (the
"Company"), the stockholders of the Company listed on the Schedule of
Stockholders attached hereto (collectively, the "Sellers" and individually, a
"Seller"), and NATIONAL EQUIPMENT SERVICES, INC., a Delaware corporation (the
"Purchaser"). The Company, the Sellers and the Purchaser are referred to herein
collectively as the "Parties" and individually as a "Party."
WHEREAS, the authorized capital stock of the Company consists of 2,500 shares
of Common Stock, par value $10.00 per share (the "Common Stock"), of which 1,000
shares are issued and outstanding;
WHEREAS, the Sellers own beneficially and of record 100% of the issued and
outstanding Common Stock; and
WHEREAS, the Purchaser desires to acquire from each Seller, and each Seller
desires to sell to the Purchaser, all of the Common Stock owned by such Seller
(collectively, the "Acquired Stock").
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Parties agree as follows:
ARTICLE I
DEFINITIONS
1.1 DEFINITIONS. For purposes hereof, the following terms, when used herein
with initial capital letters, shall have the respective meanings set forth
herein:
"Affiliate" of any Person means any other Person controlling, controlled by or
under common control with such first Person, where "control" means the
possession, directly or indirectly, of the power to direct the management and
policies of a Person whether through the ownership of voting securities or
otherwise.
"Affiliated Group" means an affiliated group as defined in Section 1504 of the
Code (or any similar combined, consolidated or unitary group defined under
state, local or foreign income Tax law).
"Agreement" means this Stock Purchase Agreement, including all Exhibits and
Schedules hereto, as it may be amended from time to time in accordance with its
terms.
"CERCLA" means the Comprehensive Environmental Response, Compensation and
Liability Act of 1980, as amended.
"Code" means the United States Internal Revenue Code of 1986, as amended.
"Environmental Affiliates" of any Person means, with respect to any particular
matter, all other Persons whose liabilities or obligations with respect to that
particular matter have been assumed by, or are otherwise deemed by law to be
those of, such first Person.
5
<PAGE>
"Environmental and Safety Requirements" means all federal, state, local and
foreign statutes, regulations, ordinances and similar provisions having the
force or effect of law, all judicial and administrative orders and
determinations, all contractual obligations and all common law concerning public
health and safety, worker health and safety and pollution or protection of the
environment, including all such standards of conduct and bases of obligations
relating to the presence, use, production, generation, handling, transport,
treatment, storage, disposal, distribution, labeling, testing, processing,
discharge, release, threatened release, control, or cleanup of any hazardous
materials, substances or wastes, chemical substances or mixtures, pesticides,
pollutants, contaminants, toxic chemicals, petroleum products or by-products,
asbestos, polychlorinated biphenyls (or PCBs), noise or radiation.
"Environmental Lien" means any Lien, whether recorded or unrecorded, in favor
of any governmental entity or any department, agency or political subdivision
thereof relating to any liability of the Company or any Seller or any
Environmental Affiliate of the Company or any Seller arising under any
Environmental and Safety Requirement.
"ERISA" means the Employee Retirement Income Security Act of 1974, as amended.
"Excluded Assets" means the Company's Range Rover now operated by Suellen
Trubitz, the Company's gold, the Company's Llamas Note Receivable, the Company's
note receivable from the Sellers of approximately $48,000, the Company's Black
Diamond Stock, and the other assets listed on the "Excluded Assets Schedule"
attached hereto. However, if any Excluded Asset is sold for cash prior to the
Closing, such cash will not be considered an Excluded Asset (i.e., it will count
as an asset in calculating Net Equity).
"GAAP" means, at a given time, United States generally accepted accounting
principles, consistently applied.
"Indebtedness" of any Person means, without duplication: (a) indebtedness for
borrowed money or for the deferred purchase price of property or services in
respect of which such Person is liable as obligor or otherwise (other than trade
payables and other current liabilities incurred in the ordinary course of
business) and any commitment by which such Person assures a creditor against
loss, including contingent reimbursement obligations with respect to letters of
credit; (b) indebtedness guaranteed in any manner by such Person, including a
guarantee in the form of an agreement to repurchase or reimburse; (c)
obligations under capitalized leases in respect of which such Person is liable
as obligor, guarantor or otherwise, or in respect of which obligations such
Person assures a creditor against loss; and (d) any unsatisfied obligation of
such Person for "withdrawal liability" to a "multiemployer plan," as such terms
are defined under ERISA.
"Insider" means, any officer, director, employee, stockholder, partner or
Affiliate, as applicable, of the Company or any individual related by marriage
or adoption to any such individual or any entity in which any such Person owns
any beneficial interest.
"Knowledge" means, with respect to any Person, the actual knowledge of such
Person (which, in the case of the Company, is limited to the actual knowledge of
Marc Trubitz or Suellen Trubitz), without investigation or inquiry.
"Licenses" means all permits, licenses, franchises, certificates, approvals
and other authorizations of foreign, federal, state and local governments or
other similar rights.
"Lien" means any mortgage, pledge, security interest, encumbrance, easement,
restriction, charge, or other lien.
"Loss" means, with respect to any Person, any diminution in value,
consequential or other damage, liability, demand, claim, action, cause of
action, cost, damage, deficiency, Tax, penalty, fine or other loss or expense,
whether or not arising out of a third party claim, including all interest,
penalties, reasonable attorneys' fees and expenses and all amounts paid or
incurred in connection with any action, demand, proceeding, investigation or
claim by any third party (including any governmental entity or any department,
agency or political subdivision thereof) against or affecting such Person or
which, if determined adversely to such Person, would give rise to, evidence the
existence of, or relate to, any other Loss and the investigation, defense or
settlement of any of the foregoing, together with interest thereon from the date
on which such Person provides the written notice of the
6
<PAGE>
related claim as described in Section 10.2 through and including the date on
which the total amount of the claim, including such interest, is recovered or
recouped pursuant to Section 10.1.
"Material Adverse Effect" means any material adverse effect on the business,
financial condition, operations, results of operations, or future prospects of
the Company.
"Net Equity" means (i) the book value of the Company's assets (other than the
Excluded Assets), determined in accordance with OCBOA, applied on a basis
consistent with the October Pro Forma (to the extent the October Pro Forma was
prepared in accordance with OCBOA), minus (ii) the book value of the Company's
liabilities, determined in accordance with OCBOA, applied on a basis consistent
with the October Pro Forma (to the extent the October Pro Forma was prepared in
accordance with OCBOA).
"OCBOA" means Another Comprehensive Basis of Accounting (other than GAAP),
which, in this case, means the federal income tax basis of accounting, using
full accrual, which utilizes certain accounting policies discussed in footnote 1
of the Company's Financial Statements for the year ended October 31, 1996.
"October Pro Forma" means the Company's pro forma adjusted financial
statements dated as of and for the period ending October 31, 1996, copies of
which were previously provided by the Sellers to the Purchaser.
"Ordinary Course of Business" means the ordinary course of the Company's
business consistent with past practice (including, without limitation, with
respect to collection of accounts receivable, purchases of inventory and
supplies, repairs and maintenance, payment of accounts payable and accrued
expenses, levels of capital expenditures and operation of cash management
practices generally). The Purchaser acknowledges that actions that in the past
have constituted ordinary or normal business operations or practices in
connection with the Company's business shall be deemed to be actions in the
Ordinary Course of Business.
"Person" means an individual, a partnership, a corporation, an association, a
limited liability company, a joint stock company, a trust, a joint venture, an
unincorporated organization, a governmental entity or any department, agency or
political subdivision thereof and any other entity.
"Proprietary Rights" means any and all patents, patent applications,
trademarks, service marks, trademark or service mark applications and
registrations, trade and corporate names, copyrights, copyright applications and
registrations, trade secrets, know-how, technology, computer software and
software systems, business and marketing plans, customer and supplier lists,
confidential information and all other proprietary property, rights and
interests.
"Release" shall have the meaning set forth in CERCLA.
"Subsidiary" means, with respect to any Person, any corporation a majority of
the total voting power of shares of stock of which is entitled (without regard
to the occurrence of any contingency) to vote in the election of directors,
managers or trustees thereof is at the time owned or controlled, directly or
indirectly, by that Person or one or more of the other Subsidiaries of that
Person or a combination thereof, or any partnership, limited liability company,
association or other business entity a majority of the partnership or other
similar ownership interest of which is at the time owned or controlled, directly
or indirectly, by that Person or one or more Subsidiaries of that Person or a
combination thereof. For purposes of this definition, a Person is deemed to
have a majority ownership interest in a partnership, limited liability company,
association or other business entity if such Person is allocated a majority of
the gains or losses of such partnership, limited liability company, association
or other business entity or is or controls the managing director or general
partner of such partnership, limited liability company, association or other
business entity.
"Tax Returns" means returns, declarations, reports, claims for refund,
information returns or other documents (including any related or supporting
schedules, statements or information) filed or required to be filed in
connection with the determination, assessment or collection of Taxes of any
party or the administration of any laws, regulations or administrative
requirements relating to any Taxes.
7
<PAGE>
"Taxes" means any federal, state, local, or foreign income, gross receipts,
license, payroll, employment, excise, severance, stamp, occupation, premium,
windfall profits, environmental, customs duties, capital stock, franchise,
profits, withholding, social security, unemployment, disability, real property,
personal property, sales, use, transfer, registration, value added, alternative
or add-on minimum, or other tax, fee, assessment or charge of any kind
whatsoever, including any interest, penalty, or addition thereto, whether
disputed or not.
"Transaction Documents" means this Agreement, and all other agreements,
instruments, certificates and other documents to be entered into or delivered by
any Party in connection with the transactions contemplated to be consummated
pursuant to this Agreement.
"Treasury Regulations" means the United States Treasury Regulations
promulgated pursuant to the Code.
1.2 OTHER DEFINITIONAL PROVISIONS.
(a) Accounting Terms. Accounting terms which are not otherwise defined in
this Agreement have the meanings given to them under GAAP. To the extent that
the definition of accounting term that is defined in this Agreement is
inconsistent with the meaning of such term under GAAP, the definition set forth
in this Agreement will control.
(b) "Hereof," etc. The terms "hereof," "herein" and "hereunder" and terms of
similar import are references to this Agreement as a whole and not to any
particular provision of this Agreement. Section, clause, Schedule and Exhibit
references contained in this Agreement are references to Sections, clauses,
Schedules and Exhibits in or to this Agreement, unless otherwise specified.
(c) Successor Laws. Any reference to any particular Code section or any other
law or regulation will be interpreted to include any revision of or successor to
that section regardless of how it is numbered or classified.
8
<PAGE>
1.3 CROSS REFERENCE OF OTHER DEFINITIONS. Each capitalized term listed below
is defined in the corresponding Section of this Agreement:
<TABLE>
<CAPTION>
Term Section
<S> <C>
Accounts Receivable 2.3(b)
Acquired Stock Recitals
Actual Net Equity 2.3(a)
Applicable Limitation Date 10.1
Authorized Action 11.10(d)
Cap 10.2(b)(ii)
Closing 2.5(a)
Closing Date 2.5(a)
Closing Review 2.3(a)
Closing Transactions 2.5(b)
Common Stock Recitals
Company Preface
Confidential Information 11.11(a)
Draft Computation 2.3(a)
Employment Agreement 3.1(g)
Escrow Agent 2.2
Financial Statements 5.6(a)
Firm 2.3(a)
Indemnified Party 10.2(e)
Indemnifying Party 10.2(e)
Holdback 2.2
Holdback Escrow Account 2.2
Latest Balance Sheet 5.6(a)
Lease 3.1(j)
Leased Properties 5.9(b)
Net Equity Shortfall 2.3(a)
Noncompete Parties 3.1(h)
Noncompetition Agreement 3.1(h)
Objection Notice 2.3(a)
Party Preface
Pending Claim 2.4
Plans 5.17(a)
Post Write-Off Receivables 2.3(b)
Purchase Price 2.2
Purchaser Preface
Purchaser Cap 10.2(d)(ii)
Purchaser Parties 10.2(a)
Receivables Determination Date 2.3(b)
Representative 11.10(a)
Seller Preface
Seller Parties 10.2(c)
Stock Transfer Agreement 3.1(i)
Uncollected Accounts Receivable 2.3(b)
Written Off Receivables 2.3(b)
</TABLE>
ARTICLE II
PURCHASE AND SALE OF STOCK
2.1 STOCK PURCHASE. On and subject to the terms and conditions set forth in
this Agreement, on the Closing Date, the Purchaser shall purchase from each
Seller, and each Seller shall sell and transfer to the Purchaser, all of the
shares of Common Stock owned by such Seller as such ownership is set forth on
the Schedule of Stockholders attached hereto, free and clear of any Liens.
2.2 PURCHASE PRICE FOR COMPANY STOCK. The aggregate purchase price to be paid
to the Sellers for the Acquired Stock (the "Purchase Price") is $5,980,000,
which amount shall be paid as follows: (a) the Purchaser shall deliver to the
Sellers $5,780,000 (as adjusted pursuant to Section 2.3 below) in cash; and (b)
the Purchaser shall deposit $ 200,000 (the "Holdback") in an interest-bearing
escrow account with Williams, Parker, Harrison, Dietz & Getzen, as escrow agent
(the "Escrow Agent"), to be held and disbursed pursuant to the terms of Section
12.11 below (the "Holdback Escrow Account"). The Holdback shall be available to
satisfy any amounts owing to
9
<PAGE>
the Purchaser pursuant to Section 2.3 and/or Section 10.2. The Purchase Price
will be allocated among the Sellers in the manner set forth in Schedule of
Stockholders attached hereto. The Purchase Price is subject to adjustment
pursuant to Section 2.3.
2.3 PURCHASE PRICE ADJUSTMENTS.
(a) Post-Closing Adjustment for Net Equity. Within 55 days after the Closing
Date, the Purchaser and its auditors will conduct a review (the "Closing
Review") of the Net Equity as of the close of business on the day before the
Closing Date and will prepare and deliver to the Representative a computation of
the Net Equity as of the close of business on the day before the Closing Date
(the "Draft Computation"). The Purchaser and its auditors will give the
Representative and his designated auditors an opportunity to observe the Closing
Review and will make available to such Persons all records and work papers used
in preparing the Draft Computation. If the Representative disagrees with the
computation of the Net Equity reflected on the Draft Computation, the
Representative may, within ten days after receipt of the Draft Computation,
deliver a notice (an "Objection Notice") to the Purchaser setting forth the
Representative's calculation of the amount of the Net Equity as of the close of
business on the day before the Closing Date. The Purchaser and the
Representative will use reasonable efforts to resolve any disagreements as to
the computation of the Net Equity, but if they do not obtain a final resolution
within ten days after the Purchaser has received the Objection Notice, the
Purchaser and the Representative will jointly retain an independent accounting
firm of recognized national or regional standing (the "Firm") to resolve any
remaining disagreements. If the Purchaser and the Representative are unable to
agree on the choice of the Firm, the Firm will be a "big-six" accounting firm
selected by lot (after excluding one firm designated by the Purchaser and one
firm designated by the Representative). The Purchaser and the Representative
will direct the Firm to render a determination within 15 days of its retention
and the Purchaser, the Representative and their respective agents will cooperate
with the Firm during its engagement. The Firm will consider only those items
and amounts in the Draft Computation set forth in the Objection Notice which the
Purchaser and the Representative are unable to resolve. The Firm's
determination will be based on the definition of Net Equity included herein.
The determination of the Firm will be conclusive and binding upon the Purchaser
and the Sellers. The Purchaser and the Sellers shall bear the costs and expenses
of the Firm based on the percentage which the portion of the contested amount
not awarded to each Party bears to the amount actually contested by such Party.
For example, assume the Purchaser was to assert that Net Equity was $700,000 and
the Representative was to assert that Net Equity was $800,000, and the Firm was
to finally determine that Net Equity was actually $775,000. This means that the
amount contested was $100,000, the amount awarded to the Sellers (and not
awarded to the Purchaser) was $75,000 and the amount awarded to the Purchaser
(and not awarded to the Sellers) was $25,000. Therefore, because 75% of the
amount contested was not awarded to the Purchaser and 25% of the amount
contested was not awarded to the Sellers, the Purchaser should bear 75%, and the
Sellers should bear 25%, of the Firm's costs and expenses. The amount of the
Net Equity, as finally determined pursuant to this Section 2.3(a), is referred
to herein as the "Actual Net Equity." If the Actual Net Equity is less than
$845,078, the Escrow Agent shall pay to the Purchaser from the Holdback Escrow
Account, within two (2) business days after the determination thereof, the
amount of such shortfall (the "Net Equity Shortfall"); provided, however, that
if the amount then left in the Holdback Escrow Account is less than the amount
of the Net Equity Shortfall, the Sellers shall pay to the Purchaser, within two
(2) business days after the determination of the Actual Net Equity, the amount
by which the Holdback Escrow Account is less than Net Equity Shortfall by wire
transfer or delivery of other immediately available funds. If the Actual Net
Equity is greater than $845,078, the Purchaser shall pay to the Representative
(on behalf of the Sellers), within two (2) business days after the determination
of the Actual Net Equity, the amount by which the Actual Net Equity exceeds
$845,078 by wire transfer or delivery of other immediately available funds.
(b) Accounts Receivable Adjustment. Notwithstanding anything herein to the
contrary, and in addition to any other adjustments set forth in this Agreement,
the Purchase Price will be reduced dollar-for-dollar by the aggregate amount of
the net notes and accounts receivable of the Company in existence as of the
Closing (the "Accounts Receivable"), which are uncollected by the Company (the
"Uncollected Receivables Amount") as of the 85th day following the Closing Date
(the "Receivables Determination Date"). If there is an Uncollected Receivables
Amount, the Purchaser shall be entitled to receive the Uncollected Receivables
Amount from the Holdback Escrow Account within two (2) business days after the
Receivables Determination Date; provided, however, that if the amount then left
in the Holdback Escrow Account is less than the amount of the Uncollected
Receivables Amount,
10
<PAGE>
the Sellers shall pay to the Purchaser, within two (2) business days after the
Receivables Determination Date, the amount by which the Holdback Escrow Account
is less than Uncollected Receivables Amount by wire transfer or delivery of
other immediately available funds. The Purchase Price will be increased dollar-
for-dollar by the aggregate collections by the Company on notes and accounts
receivable between the Closing Date and the Receivables Determination Date (the
"Post Write-Off Collections") which are attributable to notes or accounts
receivable which had been written off by Company prior to Closing (i.e., not
counted as assets in determining Net Equity as of the close of business on the
day before the Closing Date) (the "Written Off Receivables"), which shall be
paid by the Purchaser to the Sellers within two (2) business days after receipt
thereof. For the purpose of determining amounts collected by the Company with
respect to the Accounts Receivable and the Written Off Receivables, (i) in the
absence of a bona fide dispute between an account debtor and the Company
regarding receivables of such account debtor accrued prior to the Closing Date,
all payments by an account debtor shall first be applied to the oldest
outstanding invoice due from that account debtor, whether or not that invoice
had previously been written off, and (ii) in the case of a dispute between the
Company and an account debtor with respect to a particular invoice, all payments
shall be first applied to the next oldest invoice due from that account debtor.
The Company shall diligently pursue the collection of the Accounts Receivable,
but shall not be required to bring any suit. To the extent that the Company has
not collected the full amount of the Accounts Receivable and the Purchaser has
been compensated therefor in accordance with this Section, the Company shall
assign any such uncollected Accounts Receivable to the Representative (on behalf
of the Sellers).
2.4 DISTRIBUTION OF HOLDBACK On the 90th day after the Closing Date (or such
later date as the Actual Net Equity is as finally determined pursuant to Section
2.3(a) above), the Escrow Agent shall pay to the Representative (on behalf of
the Sellers) an amount equal to the amount of funds in the Holdback Escrow
Account, if any, remaining after all amounts owing to the Purchaser pursuant to
Section 2.3 have been satisfied.
2.5 CLOSING TRANSACTIONS.
(a) Closing. The closing of the transactions contemplated by this Agreement
(the "Closing") shall take place at the offices of Kirkland & Ellis, 200 East
Randolph Drive, Chicago, Illinois 60601, commencing at 10:00 a.m. on July 18,
1997, or at such other place or on such other date as may be mutually agreeable
to the Purchaser and the Representative. The date and time of the Closing are
herein referred to as the "Closing Date."
(b) Closing Transactions. Subject to the conditions set forth in this
Agreement, the Parties shall consummate the following transactions (the "Closing
Transactions") on the Closing Date:
(i) each Seller shall deliver to the Purchaser certificates representing
the Acquired Stock owned by such Seller, duly endorsed for transfer or
accompanied by duly executed stock powers with all requisite state and federal
transfer stamps affixed thereto, and with signatures guaranteed by a
commercial bank or by a member firm of the New York Stock Exchange;
(ii) the Purchaser shall deliver to the Sellers the cash portion of the
Purchase Price in the manner set forth on the Schedule of Stockholders in
immediately available funds; and
(iii) the Company, the Sellers and the Purchaser, as applicable, shall
deliver the opinions, certificates and other documents and instruments
required to be delivered by or on behalf of such Party under Article III.
ARTICLE III
CONDITIONS TO CLOSING
3.1 CONDITIONS TO THE PURCHASER'S OBLIGATIONS. The obligation of the
Purchaser to consummate the transactions contemplated by this Agreement is
subject to the satisfaction of the following conditions as of the Closing Date:
11
<PAGE>
(a) The representations and warranties set forth in Article V and Article VI
hereof shall be true and correct in all material respects at and as of the
Closing Date as though then made and as though the Closing Date were substituted
for the date of this Agreement throughout such representations and warranties
(without taking into account any disclosures made by the Company or the Sellers
to the Purchaser pursuant to Sections 4.1(g), 5.24 and 6.5 hereof);
(b) The Company and each Seller shall have performed and complied with all of
the covenants and agreements required to be performed by each of them under this
Agreement on or prior to the Closing;
(c) All consents by third parties that are required for the transfer of the
Acquired Stock to the Purchaser, and the consummation of the other transactions
contemplated hereby or that are required in order to prevent a breach of, a
default under, a termination or modification of, or any acceleration of, any
obligations under any material contract to which the Company is a party shall
have been obtained, all on terms reasonably satisfactory to the Purchaser;
(d) All governmental filings, authorizations and approvals that are required
for the transfer of the Acquired Stock to the Purchaser and the consummation of
the other transactions contemplated hereby shall have been duly made and
obtained on terms reasonably satisfactory to the Purchaser;
(e) No action, suit, or proceeding shall be pending or threatened before any
court or quasi-judicial or administrative agency of any federal, state, local,
or foreign jurisdiction or before any arbitrator wherein an unfavorable
judgment, decree, injunction, order or ruling would prevent the performance of
this Agreement or any of the transactions contemplated hereby, declare unlawful
the transactions contemplated by this Agreement, cause such transactions to be
rescinded or materially and adversely affect the right of the Purchaser to own,
operate or control the Company, and no judgment, decree, injunction, order or
ruling shall have been entered which has any of the foregoing effects;
(f) Except as otherwise specified in writing by the Purchaser to the
Representative, all of the Company's directors shall have resigned and such
resignations shall be effective as of the Closing Date;
(j) Payoff letters with respect to all of the Company's Indebtedness
outstanding as of the Closing and releases of any and all Liens (including
appropriate UCC termination statements) held by third parties against property
of the Company shall have been obtained, all on terms reasonably satisfactory to
the Purchaser;
(g) Marc Trubitz and the Company shall have entered into an agreement relating
to his employment with the Company (the "Employment Agreement"), substantially
in the form of Exhibit A attached hereto, and the Employment Agreement shall be
in full force and effect;
(h) Each of the Sellers, Randall Brevard, Linda Sue Hughes, and Donald Stewart
(collectively, the "Noncompete Parties") and the Purchaser shall have entered
into a noncompetition agreement (the "Noncompetition Agreement"), substantially
in the form of Exhibit B attached hereto, and the Noncompetition Agreement shall
be in full force and effect;
(i) The Noncompete Parties and the Purchaser shall have entered into an
agreement relating to restrictions on transfer of the capital stock of the
Purchaser issued pursuant to the Noncompetition Agreement (the "Stock Transfer
Agreement"), substantially in the form of Exhibit C attached hereto, and the
Stock Transfer Agreement shall be in full force and effect;
(j) The Company and Marc Trubitz and Suellen Trubitz, husband and wife, shall
have entered into a lease agreement with respect to the property located at 110
Pleasant Valley Road, Harrisonburg, Virginia (the "Lease"), substantially in the
form of Exhibit D attached hereto, and the Lease shall be in full force and
effect;
(k) The Purchaser shall have received an opinion, dated the Closing Date, of
Williams, Parker, Harrison, Dietz & Getzen, counsel to the Company and the
Sellers, substantially in the form of Exhibit E attached hereto;
(l) On or prior to the Closing Date, the Sellers shall have delivered to the
Purchaser all of the following:
12
<PAGE>
(i) a certificate from the Company and the Sellers in a form reasonably
satisfactory to the Purchaser, dated the Closing Date, stating that the
preconditions specified in Sections 3.1(a) through (k) have been satisfied;
(ii) copies of all third party and governmental consents, approvals, filings,
releases and terminations required in connection with the consummation of the
transactions contemplated herein;
(iii) certified copies of the resolutions of the Company's board of
directors approving the transactions contemplated by this Agreement;
(iv) certificates of the secretary of state of the State of Virginia and
each state where the Company is qualified to do business providing that the
Company is in good standing;
(v) copies of the resignations described in Section 3.1(f);
(vi) all documents and records relating to the business of the Company that
are in any Seller's possession;
(vii) landlord consents and estoppel certificates from the Company's
landlords in form and substance satisfactory to the Purchaser; and
(viii) such other documents or instruments as the Purchaser may reasonably
request to effect the transactions contemplated hereby; and
(m) All proceedings to be taken by the Company and each Seller in connection
with the consummation of the Closing Transactions and the other transactions
contemplated hereby and all certificates, opinions, instruments and other
documents required to be delivered by the Company and each Seller to effect the
transactions contemplated hereby reasonably requested by the Purchaser shall be
reasonably satisfactory in form and substance to the Purchaser.
Any condition specified in this Section 3.1 may be waived by the Purchaser;
provided that no such waiver shall be effective against the Purchaser unless it
is set forth in a writing executed by the Purchaser.
3.2 CONDITIONS TO EACH SELLER'S OBLIGATIONS. The obligation of each Seller to
consummate the transactions contemplated by this Agreement is subject to the
satisfaction of the following conditions as of the Closing Date:
(a) The representations and warranties set forth in Article VIII shall be true
and correct in all material respects at and as of the Closing Date as though
then made and as though the Closing Date were substituted for the date of this
Agreement throughout such representations and warranties (without taking into
account any disclosures made by the Purchaser to the Sellers pursuant to
Sections 4.3(a) and 8.7 hereof);
(b) The Purchaser shall have performed and complied with all of the covenants
and agreements required to be performed by it under this Agreement on or prior
to the Closing;
(c) All governmental filings, authorizations and approvals that are required
for the transfer of the Acquired Stock to the Purchaser and the consummation of
the other transactions contemplated hereby shall have been duly made and
obtained on terms reasonably satisfactory to the Representative;
(d) No action, suit, or proceeding shall be pending before any court or quasi-
judicial or administrative agency of any federal, state, local, or foreign
jurisdiction or before any arbitrator wherein an unfavorable judgment, decree,
injunction, order or ruling would prevent the performance of this Agreement or
any of the transactions contemplated hereby, declare unlawful the transactions
contemplated by this Agreement, cause such transactions to be rescinded or
materially and adversely affect the right of the Purchaser to own, operate or
control the Company, and no judgment, decree, injunction, order or ruling shall
have been entered which has any of the foregoing effects;
13
<PAGE>
(e) Marc Trubitz and the Company shall have entered into the Employment
Agreement, and the Employment Agreement shall be in full force and effect;
(f) The Noncompete Parties and the Purchaser shall have entered into the
Noncompetition Agreement, and the Noncompetition Agreement shall be in full
force and effect;
(g) The Noncompete Parties and the Purchaser shall have entered into the Stock
Transfer Agreement, and the Stock Transfer Agreement shall be in full force and
effect;
(h) The Company and Marc Trubitz and Suellen Trubitz, husband and wife, shall
have entered into the Lease, the Purchaser shall have guaranteed the Lease and
the Lease and such guarantee shall be in full force and effect;
(i) All guarantees of the Sellers with respect to the Company's Indebtedness
shall have been released;
(j) On or prior to the Closing Date, the Purchaser shall have delivered to the
Representative all of the following:
(i) a certificate from the Purchaser in a form reasonably satisfactory
to the Representative, dated the Closing Date, stating that the preconditions
specified in Sections 3.2(a) through (i), inclusive, have been satisfied;
(ii) certificates of the secretary of state of the State of Delaware
providing that the Purchaser is in good standing;
(iii) certified copies of the resolutions of the Purchaser's board of
directors approving the transactions contemplated by this Agreement; and
(iv) such other documents or instruments as the Sellers may reasonably
request to effect the transactions contemplated hereby; and
(k) All proceedings to be taken by the Purchaser in connection with the
consummation of the Closing Transactions and the other transactions contemplated
hereby and all certificates, opinions, instruments and other documents required
to be delivered by the Purchaser to effect the transactions contemplated hereby
reasonably requested by the Representative shall be reasonably satisfactory in
form and substance to the Representative.
Any condition specified in this Section 3.2 may be waived by the Representative;
provided that no such waiver shall be effective unless it is set forth in a
writing executed by the Representative.
ARTICLE IV
COVENANTS PRIOR TO CLOSING
4.1 AFFIRMATIVE COVENANTS OF THE COMPANY AND EACH SELLER. Prior to the
Closing, unless the Purchaser otherwise agrees in writing, each Seller shall
cause the Company to, and in the case of Sections 4.1(f), 4.1(g), 4.1(h) and
4.1(i) each Seller also shall:
(a) conduct its business and operations only in the Ordinary Course of
Business;
(b) keep in full force and effect its corporate existence and all rights,
franchises and intellectual property relating or pertaining to its business and
use its best efforts to cause its current insurance (or reinsurance) policies
not to be canceled or terminated or any of the coverage thereunder to lapse;
(c) use its reasonable efforts to carry on the business of the Company in the
same manner as presently conducted and to keep the Company's business
organization and properties intact, including its present business operations,
physical facilities, working conditions and employees and its present
relationships with lessors, licensors, suppliers and customers and others having
business relations with it;
14
<PAGE>
(d) maintain the material assets of the Company in the condition they are in
upon the full execution of this Agreement;
(e) maintain the books, accounts and records of the Company in accordance with
past custom and practice as used in the preparation of the Financial Statements;
(f) encourage employees to continue their employment with the Company after
the Closing; provided, however, the Purchaser acknowledges that the Sellers are
not guaranteeing such continued employment after Closing;
(g) promptly (once the Company or any Seller obtains Knowledge thereof) inform
the Purchaser in writing of any variances from the representations and
warranties contained in Article V or Article VI hereof or any breach of any
covenant hereunder by the Company or any Seller;
(h) cooperate with the Purchaser and use best efforts to cause the conditions
to the Purchaser's obligation to close to be satisfied (including, without
limitation, the execution and delivery of all agreements contemplated hereunder
to be so executed and delivered and the making and obtaining of all third party
and governmental notices, filings, authorizations, approvals, consents, releases
and terminations); and
(i) cooperate with the Purchaser in the Purchaser's investigation of the
business and properties of the Company, to permit the Purchaser and its
employees, agents, accounting, legal and other authorized representatives to (i)
have full access to the premises, books and records of the Company at reasonable
hours, (ii) visit and inspect any of the properties of the Company, and (iii)
discuss the affairs, finances and accounts of the Company with the directors,
officers, partners, key employees, key customers, key sales representatives, key
suppliers and independent accountants of the Company.
In addition, at or prior to the Closing, the Sellers agree to purchase from the
Company that certain vehicle located in Florida for a cash purchase price equal
to the book value of such vehicle.
4.2 NEGATIVE COVENANTS OF THE COMPANY AND EACH SELLER. Prior to the Closing,
unless the Purchaser otherwise agrees in writing, each Seller shall cause the
Company to not:
(a) take any action that would require disclosure under Section 5.8;
(b) make any loans, enter into any transaction with any Insider or make or
grant any increase in any employee's or officer's compensation or make or grant
any increase in any employee benefit plan, incentive arrangement or other
benefit covering any of the employees of the Company;
(c) establish or, except in accordance with past practice, contribute to any
pension, retirement, profit sharing or stock bonus plan or multiemployer plan
covering the employees of the Company;
(d) except as specifically contemplated by this Agreement, enter into any
contract, agreement or transaction, other than in the Ordinary Course of
Business and at arm's length with unaffiliated Persons;
(e) declare, pay, make or otherwise effectuate any dividends, distributions,
redemptions, equity repurchases or other transactions involving the Company's
capital stock or equity securities;
(f) engage in any activity other than in the Ordinary Course of Business which
would accelerate the collection of its accounts or notes receivable, delay the
payment of its accounts payable, delay its capital expenditures, or reduce or
otherwise restrict the amount of inventory on hand;
15
<PAGE>
(g) sell, transfer, contribute, distribute, or otherwise dispose of any
securities or assets of the Company, or agree to do any of the foregoing, to
any Person, or negotiate or have any discussions with any Person with respect to
any of the foregoing, other than in the Ordinary Course of Business.
Notwithstanding the foregoing, at or prior to the Closing, the Company may
transfer the Excluded Assets to the Sellers.
4.3 COVENANTS OF THE PURCHASER. Prior to the Closing, the Purchaser shall:
(a) promptly (once it obtains Knowledge thereof) inform the Representative in
writing of any variances from the representations and warranties contained in
Article VIII or any breach of any covenant hereunder by the Purchaser; and
(b) cooperate with the Sellers and use its best efforts to cause the
conditions to each Seller's obligation to close to be satisfied (including,
without limitation, the execution and delivery of all agreements contemplated
hereunder to be so executed and delivered and the making and obtaining of all
third party and governmental filings, authorizations, approvals, consents,
releases and terminations).
(c) conduct its investigations of the business and properties of the Company
subject to the following conditions and restrictions:
(i) The Purchaser shall pay for all work and inspections performed on or
in connection with the Company or the business thereof.
(ii) At all times before the Closing, the Purchaser agrees to hold in
strict confidence and not to disclose to any other person, without the prior
written consent of the Sellers, all information and documents, including this
Agreement, related to the Company or to the transactions contemplated by this
Agreement, except for information and documents generally available to the
public, and except as may be required by applicable law or as otherwise
contemplated in this Agreement, and except, to the extent necessary for the
Purchaser's analysis of the Company or performance of this Agreement, to the
Purchaser's employees, representatives, legal and financial advisors, and
other consultants. Without limiting the foregoing confidentiality
requirements, until the Closing, the Purchaser agrees that the Purchaser may
use documents and information concerning the Company or the business
operations thereof provided or made available to the Purchaser pursuant to
this Agreement only for the transactions contemplated in this Agreement, and
for no other purpose.
(iii) The Purchaser, as a condition to its exercise of its right of entry
and of investigation hereunder, agrees to indemnify, defend, and hold harmless
the Sellers from all fines, penalties, liens, losses, costs, claims, damages,
liabilities, and expenses, including reasonable attorneys' fees and other
costs and expenses incurred, sustained by, or asserted against the Company or
Sellers caused by the exercise by Purchaser, or any of its agents, of this
right of entry or of investigation ("Purchaser Generated Losses"); provided
that any fines, penalties, liens, losses, costs, claims, damages, liabilities,
or expenses incurred, sustained by, or asserted against the Company or Sellers
as a result of the Purchaser's or any third party's discovery (as opposed to
causation) of any fact, circumstance or condition concerning the Company
(including, without limitation, any claims by the Purchaser for
indemnification pursuant to Section 10.2) shall not be deemed a Purchaser
Generated Loss hereunder. The foregoing indemnification provision shall
survive the Closing or the termination of this Agreement (for whatever
reason).
ARTICLE V
REPRESENTATIONS AND WARRANTIES
CONCERNING THE COMPANY
As a material inducement to the Purchaser to enter into this Agreement, each
Seller hereby jointly and severally represents and warrants that:
16
<PAGE>
5.1 ORGANIZATION AND CORPORATE POWER. The Company is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Virginia and is qualified to do business in every jurisdiction in which it is
required to be qualified, with the possible exceptions of West Virginia,
Maryland and Pennsylvania. All jurisdictions in which the Company is qualified
to do business are set forth on the "Organization Schedule" attached hereto. The
Company has full power and authority and all licenses, permits and
authorizations necessary to own and operate its properties and to carry on its
business as now conducted. Correct and complete copies of the Company's
articles of incorporation and by-laws have been furnished to the Purchaser,
which documents reflect all amendments made thereto at any time prior to the
date of this Agreement. Correct and complete copies of the minute books
containing the records of meetings of the stockholders and board of directors,
the stock certificate books and the stock record books of the Company have been
furnished to the Purchaser. The Company is not in default under or in violation
of any provision of its articles of incorporation or by-laws.
5.2 AUTHORIZATION OF TRANSACTIONS. The Company has full corporate power and
authority to execute and deliver the Transaction Documents to which it is a
party and to consummate the transactions contemplated hereby and thereby. The
board of directors of the Company has duly approved the Transaction Documents to
which the Company is a party and has duly authorized the execution and delivery
of such Transaction Documents and the consummation of the transactions
contemplated thereby. No other corporate proceedings on the part of the Company
are necessary to approve and authorize the execution and delivery of the
Transaction Documents to which the Company is a party and the consummation of
the transactions contemplated thereby. All Transaction Documents to which the
Company is a party have been duly executed and delivered by the Company and
constitute the valid and binding agreements of the Company, enforceable against
the Company in accordance with their terms.
5.3 CAPITALIZATION. The authorized stock of the Company consists of 2,500
shares of Common Stock, par value $10.00 per share, of which 1,000 shares are
issued and outstanding. All of the issued and outstanding shares of the
Company's capital stock have been duly authorized, are validly issued, fully
paid, and nonassessable, and are held of record and beneficially by the Sellers
in the amounts set forth on the Schedule of Stockholders and are not subject to
(except to the extent provided by state of Virginia statutes) nor were they
issued in violation of, any preemptive rights or rights of first refusal, and
are owned of record and beneficially by the respective Sellers as set forth on
the Schedule of Stockholders free and clear of all Liens. There are no
outstanding or authorized options, warrants, rights, contracts, calls, puts,
rights to subscribe, conversion rights or other agreements or commitments to
which the Company is a party or which are binding upon the Company providing for
the issuance, disposition or acquisition of any of its capital stock (other than
this Agreement). There are no outstanding or authorized stock appreciation,
phantom stock or similar rights with respect to the Company. There are no voting
trusts, proxies or any other agreements or understandings with respect to the
voting of the capital stock of the Company. The Company is not subject to any
obligation (contingent or otherwise) to repurchase or otherwise acquire or
retire any shares of its capital stock.
5.4 SUBSIDIARIES; INVESTMENTS. The Company does not own or hold any shares of
stock or any other security or interest in any other Person (except the Black
Diamond Stock included in the definition of "Excluded Assets") or any rights to
acquire any such stock or other security or interest, and the Company has never
owned any Subsidiary.
17
<PAGE>
5.5 ABSENCE OF CONFLICTS. Except as set forth on the "Conflicts Schedule" or
any other schedule attached hereto, the execution, delivery and performance of
the Transaction Documents and the consummation of the transactions contemplated
thereby by the Company do not and shall not (a) conflict with or result in any
breach of any of the terms, conditions or provisions of, (b) constitute a
default under, (c) result in a violation of, (d) give any third party the right
to modify, terminate or accelerate any obligation under, (e) result in the
creation of any Lien upon the Acquired Stock or the assets of the Company, or
(f) require any authorization, consent, approval, exemption or other action by
or notice or declaration to, or filing with, any court or administrative or
other governmental body or agency (except for authorizations, consents,
approvals, and exemptions required as a result of the Purchaser's legal or
regulatory status), under the provisions of the articles of incorporation or by-
laws of the Company or any indenture, mortgage, lease, loan agreement or other
agreement or instrument to which the Company is bound or affected, or any law,
statute, rule or regulation to which the Company is subject or any judgment,
order or decree to which the Company is subject.
5.6 FINANCIAL STATEMENTS AND RELATED MATTERS.
(a) Financial Statements. Attached hereto as the "Financial Statements
Schedule" are copies of the Company's (i) unaudited balance sheet as of May 30,
1997 (the "Latest Balance Sheet") and the related statements of income and cash
flows for the seven-month period then ended and (ii) audited balance sheets and
statements of income and cash flows for the fiscal years ended October 31, 1996
and 1995. Each of the foregoing financial statements (including in all cases
the notes thereto, if any) (the "Financial Statements") is accurate and complete
in all material respects, is consistent with the Company's books and records
(which, in turn, are accurate and complete), present fairly the Company's
financial condition and results of operations as of the times and for the
periods referred to therein, and has been prepared in accordance with OCBOA,
subject in the case of unaudited financial statements to changes resulting from
normal year-end adjustments for recurring accruals (which shall not be material
individually or in the aggregate), to the absence of footnote disclosure, and to
the absence of an amount of allowances for doubtful accounts and of a reserve
for inventory obsolescence.
(b) Receivables. To the Company's and the Sellers' Knowledge, the Company's
notes and accounts receivable are valid receivables, current within 90 days, and
are subject to no valid and substantial counterclaims or set-offs, at the
aggregate amount recorded on the Company's books and records as of the Closing,
net of an amount equal to the Holdback, which constitutes a reserve against
doubtful accounts.
(c) Inventory. The Company's inventory is being sold "as is" in the condition
it is in upon the execution of this Agreement.
5.7 ABSENCE OF UNDISCLOSED LIABILITIES. Except as set forth on the
"Liabilities Schedule" or any other schedule attached hereto, the Company has no
obligations or liabilities (whether accrued, absolute, contingent, unliquidated
or otherwise, whether or not known, whether due or to become due and regardless
of when asserted) arising out of transactions entered into at or prior to the
Closing, or any action or inaction at or prior to the Closing, or any state of
facts existing at or prior to the Closing, except (i) obligations or liabilities
under contracts or commitments or other matters described on one of the
schedules attached hereto (including, but not limited to, the Contracts
Schedule), (ii) contracts and commitments which are not required to be disclosed
thereon (none of which is a liability for breach of contract, breach of
warranty, tort or infringement or a claim or lawsuit or an environmental
liability), and (iii) liabilities which have arisen after the date of the Latest
Balance Sheet in the Ordinary Course of Business or otherwise in accordance with
the terms and conditions of this Agreement (none of which is a liability for
breach of contract, breach of warranty, tort or infringement or a claim or
lawsuit or an environmental liability).
5.8 ABSENCE OF CERTAIN DEVELOPMENTS. Except as set forth on the "Developments
Schedule" or any other schedule attached hereto and except as expressly
contemplated by this Agreement, since May 30, 1997, the Company has not:
18
<PAGE>
(a) suffered any theft, damage, destruction or casualty loss in excess of
$100,000, to its assets, whether or not covered by insurance, or of $10,000 to
its assets if not covered by insurance, or suffered any substantial destruction
of the Company's books and records;
(b) except for the transfer of the Excluded Assets described in the last
sentence of Section 4.2, redeemed or repurchased, directly or indirectly, any
shares of capital stock or other equity security or declared, set aside or paid
any dividends or made any other distributions (whether in cash or in kind) with
respect to any shares of its capital stock or other equity security;
(c) issued, sold or transferred any equity securities, any securities
convertible, exchangeable or exercisable into shares of its capital stock or
other equity securities, or warrants, options or other rights to acquire shares
of its capital stock or other equity securities of the Company;
(d) subjected any portion of its properties or assets to any Lien;
(e) sold, leased, assigned or transferred (including, without limitation,
transfers to the Sellers or any Insider) a portion of its tangible assets,
except for sales and leases of inventory in the Ordinary Course of Business, or
canceled without fair consideration any material debts or claims owing to or
held by it;
(f) sold, assigned, licensed or transferred (including, without limitation,
transfers to the Sellers or any Insider) any Proprietary Rights owned by, issued
to or licensed to the Company or disclosed any confidential information (other
than pursuant to agreements requiring the disclosure to maintain the
confidentiality of and preserving all rights of the Company in such confidential
information) or received any confidential information of any third party in
violation of any obligation of confidentiality;
(g) suffered any extraordinary and uninsured losses or waived any rights of
material value;
(h) entered into, amended or terminated any material lease, contract,
agreement or commitment, or taken any other action or entered into any other
transaction other than in the Ordinary Course of Business;
(i) materially changed any significant business practice;
(j) made or granted any bonus or any wage, salary or compensation increase to
any director, officer, employee or sales representative, group of employees or
consultant or made or granted any increase in any employee benefit plan or
arrangement, or amended or terminated any existing employee benefit plan or
arrangement or adopted any new employee benefit plan or arrangement;
(k) made any other change in employment terms for any of its directors,
officers, and employees outside the Ordinary Course of Business;
(l) conducted its cash management customs and practices other than in the
Ordinary Course of Business (including, without limitation, with respect to
collection of accounts receivable, purchases of inventory and supplies, repairs
and maintenance, payment of accounts payable and accrued expenses, levels of
capital expenditures and operation of cash management practices generally);
(m) made any capital expenditures or commitments for capital expenditures that
are outside the Ordinary Course of Business;
(n) made any loans or advances to, or guarantees for the benefit of, any
Persons; or
(o) changed (or authorized any change) in its articles of incorporation or by-
laws.
5.9 TITLE TO PROPERTIES.
(a) The Company does not own, and has never owned, any real property.
19
<PAGE>
(b) The leases and subleases described on the "Leased Real Property Schedule"
attached hereto (the "Leased Properties") constitute all of the leases and
subleases under which the Company holds leasehold or subleasehold interests in
real property. The real property leases and subleases described on the Leased
Real Property Schedule are valid, binding, enforceable and in full force and
effect and have not been modified (except to the extent disclosed in the
documents delivered to the Purchaser), and the Company holds a valid and
existing leasehold interest under such leases or subleases to which it is a
party for the term set forth on the Leased Real Property Schedule. The Company
has delivered to the Purchaser complete and accurate copies of each of the
leases or subleases described on the Leased Real Property Schedule. With
respect to each lease and sublease of Real Property listed on the Leased Real
Property Schedule (other than the Real Property subject to the Lease):
(i) the lease or sublease shall continue to be legal, valid, binding,
enforceable and in full force and effect on identical terms immediately
following the Closing;
(ii) neither the Company nor any other party to the lease or sublease is
in breach or default, and no event has occurred which, with notice or lapse of
time, would constitute such a breach or default or permit termination,
modification or acceleration under the lease or sublease;
(iii) no party to the lease or sublease has repudiated any provision
thereof and there are no disputes, oral agreements or forbearance programs in
effect as to the lease or sublease;
(iv) the Company has not assigned, transferred, conveyed, mortgaged,
deeded in trust or encumbered any interest in the leasehold or subleasehold;
(v) all buildings, improvements or other property leased or subleased
thereunder have received all approvals of governmental authorities required in
connection with the operation thereof and have been operated and maintained in
accordance with applicable laws, rules and regulations; and
(vi) the owner of the building, improvements or other real property
leased or subleased has good and marketable title to the parcel of real
property, free and clear of all Liens, other than a mortgage in favor of
Crestar in the outstanding principal amount of approximately Six Hundred and
00/100 Thousand Dollars ($600,000.00), and other than (A) installments of
special assessments and taxes not yet due and payable and (B) recorded
easements, covenants and restrictions of record which do not impair the
current use, occupancy or value, or the marketability of title, of the
property subject thereto.
(c) Except as set forth on the Affiliated Transactions Schedule, the real
property described on the Leased Real Property Schedule constitutes all of the
real property used or occupied by the Company.
(d) Except as set forth on the Leased Real Property Schedule, the Company owns
good and marketable title to, or a valid leasehold interest in, free and clear
of all Liens, all of the personal property and assets which are shown on the
Latest Balance Sheet or acquired thereafter or located on the Leased Properties
or used by the Company.
(e) The buildings, machinery, equipment, personal properties, vehicles and
other tangible assets of the Company located upon or used in connection with the
Leased Properties are operated in conformity with all applicable laws and
regulations. The Company owns or leases under valid leases all buildings,
machinery, equipment and other tangible assets necessary for the conduct of its
business.
5.10 TAXES. Except as set forth on the "Taxes Schedule" attached hereto, (i)
the Company has timely filed or shall timely file all Tax Returns which are
required to be filed on or before the Closing Date, and all such Tax Returns are
true, complete and accurate, (ii) all Taxes due and payable by the Company have
been paid or shall be paid by the Company or the Sellers on or before the
Closing Date and all Taxes accrued but not yet due are shown on the Latest
Balance Sheet or are set forth on the Taxes Schedule and no Taxes are
delinquent, (iii) no deficiency for any amount of Tax has been asserted or
assessed by a taxing authority against the Company and neither the Company nor
any Seller reasonably expects that any such assertion or assessment of Tax
liability will be made, (iv)
20
<PAGE>
the Company has not consented to extend the time in which any Tax may be
assessed or collected by any taxing authority, (v) the Company has not been a
member of an Affiliated Group, (vi) no claim has ever been made by a taxing
authority in a jurisdiction where the Company does not file Tax Returns that the
Company is or may be subject to Taxes assessed by such jurisdiction, (vii) the
Company has no liability for Taxes of any other Person under Treasury
Regulations Section 1.1502-6 (or any similar provision or state, local or
foreign Tax law), as a transferee, by contract, or otherwise, and (viii) the
Company has withheld and paid all Taxes required to have been withheld and paid
in connection with amounts paid or owing to any employee, independent
contractor, creditor, stockholder or other third party. The Taxes Schedule
contains a list of states, territories and jurisdictions (whether foreign or
domestic) in which the Company is required to file Tax Returns.
5.11 CONTRACTS AND COMMITMENTS.
(a) Except as specifically contemplated by this Agreement and except as set
forth on the "Contracts Schedule" or any other schedule attached hereto, the
Company is not a party to or bound by, whether written or oral, any:
(i) collective bargaining agreement or contract with any labor union or
any bonus, pension, profit sharing, retirement or any other form of deferred
compensation plan or any stock purchase, stock option, hospitalization
insurance or similar plan or practice, whether formal or informal;
(ii) any contract for the employment of any officer, individual employee
or other person on a full-time or consulting basis or any severance agreements
(in each case, except for those which are terminable by the Company at will
without liability therefor);
(iii) agreement or indenture relating to the borrowing of money or to
mortgaging, pledging or otherwise placing a Lien on any of its assets;
(iv) agreements with respect to the lending or investing of funds;
(v) license or royalty agreements;
(vi) guaranty of any obligation, other than endorsements made for
collection;
(vii) lease or agreement under which it is lessee of, or holds or
operates, any personal property owned by any other party calling for payments
in excess of $10,000 annually;
(viii) contract or group of related contracts with the same party
continuing over a period of more than six months from the date or dates
thereof, not terminable by it on 30 days or less notice without penalties or
involving more than $10,000;
(ix) contract which prohibits it from freely engaging in business
anywhere in the world; or
(x) other agreement material to it not entered into in the Ordinary
Course of Business .
(b) Except as disclosed on the Contracts Schedule or any other schedule
attached hereto, (i) no contract or commitment required to be disclosed on the
Contracts Schedule has been breached or canceled by the other party and the
Company has no Knowledge of any anticipated breach by any other party to any
contract set forth on the Contracts Schedule, (ii) no customer has indicated in
writing or orally to the Company or any Seller that it shall stop or materially
decrease the business done with the Company or that it desires to renegotiate
its contract or current arrangement with the Company, (iii) the Company has
performed all the material obligations required to be performed by it in
connection with the contracts or commitments required to be disclosed on the
Contracts Schedule and is not in default under or in breach of any contract or
commitment required to be disclosed on the Contracts Schedule, and (iv) each
agreement is legal, valid, binding, enforceable and in full force and effect and
will continue as such following the consummation of the transactions
contemplated hereby. For purposes of this Section 5.11(b), "Knowledge" shall be
deemed to include the actual knowledge of each of the Noncompete Parties.
21
<PAGE>
(c) The Sellers have provided the Purchaser with access to all written
contracts which are required to be disclosed on the Contracts Schedule, in each
case together with all amendments, waivers or other changes thereto (all of
which are disclosed on the Contracts Schedule). The Contracts Schedule
contains an accurate and complete description of all material terms of all oral
contracts referred to therein (except for those which are terminable by the
Company at will without liability therefor).
5.12 PROPRIETARY RIGHTS.
(a) Except as set forth on the Proprietary Rights Schedule, (i) the Company
owns and possesses without restriction as to use, all right, title and interest
in and to the Proprietary Rights necessary for the operation of the Company's
businesses as currently conducted; (ii) the Company has not received any notices
of invalidity, infringement or misappropriation from any third party with
respect to any such Proprietary Rights; (iii) to the Company's Knowledge, the
Company has not interfered with, infringed upon, misappropriated or otherwise
come into conflict with any Proprietary Rights of any third parties; and (iv) to
the Company's Knowledge, no third party has interfered with, infringed upon,
misappropriated, or otherwise come into conflict with any Proprietary Rights of
the Company.
(b) The Purchaser acknowledges that the Sellers have taken no measures to
register or otherwise protect the name "Equipco Sales and Rental." The Sellers
do not make any warranty or representation whatsoever about any right the
Company may have to said name.
5.13 LITIGATION; PROCEEDINGS. Except as set forth on the "Litigation
Schedule" or any other schedule attached hereto, there are no actions, suits,
proceedings, orders, judgments, decrees or investigations pending or, to the
Company's Knowledge, threatened against or affecting the Company at law or in
equity, or before or by any federal, state, municipal or other governmental
department, commission, board, bureau, agency or instrumentality, domestic or
foreign. The Company is not subject to any outstanding order, judgment or
decree issued by any court or quasi-judicial or administrative agency of any
federal, state, local or foreign jurisdiction or any arbitrator.
5.14 BROKERAGE. Except as set forth on the "Brokerage Schedule" attached
hereto, there are no claims for brokerage commissions, finders' fees or similar
compensation in connection with the transactions contemplated by this Agreement
based on any arrangement or agreement made by or on behalf of the Company.
5.15 GOVERNMENTAL LICENSES AND PERMITS. The "Permits Schedule" attached
hereto contains a complete listing of all material Licenses owned or possessed
by the Company or used by the Company in the conduct of its business. Except as
indicated on the Permits Schedule or any other schedule attached hereto, the
Company owns or possesses all right, title and interest in and to all Licenses
which are necessary to conduct its business as presently conducted and shall use
its reasonable efforts to maintain all such Licenses until Closing. No loss or
expiration of any License is pending or, to the Company's Knowledge, threatened
or reasonably foreseeable (including, without limitation, as a result of the
transactions contemplated hereby) other than expiration in accordance with the
terms thereof.
5.16 EMPLOYEES. Except as set forth on the "Employees Schedule" or any other
schedule attached hereto, to the Knowledge of the Company, no key executive
employee and no group of employees or independent contractors of the Company has
any plans to terminate his, her or its employment or relationship as an
independent contractor with the Company; provided, however, that such continued
employment or relationship is not guaranteed by the Sellers. The Company has
complied with all applicable laws relating to the employment of personnel and
labor. Except as set forth on the "Employees Schedule" or any other schedule
attached hereto, the Company is not a party to or bound by any collective
bargaining agreement, nor has such party experienced any strikes or other
material employee or labor disputes. The Company has not engaged in any unfair
labor practice. The Company has no Knowledge of any organizational effort
presently being made or threatened by or on behalf of any labor union with
respect to employees of the Company.
22
<PAGE>
5.17 EMPLOYEE BENEFIT MATTERS.
(a) The "Benefit Plans Schedule" and the other schedules attached hereto set
forth all of the Company's bonus, deferred or incentive compensation, profit
sharing, retirement, vacation, sick leave, hospitalization or severance plans,
and all "employee pension benefit plans" (as defined in Section 3(2) of ERISA),
"employee welfare benefit plans" (as defined in Section 3(1) of ERISA) and
fringe benefit plans (the "Plans"). None of the Plans are subject to Title IV
of ERISA nor provide for medical or life insurance benefits to retired or former
employees of the Company (other than as required under Section 4980B of the Code
or under a similar state law). The Company is not a participating or
contributing employer in any "multiemployer plan" (as defined in Section 3(37)
of ERISA) with respect to employees of the Company nor has the Company incurred
any withdrawal liability with respect to any multiemployer plan or any liability
in connection with the termination or reorganization of any multiemployer plan.
(b) Each Plan is in all material respects in compliance, and has been
administered in all material respects in accordance, with the applicable
provisions of ERISA and the Code, and all other applicable laws, rules and
regulations, including, but not limited to, medical continuation under Section
4980B of the Code. The Company has not (i) engaged in any transaction
prohibited by ERISA or the Code; (ii) breached any fiduciary duty owed by it
with respect to the Plans described above; or (iii) failed to file and
distribute timely and properly all reports and information required to be filed
or distributed in accordance with ERISA or the Code. With respect to each Plan,
all contributions, premiums or payments which are due on or before the Closing
Date have been paid. Each Plan which is intended to be qualified under Section
401(a) of the Code has received from the Internal Revenue Service a favorable
determination letter.
(c) The Company has not incurred and has no reason to expect that it will
incur, any liability to the PBGC (other than PBGC premium payments) or otherwise
under Title IV of ERISA (including any withdrawal liability) or under the Code
with respect to any employee pension benefit plan that the Company or any member
of its "controlled group" (within the meaning of Section 414 of the Code,
including members of its controlled group at any time during the past six years)
maintains or ever has maintained or to which any of them contributes, ever has
contributed, or ever has been required to contribute.
5.18 INSURANCE. The "Insurance Schedule" attached hereto lists each insurance
policy maintained by the Company with respect to its properties, assets and
business, together with a claims history for the past three years. All of such
insurance policies are in full force and effect, and the Company is not in
material default with respect to its obligations under any such insurance
policies and the Company has not been denied insurance coverage. Except as set
forth on the Insurance Schedule, the Company does not have any self-insurance or
co-insurance programs, and the reserves set forth on the Latest Balance Sheet
are adequate to cover all anticipated liabilities with respect to self-insurance
or coinsurance programs.
5.19 OFFICERS AND DIRECTORS; BANK ACCOUNTS. The "Officers, Directors and Bank
Accounts Schedule" attached hereto lists all officers and directors of the
Company, and all bank accounts, safety deposit boxes and lock boxes (designating
each authorized signatory with respect thereto) for the Company.
5.20 AFFILIATE TRANSACTIONS. Except as disclosed on the "Affiliated
Transactions Schedule" or any other schedule attached hereto, no Insider is a
party to any agreement, contract, commitment or transaction with the Company or
which is pertaining to the business of the Company (except agreements arising
out of any Insider's employer/employee relationship with the Company) or has any
interest in any property, real or personal or mixed, tangible or intangible,
used in or pertaining to the business of the Company.
23
<PAGE>
5.21 COMPLIANCE WITH LAWS. Except as disclosed in this Agreement, on the
"Liabilities Schedule" or any other schedule attached hereto, the Company and
its officers, directors, partners, agents and employees have substantially
complied with and are in material compliance with all applicable laws,
regulations and ordinances of foreign, federal, state and local governments and
all agencies thereof which are applicable to the business, business practices
(including, but not limited to, the Company's marketing and sales of its
products and services) or any owned or leased properties of the Company and to
which the Company may be subject, and no claims have been filed against the
Company alleging a violation of any such laws or regulations, and the Company
has not received notice of any such violations.
5.22 ENVIRONMENTAL MATTERS. Except as set forth on the "Environmental
Schedule" attached hereto:
(a) The Company has complied with and is currently in compliance with all
Environmental and Safety Requirements, and the Company has not received any oral
or written notice, report or information regarding any liabilities (whether
accrued, absolute, contingent, unliquidated or otherwise) or any corrective,
investigatory or remedial obligations arising under Environmental and Safety
Requirements which relate to the Company or any of its properties or facilities.
(b) Without limiting the generality of the foregoing, the Company has obtained
and complied with, and is currently in compliance with, all permits, licenses
and other authorizations that may be required pursuant to any Environmental and
Safety Requirements for the occupancy of its properties or facilities or the
operation of its business. A list of all such permits, licenses and other
authorizations which are material to the Company is set forth on the
Environmental Schedule.
(c) Neither this Agreement or the other Transaction Documents nor the
consummation of the transactions contemplated hereby and thereby shall impose
any obligations on the Company or otherwise for site investigation or cleanup,
or notification to or consent of any government agencies or third parties under
any Environmental and Safety Requirements (including, without limitation, any so
called "transaction-triggered" or "responsible property transfer" laws and
regulations).
(d) None of the following exists at any property or facility owned, occupied
or operated by the Company: (i) underground storage tanks or surface
impoundments; (ii) asbestos-containing material in any form or condition; (iii)
materials or equipment containing polychlorinated biphenyls; or (iv) landfills.
(e) The Company has not treated, stored, disposed of, arranged for or
permitted the disposal of, transported, handled or Released any substance
(including, without limitation, any hazardous substance) or owned, occupied or
operated any facility or property, so as to give rise to liabilities of the
Company for response costs, natural resource damages or attorneys' fees pursuant
to CERCLA or any other Environmental and Safety Requirements.
(f) Without limiting the generality of the foregoing, no facts, events or
conditions relating to the past or present properties, facilities or operations
of the Company shall prevent, hinder or limit continued compliance with
Environmental and Safety Requirements, give rise to any corrective,
investigatory or remedial obligations pursuant to Environmental and Safety
Requirements or give rise to any other liabilities (whether accrued, absolute,
contingent, unliquidated or otherwise) pursuant to Environmental and Safety
Requirements, including, without limitation, those liabilities relating to
onsite or offsite Releases or threatened Releases of hazardous materials,
substances or wastes, personal injury, property damage or natural resources
damage.
(g) The Company has not, either expressly or by operation of law, assumed or
undertaken any liability or corrective investigatory or remedial obligation of
any other Person relating to any Environmental and Safety Requirements.
(h) No Environmental Lien has attached to any property owned, leased or
operated by the Company.
24
<PAGE>
5.23 DISCLOSURE. To the Company's and the Sellers' Knowledge, neither this
Agreement, the other Transaction Documents, nor any of the schedules,
attachments or Exhibits hereto, contain any untrue statement of a material fact
or omit a material fact necessary to make each statement contained herein or
therein, not misleading.
5.24 CLOSING DATE. All of the representations and warranties contained in
this Article V and elsewhere in this Agreement and all information delivered in
any schedule, attachment or Exhibit hereto or in any writing delivered to the
Purchaser are true and correct on the date of this Agreement and shall be true
and correct on the Closing Date, except to the extent that any Seller has
advised the Purchaser otherwise in writing prior to the Closing.
ARTICLE VI
REPRESENTATIONS AND WARRANTIES CONCERNING THE SELLERS
As a material inducement to the Purchaser to enter into this Agreement, each
Seller severally represents and warrants to the Purchaser that:
6.1 AUTHORIZATION OF TRANSACTIONS. Such Seller has full power, authority and
legal capacity to enter into this Agreement and the other documents contemplated
hereby to which such Seller is a party and to perform his obligations hereunder
and thereunder. This Agreement and the other documents contemplated hereby to
which such Seller is a party have been duly executed and delivered by such
Seller and constitute the valid and binding agreements of such Seller,
enforceable in accordance with their respective terms.
6.2 ABSENCE OF CONFLICTS. Neither the execution and the delivery of this
Agreement and the other documents contemplated hereby to which such Seller is a
party, nor the consummation of the transactions contemplated hereby and thereby,
shall (a) conflict with, result in a breach of any of the provisions of, (b)
constitute a default under, (c) result in the violation of, (d) give any third
party the right to terminate or to accelerate any obligation under, (e) result
in the creation of any Lien upon the Acquired Stock owned by such Seller, or (f)
require any authorization, consent, approval, execution or other action by or
notice to any court or other governmental body or agency (except for
authorizations, consents, approvals, and exemptions required as a result of the
Purchaser's legal or regulatory status), under the provisions of any indenture,
mortgage, lease, loan agreement or other agreement or instrument to which such
Seller is bound or affected, or any statute, regulation, rule, judgment, order,
decree or other restriction of any government, governmental agency or court to
which such Seller is subject. No notice to, filing with or authorization,
consent or approval of any government or governmental agency by such Seller is
necessary for the consummation of the transactions contemplated by this
Agreement and the other documents contemplated hereby to which such Seller is a
party.
6.3 BROKERAGE. Except as set forth on the Brokerage Schedule, there are no
claims for brokerage commissions, finders' fees or similar compensation in
connection with the transactions contemplated by this Agreement based on any
arrangement or agreement made by or on behalf of such Seller.
6.4 SHARES. Such Seller holds of record and owns beneficially the shares of
Acquired Stock as indicated on the Schedule of Stockholders, free and clear of
any Liens. Such Seller is not a party to any option, warrant, right, contract,
call, put or other agreement or commitment providing for the disposition or
acquisition of any capital stock of the Company (other than this Agreement).
Such Seller is not a party to any voting trust, proxy or other agreement or
understanding with respect to the voting of any capital stock of the Company.
6.5 CLOSING DATE. All of the representations and warranties concerning such
Seller contained in this Article VI and elsewhere in this Agreement and all
information delivered in any schedule, attachment or Exhibit hereto or in any
writing delivered to the Purchaser are true and correct on the date of this
Agreement and shall be true and correct on the Closing Date except to the extent
that such Seller has advised the Purchaser otherwise in writing prior to the
Closing.
25
<PAGE>
ARTICLE VII
LIMITATIONS ON REPRESENTATIONS AND WARRANTIES
CONCERNING THE COMPANY AND THE SELLERS
EXCEPT AS EXPRESSLY PROVIDED IN THIS AGREEMENT, SELLERS MAKE NO WARRANTIES OR
REPRESENTATIONS OF ANY KIND OR CHARACTER, EXPRESS OR IMPLIED, WITH RESPECT TO
THE COMPANY, THE BUSINESS OR PROPERTIES THEREOF. Without limiting the
foregoing, except as specifically set forth in this Agreement, the Sellers and
the Company have not made, or authorized anyone to make, any warranty or
representation about the Contracts, about the present operation, income
generated by, or any other matter or thing affecting or relating to the business
of the Company or any matter or thing pertaining to this Agreement, and no such
representation or warranty shall be implied. The Purchaser expressly
acknowledges that no such warranty or representation has been made and that the
Purchaser is not relying on any warranty or representation whatsoever other than
as is expressly set forth in this Agreement. Except as set forth in this
Agreement, the Purchaser shall accept the Company and its assets, liabilities
and operations "as is," "where is," subject to all defects, and in its condition
on the date of Closing.
ARTICLE VIII
REPRESENTATIONS AND WARRANTIES CONCERNING THE PURCHASER
As a material inducement to the Sellers to enter into this Agreement, the
Purchaser hereby represents and warrants to the Sellers that:
8.1 ORGANIZATION AND CORPORATE POWER. The Purchaser is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware, with full corporate power and authority to enter into this Agreement
and the other agreements contemplated hereby to which the Purchaser is a party
and perform its obligations hereunder and thereunder.
8.2 AUTHORIZATION OF TRANSACTION. The execution, delivery and performance of
this Agreement and the other agreements contemplated hereby to which the
Purchaser is a party have been duly and validly authorized by all requisite
corporate action on the part of the Purchaser, and no other corporate
proceedings on its part are necessary to authorize the execution, delivery or
performance of this Agreement. This Agreement constitutes, and each of the
other agreements contemplated hereby to which the Purchaser is a party shall
when executed constitute, a valid and binding obligation of the Purchaser,
enforceable in accordance with their terms.
8.3 NO VIOLATION. The Purchaser is not subject to or obligated under its
certificate of incorporation, its by-laws, any applicable law, or rule or
regulation of any governmental authority, or any agreement or instrument, or any
license, franchise or permit, or subject to any order, writ, injunction or
decree, which would be breached or violated by its execution, delivery or
performance of this Agreement and the other agreements contemplated hereby to
which the Purchaser is a party.
8.4 GOVERNMENTAL AUTHORITIES AND CONSENTS. The Purchaser is not required to
submit any notice, report or other filing with any governmental authority in
connection with the execution or delivery by it of this Agreement and the other
agreements contemplated hereby to which the Purchaser is a party or the
consummation of the transactions contemplated hereby or thereby. No consent,
approval or authorization of any governmental or regulatory authority or any
other party or person is required to be obtained by the Purchaser in connection
with its execution, delivery and performance of this Agreement and the other
agreements contemplated hereby to which the Purchaser is a party or the
transactions contemplated hereby or thereby.
8.5 LITIGATION. There are no actions, suits, proceedings or orders pending
or, to the Purchaser's knowledge, threatened against or affecting the Purchaser
at law or in equity, or before or by any federal, state, municipal or other
governmental department, commission, board, bureau, agency or instrumentality,
domestic or foreign, which
26
<PAGE>
would adversely affect the Purchaser's performance under this Agreement and the
other agreements contemplated hereby to which the Purchaser is a party or the
consummation of the transactions contemplated hereby or thereby.
8.6 BROKERAGE. There are no claims for brokerage commissions, finders' fees
or similar compensation in connection with the transactions contemplated by this
Agreement based on any arrangement or agreement made by or on behalf of the
Purchaser.
8.7 CLOSING DATE. All of the representations and warranties contained in this
Article VIII and elsewhere in this Agreement and all information delivered in
any schedule, attachment or Exhibit hereto or in any writing delivered to the
Sellers are true and correct on the date of this Agreement and shall be true and
correct on the Closing Date, except to the extent that the Purchaser has advised
the Sellers otherwise in writing prior to the Closing.
ARTICLE IX
TERMINATION
9.1 TERMINATION. This Agreement may be terminated at any time prior to the
Closing:
(a) by mutual written consent of the Representative and the Purchaser;
(b) by the Representative or the Purchaser if there has been a material
misrepresentation or breach on the part of the other Party of the
representations, warranties or covenants set forth in this Agreement or if
events have occurred which have made it impossible to satisfy a condition
precedent to the terminating Party's obligations to consummate the transactions
contemplated hereby unless such terminating Party's willful or knowing breach of
this Agreement has caused the condition to be unsatisfied; or
(c) by the Representative or the Purchaser if the Closing has not occurred on
or prior to July 18, 1997; provided, however, that neither the Purchaser nor
the Representative shall be entitled to terminate this Agreement pursuant to
this Section 9.1(c) if such Party's willful or knowing breach of this Agreement
has prevented the consummation of the transactions contemplated hereby at or
prior to such time.
9.2 EFFECT OF TERMINATION. In the event of termination of this Agreement by
either the Representative or the Purchaser as provided in Section 9.1, this
Agreement shall forthwith become void and there shall be no liability on the
part of any Party to any other Party under this Agreement, except that the
provisions of Section 11.7 and Article XII shall continue in full force and
effect and except that nothing herein shall relieve any Party from liability for
any breach of this Agreement prior to such termination.
ARTICLE X
INDEMNIFICATION AND RELATED MATTERS
10.1 SURVIVAL. All representations, warranties, covenants and agreements set
forth in this Agreement or in any writing or certificate delivered in connection
with this Agreement shall survive the Closing Date and the consummation of the
transactions contemplated hereby and shall not be affected by any examination
made for or on behalf of any Party, the knowledge of any of such Party's
officers, directors, stockholders, employees or agents, or the acceptance of any
certificate or opinion. Notwithstanding the foregoing, no Party shall be
entitled to recover for any Loss pursuant to Section 10.2(a)(i), 10.2(a)(ii), or
Section 10.2(c)(i) unless written notice of a claim thereof is delivered to the
other Party prior to the Applicable Limitation Date. For purposes of this
Agreement, the term "Applicable Limitation Date" shall mean the second
anniversary of the Closing Date; provided that the Applicable Limitation Date
with respect to the following Losses shall be as follows: (i) with respect to
any Loss arising from or related to a breach of the representations and
warranties of the Company and the Sellers set forth in Sections 5.10 (Taxes) and
5.17 (Employee Benefit Matters), the Applicable Limitation Date shall be the
30th day after expiration of the statute of limitations (including any
extensions thereto to the extent that such statute of limitations may be
27
<PAGE>
tolled) applicable to the Tax which gave rise to such Loss, (ii) with respect to
any Loss arising from or related to a breach of the representations and
warranties of the Company and the Sellers set forth in Section 5.22
(Environmental Matters), the Applicable Limitation Date shall be the fifth
anniversary of the Closing Date, and (iii) with respect to any Loss arising from
or related to a breach of the representations and warranties of the Company and
the Sellers set forth in Section 5.1 (Organization and Corporate Power), Section
5.2 (Authorization of Transactions), Section 5.3 (Capitalization), Section 5.5
(Absence of Conflicts), Section 5.14 (Brokerage) or Article V (Representations
and Warranties with Respect to the Sellers) and with respect to any Loss arising
from or related to a breach of the representations and warranties of the
Purchaser set forth in Section 7.1 (Organization an Corporate Power), 7.2
(Authorization of Transactions), 7.3 (No Violation) or 7.6 (Brokerage), there
shall be no Applicable Limitation Date (i.e., such representations and
warranties shall survive forever).
10.2 INDEMNIFICATION.
(a) Subject to the limitations set forth in Section 10.1, each Seller shall
jointly and severally indemnify the Purchaser, and the Company and each of their
respective officers, directors, stockholders, employees, agents,
representatives, affiliates, successors and assigns (collectively, the
"Purchaser Parties") and hold each of them harmless from and against and pay on
behalf of or reimburse such Purchaser Parties in respect of any Loss which any
such Purchaser Party may suffer, sustain or become subject to, as a result of or
relating to:
(i) the breach of any representation or warranty made by the Company or
any Seller contained in this Agreement (other than representations or
warranties set forth in Article VI) or any certificate delivered by the
Company or any Seller to the Purchaser with respect thereto in connection with
the Closing;
(ii) the breach of any representation or warranty made by such Seller
contained in Article VI of this Agreement or any certificate delivered by such
Seller to the Purchaser with respect thereto in connection with the Closing;
(iii) the breach of any covenant or agreement made by the Company or any
Seller contained in this Agreement, the other Transaction Documents, any
Exhibit hereto or any certificate delivered by the Company or any Seller to
the Purchaser with respect thereto in connection with the Closing; or
(iv) any current or former underground storage tank located on the 1550
East Market Street property in Harrisonburg, Virginia.
The Purchaser's remedy for any indemnification of Losses hereunder may be
satisfied by proceeding against one or more Sellers individually for all or any
portion of any such Loss; provided that no Seller shall be liable hereunder for
Losses in excess of such Seller's pro rata portion of the Cap based on such
Seller's proportionate ownership of the Acquired Stock as set forth on the
Schedule of Stockholders. Notwithstanding the foregoing, if any such Loss
arises from a breach of such Seller's representation or warranty contained in
Article V, the Purchaser shall proceed solely against such breaching Seller for
the entire amount of such Loss.
(b) The indemnification provided for in Section 10.2(a)(i) above is subject to
the following limitations:
(i) the Sellers will be liable to the Purchaser Parties with respect to
claims referred to in Section 10.2(a)(i) only if the Purchaser gives the
Representative written notice thereof within the Applicable Limitation Date;
(ii) The aggregate amount of all payments made by the Sellers in
satisfaction of claims for indemnification pursuant to Section 10.2(a)(i)
shall not exceed the Purchase Price (the "Cap"); and
(iii) Notwithstanding anything in this Agreement to the contrary, the
Sellers shall not be responsible for any Loss resulting from the failure of
the Company to comply with Worker Safety Requirements after the Closing even
if the Company is operated after the Closing in the same manner in which the
Company was operated prior to Closing. "Worker Safety Requirements" means all
federal, state, local and foreign statutes, regulations,
28
<PAGE>
ordinances and similar provisions having the force or effect of law, all
judicial and administrative orders and determinations, all contractual
obligations and all common law concerning worker safety.
Notwithstanding any implication to the contrary contained in this Agreement, so
long as the Purchaser delivers written notice of a claim to the Sellers no later
than the Applicable Limitation Date, the Sellers shall be required to indemnify
the Purchaser Parties for all Losses (up to the Cap) which the Purchaser Parties
may incur in respect of the matters which are the subject of such claim,
regardless of when incurred.
(c) The Purchaser shall indemnify the Sellers and hold each Seller and its
officers, directors, stockholders, employees, agents, representatives,
affiliates, successors and assigns (collectively, the "Seller Parties") harmless
from and against and pay on behalf of or reimburse such Sellers in respect of
any Loss which any Seller Parties may suffer, sustain or become subject to, as a
result of or relating to:
(i) the breach of any representation or warranty made by the Purchaser
contained in Article VIII of this Agreement or any certificate delivered by
the Purchaser to the Sellers with respect thereto in connection with the
Closing; or
(ii) the breach of any representation, warranty (other than
representations or warranties set forth in Article VIII), covenant or
agreement made by the Purchaser contained in this Agreement, the other
Transaction Documents, any Exhibit hereto or any certificate delivered by the
Purchaser to the Sellers with respect thereto in connection with the Closing.
(d) The indemnification provided for in Section 10.2(c)(i) above is subject to
the following limitations:
(i) The Purchaser will be liable to the Seller Parties with respect to
claims referred to in Section 10.2(c)(i) only if a Seller gives the Purchaser
written notice thereof within the Applicable Limitation Date; and
(ii) The aggregate amount of all payments made by the Purchaser in
satisfaction of claims for indemnification pursuant to Section 10.2(c)(i)
shall not exceed $5,980,000 (the "Purchaser Cap").
Notwithstanding any implication to the contrary contained in this Agreement, so
long as the Representative delivers written notice of a claim to the Purchaser
no later than the Applicable Limitation Date, the Purchaser shall be required to
indemnify the Seller Parties for all Losses (up to the Purchaser Cap) which the
Seller Parties may incur in respect of the matters which are the subject of such
claim, regardless of when incurred.
(e) If a party hereto seeks indemnification under this Article X, such party
(the "Indemnified Party") shall give written notice to the other party (the
"Indemnifying Party") promptly after receiving written notice of any action,
lawsuit, proceeding, investigation or other claim against it (if by a third
party) or discovering the liability, obligation or facts giving rise to such
claim for indemnification, describing the claim, the amount thereof (if known
and quantifiable), and the basis thereof; provided that the failure to so notify
the Indemnifying Party shall not relieve the Indemnifying Party of its or his
obligations hereunder except to the extent such failure shall have prejudiced
the Indemnifying Party. In that regard, if any action, lawsuit, proceeding,
investigation or other claim shall be brought or asserted by any third party
which, if adversely determined, would entitle the Indemnified Party to indemnity
pursuant to this Article X, the Indemnified Party shall promptly notify the
Indemnifying Party of the same in writing, specifying in detail the basis of
such claim and the facts pertaining thereto and the Indemnifying Party shall be
entitled to contest and to participate in the defense of such action, lawsuit,
proceeding, investigation or other claim giving rise to the Indemnified Party's
claim for indemnification at its expense, and at its option (subject to the
limitations set forth below) shall be entitled to appoint lead counsel of such
defense with reputable counsel reasonably acceptable to the Indemnified Party;
provided that the Indemnifying Party shall not have the right to assume control
of such defense and shall pay the fees and expenses of counsel retained by the
Indemnified Party, if the claim which the Indemnifying Party seeks to assume
control (i) seeks non-monetary relief, (ii) involves criminal allegations,
(iii) involves a claim to which the Indemnified Party reasonably believes an
adverse determination would have a material adverse effect on the Indemnified
Party's reputation or future business prospects, or (iv)
29
<PAGE>
involves a claim which, upon petition by the Indemnified Party, the appropriate
court rules that the Indemnifying Party failed or is failing to vigorously
prosecute or defend.
If the Indemnifying Party is permitted to assume and control the defense and
elects to do so, the Indemnified Party shall have the right to employ counsel
separate from counsel employed by the Indemnifying Party in any such action and
to participate in the defense thereof, but the fees and expenses of such counsel
employed by the Indemnified Party shall be at the expense of the Indemnified
Party unless (i) the employment thereof has been specifically authorized by the
Indemnifying Party in writing, or (ii) the Indemnifying Party has been advised
by counsel that a reasonable likelihood exists of a conflict of interest between
the Indemnifying Party and the Indemnified Party.
The Indemnifying Party shall not be liable to indemnify the Indemnified Party
under this Agreement for any amounts paid by the Indemnified Party in settlement
of any action or claim effected without the Indemnifying Party's written
consent, which consent shall not be unreasonably withheld. If the Indemnifying
Party shall control the defense of any such claim, the Indemnifying Party shall
obtain the prior written consent of the Indemnified Party (which shall not be
unreasonably withheld) before entering into any settlement of a claim or ceasing
to defend such claim, if pursuant to or as a result of such settlement or
cessation, injunction or other equitable relief will be imposed against the
Indemnified Party or if such settlement does not expressly unconditionally
release the Indemnified Party from all liabilities and obligations with respect
to such claim, without prejudice.
(f) If the Indemnifying Party reasonably elects to contest any demand,
assertion, or claim, it shall not be obligated to make any payments to the
Indemnified Party with respect thereto until the legal remedies available to the
Indemnifying Party or the Indemnified Party, as the case may be, with respect to
such demand, assertion, or claim, shall have been exhausted.
(g) If requested by the Indemnifying Party, the Indemnified Party agrees to
cooperate with the Indemnifying Party in contesting any legitimate demand,
assertion, or claim which the Indemnifying Party elects to contest, or, if
appropriate, in the making of any legitimate counterclaim or demand against the
person asserting such demand, assertion, or claim or any cross-complaint which
Indemnifying Party elects to contest, but the Indemnifying Party shall reimburse
Indemnified Party for any expenses incurred by the Indemnified Party in so
cooperating with the Indemnifying Party. If such counterclaim or cross-
complaint results in receipts by Indemnified Party of amounts in excess of the
amount which is subject to any such demand, assertion or claim, such excess
shall first be applied to the payment of the reasonable costs and expenses of
Indemnifying Party incurred in connection with such contest, counterclaim, or
cross complaint, and the balance retained by Indemnified Party.
(h) The Indemnifying Party shall pay the Indemnified Party in immediately
available funds promptly after the first to occur of (i) the time at which the
Indemnified Party provides the Indemnifying Party with written notice of a claim
hereunder and the Parties agree that the claim entitles the Indemnified Party to
indemnity pursuant to this Article X and agree not to contest such claim or (ii)
the time at which a court of competent jurisdiction determines that the
Indemnifying Party is liable to the Indemnified Party with respect to a claim
hereunder.
(i) Amounts paid to or on behalf of the Sellers or the Purchaser as
indemnification shall be treated as adjustments to the Purchase Price.
(j) In the event of payment under this Agreement, the Indemnifying Party shall
be subrogated to the extent of such payment to all of the rights of recovery of
the Indemnified Party, who shall execute all reasonable papers required and take
such other reasonable actions that may be necessary to secure such rights,
including the execution of such documents necessary to enable the Indemnifying
Party effectively to bring suit to enforce such rights.
(k) Effective upon the Closing, each Seller hereby irrevocably waives,
releases and discharges the Company from any and all liabilities and obligations
to such Seller of any kind or nature whatsoever, whether in his capacity as a
Seller hereunder, as a stockholder, officer or director of the Company or
otherwise (including, without limitation, in respect of rights of contribution
or indemnification other than compensation as an employee of the Company), in
each case whether absolute or contingent, liquidated or unliquidated, and
whether arising hereunder
30
<PAGE>
or under any other agreement or understanding or otherwise at law or equity, and
Company shall not seek to recover any amounts in connection therewith or
thereunder from any of the Sellers.
(l) Effective upon the Closing, and except as otherwise expressly provided in
this Agreement, the Company hereby irrevocably waives, releases and discharges
each of the Sellers from any and all liabilities and obligations to the Company
of any kind or nature whatsoever, whether in its capacity as a stockholder,
employee, officer or director of the Company or otherwise in each case whether
absolute or contingent, liquidated or unliquidated, and whether arising
hereunder or under any other agreement or understanding or otherwise at law or
equity, and Company shall not seek to recover any amounts in connection
therewith or thereunder from any of the Sellers.
ARTICLE XI
ADDITIONAL AGREEMENTS
11.1 CONTINUING ASSISTANCE. Subsequent to the Closing, each Seller and the
Purchaser (at their own cost) shall assist each other (including making records
available) in the preparation of their respective Tax Returns and the filing and
execution of Tax elections, if required, as well as any audits or litigation
that ensue as a result of the filing thereof, to the extent that such assistance
is reasonably requested.
11.2 TAX MATTERS.
(a) All transfer, documentary, sales, use, stamp, registration and other such
Taxes and fees (including any penalties and interest thereon) incurred in
connection with this Agreement shall be paid by the Sellers when due, and each
Seller shall, at his or its own expense, file all necessary Tax Returns and
other documentation with respect to all such transfer, documentary, sales, use,
stamp, registration and other Taxes and fees, and if required by applicable law,
the Purchaser shall, and shall cause its affiliates to, join in the execution of
any such Tax Returns and other documentation.
(b) The Sellers shall reimburse the Purchaser for all Taxes of the Company
with respect to any period (or portion thereof) ending on or before the Closing
Date within ten days of payment by the Purchaser or the Company of such Taxes to
the extent such Taxes are not accrued as liabilities in the Actual Net Equity
amount. For purposes of this Section 11.2(b), in the case of any Taxes that are
imposed on a periodic basis and are payable for a Taxable period that includes
(but does not end on) the Closing Date, the portion of such Tax which is respect
to the portion of such Taxable period ending on the Closing Date shall (x) in
the case of any Taxes other than Taxes based upon or related to income or
receipts, be deemed to be the amount of such Tax for the entire Taxable period
multiplied by a fraction the numerator of which is the number of days in the
Taxable period ending on the Closing Date and the denominator of which is the
number of days in the entire Taxable period, and (y) in the case of any Tax
based upon or related to income or receipts be deemed equal to the amount which
would be payable if the relevant Taxable period ended on the Closing Date.
11.3 PRESS RELEASES AND ANNOUNCEMENTS. Prior to the Closing Date, no press
releases related to this Agreement and the transactions contemplated herein, or
other announcements to the employees, customers or suppliers of the Company
shall be issued without the mutual approval of all Parties, except for any
public disclosure which any Party in good faith believes is required by law or
regulation (in which case the disclosure shall be prepared jointly by the
Sellers and the Purchaser). After the Closing Date, no press releases related to
this Agreement and the transactions contemplated herein, or other announcements
to the employees, customers or suppliers of the Company shall be issued without
the Purchaser's consent (which shall not be unreasonably withheld).
11.4 FURTHER TRANSFERS. Each Seller shall execute and deliver such further
instruments of conveyance and transfer and take such additional action as the
Purchaser may reasonably request to effect, consummate, confirm or evidence the
transfer to the Purchaser of the Acquired Stock and any other transactions
contemplated hereby.
31
<PAGE>
11.5 SPECIFIC PERFORMANCE. Each Seller acknowledges that the Company's
business is unique and recognizes and affirms that in the event of a breach of
this Agreement by such Seller, money damages may be inadequate and the Purchaser
may have no adequate remedy at law. Accordingly, each Seller agrees that the
Purchaser shall have the right, in addition to any other rights and remedies
existing in its favor, to enforce its rights and such Seller's obligations
hereunder not only by an action or actions for damages but also by an action or
actions for specific performance, injunctive and/or other equitable relief.
11.6 TRANSITION ASSISTANCE. Each Seller shall not in any manner take any
action which is designed, intended, or might be reasonably anticipated to have
the effect of discouraging customers, suppliers, lessors, licensors and other
business associates from maintaining the same business relationships with the
Company after the date of this Agreement as were maintained with the Company
prior to the date of this Agreement.
11.7 EXPENSES. Except as otherwise provided herein, each Seller and the
Purchaser shall pay all of their own fees, costs and expenses (including,
without limitation, fees, costs and expenses of legal counsel, investment
bankers, accountants, brokers or other representatives and consultants and
appraisal fees, costs and expenses) incurred in connection with the negotiation
of the this Agreement and the other agreements contemplated hereby, the
performance of its obligations hereunder and thereunder, and the consummation of
the transactions contemplated hereby and thereby.
11.8 EXCLUSIVITY. Until this Agreement is terminated by its terms, neither
the Company nor the Sellers (and neither the Company nor the Sellers shall cause
or permit any Insider or agent or any other Person acting on behalf of any
Seller, the Company, or its Affiliates to), (a) solicit, initiate or encourage
the submission of any proposal or offer from any Person (including any of them)
relating to any (i) liquidation, dissolution or recapitalization of, (ii) merger
or consolidation with or into, (iii) acquisition or purchase of assets of or any
equity interest in or (iv) similar transaction or business combination involving
the Company or (b) participate in any discussions or negotiations regarding,
furnish any information with respect to, assist or participate in, or facilitate
in any other manner any effort or attempt by any other Person to do or seek any
of the foregoing. The Company and each Seller agrees that it will discontinue
immediately any negotiations or discussion with respect to any of the foregoing.
Until this Agreement is terminated by its terms, the Sellers and the Company
shall notify the Purchaser immediately if any Person makes any proposal, offer,
inquiry or contact with respect to any of the foregoing.
11.9 BOOKS AND RECORDS. Unless otherwise consented to in writing by the
Sellers or the Purchaser (as the case may be), the Purchaser and the Sellers
will not, for a period of seven years following the date hereof, destroy, alter
or otherwise dispose of any of the books and records of the Company acquired by
the Purchaser hereunder or retained by any Seller without first offering to
surrender to the Sellers or the Purchaser such books and records or any portion
thereof of which the Sellers or the Purchaser may intend to destroy, alter or
dispose. The Purchaser and the Sellers will allow the other party's
representatives, attorneys and accountants access to such books and records,
upon reasonable request for during such party's normal business hours, for the
purpose of examining and copying the same in connection with any matter whether
or not related to or arising out of this Agreement or the transactions
contemplated hereby.
11.10 APPOINTMENT OF REPRESENTATIVE.
(a) Powers of Attorney. Each Seller irrevocably constitutes and appoints Marc
Trubitz (the "Representative") as such Seller's true and lawful agent, proxy and
attorney-in-fact and agent and authorizes the Representative acting for such
Seller and in such Seller's name, place and stead, in any and all capacities to
do and perform every act and thing required or permitted to be done in
connection with the transactions contemplated by this Agreement, as fully to all
intents and purposes as such Person might or could do in person, including,
without limitation:
(i) determine the presence (or absence) of claims for indemnification
against the Purchaser pursuant to Section 10.2 above;
(ii) deliver all notices required to be delivered by such Seller under
this Agreement, including, without limitation, any notice of a claim for which
indemnification is sought under Section 10.2 above;
32
<PAGE>
(iii) receive all notices required to be delivered to such Seller under
this Agreement, including, without limitation, any notice of a claim for which
indemnification is sought under Section 10.2 above;
(iv) take any and all action on behalf of such Seller from time to time
as the Representative may deem necessary or desirable to defend, pursue,
resolve and/or settle claims under this Agreement, including, without
limitation, indemnification under Section 10.2; and
(v) to engage and employ agents and representatives (including
accountants, legal counsel and other professionals) and to incur such other
expenses as he deems necessary or prudent in connection with the
administration of the foregoing.
Each Seller grants unto said attorney-in-fact and agent full power and authority
to do and perform each and every act and thing necessary or desirable to be done
in connection with the transactions contemplated by this Agreement, as fully to
all intents and purposes as the undersigned might or could do in person, hereby
ratifying and confirming all that the Representative may lawfully do or cause to
be done by virtue hereof. Each Seller will, by executing this Agreement agree
that such agency, proxy and power of attorney are coupled with an interest, and
are therefore irrevocable without the consent of the Representative and shall
survive the death, incapacity, or bankruptcy of such Seller. Each Seller
acknowledges and agrees that upon execution of this Agreement, any delivery by
the Representative of any waiver, amendment, agreement, opinion, certificate or
other documents executed by the Representative or any decisions made by the
Representative pursuant to this Section 11.10, such Seller shall be bound by
such documents or decision as fully as if such Seller had executed and delivered
such documents or made such decisions.
(b) The Representative shall not have by reason of this Agreement a fiduciary
relationship in respect of any Seller, except in respect of amounts received on
behalf of such Seller. The Representative shall not be liable to any Seller for
any action taken or omitted by him or any agent employed by him hereunder or
under any other Transaction Document, or in connection therewith, except that
the Representative shall not be relieved of any liability imposed by law for
gross negligence or willful misconduct. The Representative shall not be liable
to the Sellers for any apportionment or distribution of payments made by him in
good faith, and if any such apportionment or distribution is subsequently
determined to have been made in error the sole recourse of any Seller to whom
payment was due, but not made, shall be to recover from other Sellers any
payment in excess of the amount to which they are determined to have been
entitled. The Representative shall not be required to make any inquiry
concerning either the performance or observance of any of the terms, provisions
or conditions of this Agreement.
(c) Replacement of the Representative. Upon the resignation, death,
disability or incapacity of the initial Representative appointed pursuant to
Section 11.10(a) above, each Seller acknowledges and agrees that Suellen Trubitz
become the Representative hereunder. In the event of the resignation, death,
disability or incapacity of Suellen Trubitz as the Representative hereunder,
each Seller acknowledges and agrees that such Representative's executor,
guardian or legal representative, as the case may be, shall (in consultation
with the Sellers) appoint a replacement reasonably believed by such person as
capable of carrying out the duties and performing the obligations of the
Representative hereunder within thirty (30) days. Any substituted
representative shall be deemed the Representative for all purposes of this
Agreement and the other Transaction Documents.
33
<PAGE>
(d) Actions of the Representative; Liability of the Representative. Each
Seller agrees that the Purchaser shall be entitled to rely on any action taken
by the Representative, on behalf of the Sellers, pursuant to Section 11.10(a)
above (each, an "Authorized Action"), and that each Authorized Action shall be
binding on each Seller as fully as if such Seller had taken such Authorized
Action. The Purchaser agrees that the Representative shall have no liability to
the Purchaser for any Authorized Action, except to the extent that such
Authorized Action is found by a final order of a court of competent jurisdiction
to have constituted fraud or willful misconduct. The Sellers jointly and
severally agree to pay, and to indemnify and hold harmless the Purchaser from
and against any losses which they may suffer, sustain, or become subject to, as
the result of any claim by any Person that an Authorized Action is not binding
on, or enforceable against, the Sellers. In addition, the Sellers hereby
release and discharge the Purchaser from and against any liability arising out
of or in connection with the Representative's failure to distribute any amounts
received by the Representative on the Sellers' behalf to the Sellers.
(e) Allocation of Payments. Subject to Section 10.2(a), whenever the Sellers
are entitled to receive any payments hereunder or are obligated to make any
payments hereunder (including those specified in Section 10.2), each Seller
shall be entitled to receive from the Purchaser or shall be obligated to pay to
the Purchaser such portion of any such payment as set forth on the Schedule of
Stockholders.
11.11 CONFIDENTIALITY.
(a) Confidentiality. Each Seller shall treat and hold as confidential any
information concerning the business and affairs of the Company that is not
already generally available to the public (the "Confidential Information"),
refrain from using any of the Confidential Information except in connection with
this Agreement, and deliver promptly to the Purchaser or destroy, at the request
and option of the Purchaser, all tangible embodiments (and all copies) of the
Confidential Information which are in his possession or under his control. In
the event that any Seller is requested or required (by oral question or request
for information or documents in any legal proceeding, interrogatory, subpoena,
civil investigative demand, or similar process) to disclose any Confidential
Information, such Seller shall notify the Purchaser promptly of the request or
requirement so that the Purchaser may seek an appropriate protective order or
waive compliance with the provisions of this Section 11.11(a). If, in the
absence of a protective order or the receipt of a waiver hereunder, any Seller
is, on the advice of counsel, compelled to disclose any Confidential Information
to any tribunal or else stand liable for contempt, such Seller may disclose the
Confidential Information to the tribunal; provided that such disclosing Seller
shall use his best efforts to obtain, at the request of the Purchaser, an order
or other assurance that confidential treatment shall be accorded to such portion
of the Confidential Information required to be disclosed as the Purchaser shall
designate.
(b) Trade Names. No Seller shall use or permit any of his or its affiliates
to use the "Equipco Sales & Rentals" name or any name confusingly similar
thereto in any manner anywhere in the world after Closing.
(c) Remedy for Breach. Each Seller acknowledges and agrees that in the event
of a breach by any Seller of any of the provisions of this Section 11.11,
monetary damages shall not constitute a sufficient remedy. Consequently, in the
event of any such breach, the Company, the Purchaser and/or their respective
successors or assigns may, in addition to other rights and remedies existing in
their favor, apply to any court of law or equity of competent jurisdiction for
specific performance and/or injunctive or other relief in order to enforce or
prevent any violations of the provisions hereof, in each case without the
requirement of posting a bond or proving actual damages.
ARTICLE XII
MISCELLANEOUS
12.1 AMENDMENT AND WAIVER; TIME IS OF THE ESSENCE. This Agreement may be
amended and any provision of this Agreement may be waived, provided that any
such amendment or waiver shall be binding upon a Party only if such amendment or
waiver is set forth in a writing executed by the Purchaser and Representative.
No course of dealing between or among any persons having any interest in this
Agreement shall be deemed effective to modify, amend or discharge any part of
this Agreement or any rights or obligations of any Party under or by reason of
this Agreement. Time is of the essence of this Agreement
34
<PAGE>
12.2 NOTICES. All notices, demands and other communications given or
delivered under this Agreement shall be in writing and shall be deemed to have
been given when personally delivered, mailed by first class mail, return receipt
requested, or delivered by express courier service or telecopied (with hard copy
to follow). Notices, demands and communications to each Seller shall, unless
another address is specified in writing, or unless receipt of notice has been
specifically delegated to the Representatives under this Agreement, be sent to
the address or telecopy number indicated on the signature page attached hereto,
and notices, demands and communications to the Representative, the Company and
the Purchaser shall, unless another address is specified in writing, be sent to
the address or telecopy number indicated below:
Notices to any Seller: with a copy to:
c/o Marc Trubitz Williams, Parker, Hamilton, Dietz & Getzen
5070 Gulf of Mexico Drive 200 South Orange Avenue
Longboat Key, FL 34228 Sarasota, FL 34236-6749
Telecopy: (941) 387-9262 Attention: James L. Turner, Esq.
Notices to the Company (before
the Closing): with a copy to:
c/o Marc Trubitz Williams, Parker, Hamilton, Dietz & Getzen
P.O. Box 1537 200 South Orange Avenue
Harrisonburg, VA 22801 Sarasota, FL 34236-6749
Telecopy: (540) 433-4064 Attention: James L. Turner, Esq.
Telecopy: (941) 366-5109
Notices to the Company (after
the Closing): with a copy to:
c/o National Equipment Services, Kirkland & Ellis
Inc. 200 East Randolph Drive
1800 Sherman Avenue, Suite 100 Chicago, IL 60601
Evanston, IL 60201 Attention: Sanford E.Perl, Esq.
Attention: President Telecopy: (312) 861-2200
Telecopy: (847) 733-1078
Notices to the Purchaser: with a copy to:
- ------------------------- ---------------
National Equipment Services, Inc. Kirkland & Ellis
1800 Sherman Avenue, Suite 100 200 East Randolph Drive
Evanston, IL 60201 Chicago, IL 60601
Attention: President Attention: Sanford E. Perl, Esq.
Telecopy: (847) 733-1078 Telecopy: (312) 861-2200
12.3 BINDING AGREEMENT; ASSIGNMENT. This Agreement and all of the provisions
hereof shall be binding upon and inure to the benefit of the Parties and their
respective successors and permitted assigns; provided that neither this
Agreement nor any of the rights, interests or obligations hereunder may be
assigned by any Seller without the prior written consent of the Purchaser or by
the Purchaser (except as otherwise provided in this Agreement) without the prior
written consent of each Seller. Without limiting the generality of the
foregoing:
(a) The Purchaser may at any time prior to the Closing, at its sole
discretion, assign, in whole or in part, its rights and obligations pursuant to
this Agreement to one or more of its wholly-owned Subsidiaries; provided,
however, that the Purchaser shall nonetheless remain fully and primarily liable
under this Agreement. The Purchaser's "wholly-owned Subsidiaries" include
Subsidiaries which may be organized subsequent to the date hereof;
(b) The Purchaser may assign its rights under this Agreement for collateral
security purposes to any lender providing financing to the Purchaser, the
Company, or any of their Affiliates and any such lender may exercise all of the
rights and remedies of the Purchaser hereunder; provided, however, that the
Purchaser shall nonetheless remain fully and primarily liable under this
Agreement; and
35
<PAGE>
(c) The Purchaser may assign its rights under this Agreement, in whole or in
part, to any subsequent purchaser of substantially all of the Purchaser's
assets; provided, however, that the Purchaser shall nonetheless remain fully and
primarily liable under this Agreement; provided further that if such assignment
occurs prior to the fifth anniversary of the Closing Date and such assignee is
not reasonably acceptable to the Representative, then with respect to any Loss
arising from or related to a breach of the representations and warranties of the
Company and the Sellers set forth in (i) Section 5.22 (Environmental Matters),
the Applicable Limitation Date shall be shortened to become the later of (A) the
third anniversary of the Closing Date and (B) the date such assignment occurs or
(ii) in any other Section of Article V, except for Section 5.1 (Organization and
Corporate Power), Section 5.2 (Authorization of Transactions), Section 5.3
(Capitalization), Section 5.5 (Absence of Conflicts), Section 5.10 (Taxes),
Section 5.14 (Brokerage) and 5.17 (Employee Benefit Matters), the Applicable
Limitation Date shall be shortened to become the later of (A) the first
anniversary of the Closing Date and (B) the date such assignment occurs.
12.4 SEVERABILITY. Whenever possible, each provision of this Agreement shall
be interpreted in such manner as to be effective and valid under applicable law,
but if any provision of this Agreement is held to be prohibited by or invalid
under applicable law, such provision shall be ineffective only to the extent of
such prohibition or invalidity, without invalidating the remainder of such
provisions or the remaining provisions of this Agreement.
12.5 NO STRICT CONSTRUCTION. The language used in this Agreement shall be
deemed to be the language chosen by the Parties to express their mutual intent,
and no rule of strict construction shall be applied against any person.
12.6 CAPTIONS. The captions used in this Agreement are for convenience of
reference only and do not constitute a part of this Agreement and shall not be
deemed to limit, characterize or in any way affect any provision of this
Agreement, and all provisions of this Agreement shall be enforced and construed
as if no caption had been used in this Agreement.
12.7 ENTIRE AGREEMENT. This Agreement and the documents referred to herein
contain the entire agreement between the Parties and supersede any prior
understandings, agreements or representations by or between the Parties, written
or oral, which may have related to the subject matter hereof in any way.
12.8 COUNTERPARTS. This Agreement may be executed in multiple counterparts,
each of which shall be deemed an original but all of which taken together shall
constitute one and the same instrument.
12.9 GOVERNING LAW. All questions concerning the construction, validity and
interpretation of this Agreement shall be governed by and construed in
accordance with the domestic laws of the State of Illinois, without giving
effect to any choice of law or conflict of law provision (whether of the State
of Illinois or any other jurisdiction) that would cause the application of the
laws of any jurisdiction other than the State of Illinois.
12.10 PARTIES IN INTEREST. Nothing in this Agreement, express or implied, is
intended to confer on any person other than the Parties and their respective
successors and assigns any rights or remedies under or by virtue of this
Agreement.
12.11 ESCROW AGENT. Sole liability of the Escrow Agent shall be to take
custody of the Holdback and to disburse said escrowed monies according to the
terms of this Agreement. No fees shall be charged by Escrow Agent for setting
up the escrow and administering it. However, notwithstanding the foregoing, in
the event of a breach of this Agreement by either of the Sellers or the
Purchaser, and in the event of a dispute as to the disposition of said escrowed
funds, the parties hereto agree to allow the Escrow Agent to hold said funds
during any court proceedings, and jointly and severally agree to indemnify and
hold harmless the Escrow Agent from all liability hereunder and to reimburse the
Escrow Agent for all court costs and attorneys' fees incurred by it, including
attorneys' fees on appeal in the event it is joined in any legal proceedings
regarding this Agreement. The Purchaser acknowledges that Escrow Agent is the
attorney for the Sellers and agrees that Escrow Agent may represent the Sellers
in connection with any dispute arising under this Agreement, notwithstanding
such service as Escrow Agent
36
<PAGE>
under this Agreement. A copy of this Agreement shall be delivered to Escrow
Agent and shall constitute the escrow instructions. If any dispute arises
concerning disposition of the escrowed monies, Escrow Agent may retain the
earnest money deposit until receipt by Escrow Agent of written instructions
signed by all of the parties having an interest in such dispute and directing
the manner in which Escrow Agent should dispose of the escrowed monies until the
final determination of the rights of the parties in an appropriate judicial
proceeding. Escrow Agent shall incur no liability to any person whomsoever in
connection with the escrowed monies or actions taken or omissions occurring in
connection with this Agreement, except liability for Escrow Agent's gross
negligence or willful misconduct. Escrow Agent shall have no liability for the
failure of any institution in which Escrow Agent deposits the escrowed monies.
If the escrowed monies are to be placed in an interest-bearing account, escrow
Agent makes no warranties concerning the rate of return earned on the earnest
money deposit. The provisions of this Section shall survive the Closing or the
termination of this Agreement.
12.12 ATTORNEY'S FEES. In the event of any litigation between the parties
arising out of this Agreement, or the collection of any funds due the Purchaser
or the Seller pursuant to this Agreement, the prevailing party shall be entitled
to recover all costs incurred and a reasonable attorneys' fee, including
attorneys' fees on appeal.
12.13 SCHEDULES. The Schedules identified on the table of contents hereto are
incorporated herein by reference.
IN WITNESS WHEREOF, the Parties have executed this Stock Purchase Agreement as
of the date first written above.
NATIONAL EQUIPMENT SERVICES, INC.
By: /s/ Kevin P. Rodgers
------------------------------------
Its: CEO
-----------------------------------
MST ENTERPRISES, INC. D/B/A EQUIPCO
SALES & RENTALS
By: /s/ Marc Trubitz
------------------------------------
Its: President
-----------------------------------
/s/ Marc Trubitz
----------------------------------------
Marc Trubitz
/s/ Suellen Trubitz
----------------------------------------
Suellen Trubitz
WILLIAMS, PARKER, HARRISON, DIETZ
& GETZEN, as Escrow Agent
By: /s/ James L. Turner
------------------------------------
Its: V. P.
-----------------------------------
37
<PAGE>
Exhibit 10.21
================================================================================
ASSET PURCHASE AGREEMENT
BY AND AMONG
MCNABB ENTERPRISES, INC
THE STOCKHOLDERS OF MCNABB ENTERPRISES, INC
AND
BAT ACQUISITION CORP.
DATED AS OF JANUARY 16, 1998
===============================================================================
<PAGE>
INDEX OF SCHEDULES
------------------
Schedule of Stockholders
Excluded Assets Schedule
Organization Schedule
Subsidiaries Schedule
Conflicts Schedule
Financial Statements Schedule
Developments Schedule
Leases Schedule
Taxes Schedule
Contracts Schedule
Proprietary Rights Schedule
Brokerage Schedule
Permits Schedule
Employees Schedule
Insurance Schedule
Officers, Directors and Bank Accounts Schedule
Affiliated Transactions Schedule
Environmental Schedule
Purchase Price Allocation Schedule
- iv -
<PAGE>
INDEX OF EXHIBITS
-----------------
Exhibit A - K. McNabb Employment Agreement
Exhibit B - S. McNabb Employment Agreement
Exhibit C - Lease
Exhibit D - Noncompetition Agreement
- v -
<PAGE>
Exhibit 10.23
ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT is made as of January 16, 1998, by and
among McNabb Enterprises, Inc., a Nevada corporation (the "Seller"), the
------
stockholders of the Seller listed on the Schedule of Stockholders attached
------------------------
hereto (each a "Stockholder" and collectively, the "Stockholders"), and BAT
----------- ------------
Acquisition Corp., a Delaware corporation (the "Purchaser"). The Seller, the
---------
Stockholders and the Purchaser are referred to herein collectively as the
"Parties" and individually as a "Party."
- -------- -----
WHEREAS, the Stockholders own beneficially and of record 100% of the
issued and outstanding shares of capital stock of the Seller;
WHEREAS, the Seller is engaged in the equipment rental business (the
"Business"); and
- ---------
WHEREAS, upon the terms and subject to the conditions set forth in
this Agreement, the Purchaser desires to acquire from the Seller, and the Seller
desires to sell to the Purchaser, substantially all of the Seller's business,
assets and properties (operating as a going concern) constituting the Business.
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Parties, intending to be
legally bound, agree as follows:
ARTICLE I
DEFINITIONS
1.1 Definitions. For purposes hereof, the following terms, when used
-----------
herein with initial capital letters, shall have the respective meanings set
forth herein:
"Affiliate" of any Person means any other Person controlling,
---------
controlled by or under common control with such first Person, where "control"
-------
means the possession, directly or indirectly, of the power to direct the
management and policies of a Person whether through the ownership of voting
securities or otherwise.
"Affiliated Group" means an affiliated group as defined in Section
----------------
1504 of the Code (or any similar combined, consolidated or unitary group defined
under state, local or foreign income Tax law).
"Agreement" means this Asset Purchase Agreement, including all
---------
Exhibits and Schedules hereto, as it may be amended from time to time in
accordance with its terms.
"Baseline Total Assets" means $917,000.
---------------------
-1-
<PAGE>
"Business Day" means a day other than a Saturday, Sunday or other day
------------
on which commercial banks are authorized or required to close under the laws of
the United States.
"Cash" means cash, cash equivalents and marketable securities
----
(including, without limitation, all money market accounts, mutual fund accounts
and repurchase agreements).
"CERCLA" means the Comprehensive Environmental Response, Compensation
------
and Liability Act of 1980, as amended.
"Code" means the United States Internal Revenue Code of 1986, as
----
amended.
"Environmental Affiliates" of any Person means, with respect to any
------------------------
particular matter, all other Persons whose liabilities or obligations with
respect to that particular matter have been assumed by, or are otherwise deemed
by law to be those of, such first Person.
"Environmental and Safety Requirements" means all federal, state,
-------------------------------------
local and foreign statutes, regulations, ordinances and similar provisions
having the force or effect of law, all judicial and administrative orders and
determinations, all contractual obligations and all common law concerning public
health and safety, worker health and safety and pollution or protection of the
environment, including all such standards of conduct and bases of obligations
relating to the presence, use, production, generation, handling, transport,
treatment, storage, disposal, distribution, labeling, testing, processing,
discharge, release, threatened release, control, or cleanup of any hazardous
materials, substances or wastes, chemical substances or mixtures, pesticides,
pollutants, contaminants, toxic chemicals, petroleum products or by-products,
asbestos, polychlorinated biphenyls (or PCBs), noise or radiation.
"Environmental Lien" means any Lien, whether recorded or unrecorded,
------------------
in favor of any governmental entity or any department, agency or political
subdivision thereof relating to any liability of the Seller, any Subsidiary or
any Stockholder or any Environmental Affiliate of the Seller, any Subsidiary or
any Stockholder arising under any Environmental and Safety Requirement.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
-----
amended.
"GAAP" means, at a given time, United States generally accepted
----
accounting principles, consistently applied.
"Indebtedness" of any Person means, without duplication: (a)
------------
indebtedness for borrowed money or for the deferred purchase price of property
or services in respect of which such Person is liable, contingently or
otherwise, as obligor or otherwise (other than trade payables and other current
liabilities incurred in the ordinary course of business) and any commitment by
which such Person assures a creditor against loss, including contingent
reimbursement obligations with respect to letters of credit; (b) indebtedness
guaranteed in any manner by such Person, including a guarantee in the form of an
agreement to repurchase or reimburse; and (c) obligations under capitalized
leases in respect of which such Person is liable, contingently or otherwise, as
obligor, guarantor or otherwise, or in respect of which obligations such Person
assures a creditor against loss.
-2-
<PAGE>
"Insider" means, any officer, director, stockholder, partner or
-------
Affiliate, as applicable, of the Seller or any individual related by marriage or
adoption to any such individual or any entity in which any such Person owns any
beneficial interest.
"Licenses" means all permits, licenses, franchises, certificates,
--------
approvals and other authorizations of foreign, federal, state and local
governments or other similar rights.
"Liens" means any mortgage, pledge, security interest, encumbrance,
-----
lien or charge of any kind (including, without limitation, any conditional sale
or other title retention agreement or lease in the nature thereof), any sale of
receivables with recourse against the Seller or any Affiliate, any filing or
agreement to file a financing statement as debtor under the Uniform Commercial
Code or any similar statute other than to reflect ownership by a third party of
property leased to the Seller or any of its Subsidiaries under a lease which is
not in the nature of a conditional sale or title retention agreement, or any
subordination arrangement in favor of another Person (other than any
subordination arising in the ordinary course of business).
"Loss" means, with respect to any Person, any diminution in value,
----
consequential or other damage, liability, demand, claim, action, cause of
action, cost, damage, deficiency, Tax, penalty, fine or other loss or expense,
whether or not arising out of a third party claim, including all interest,
penalties, reasonable attorneys' fees and expenses and all amounts paid or
incurred in connection with any action, demand, proceeding, investigation or
claim by any third party (including any governmental entity or any department,
agency or political subdivision thereof) against or affecting such Person or
which, if determined adversely to such Person, would give rise to, evidence the
existence of, or relate to, any other Loss and the investigation, defense or
settlement of any of the foregoing.
"Material Adverse Effect" means any material adverse effect on the
-----------------------
business, financial condition, operations, results of operations, employee
relations, customer or supplier relations, assets or future prospects of the
Seller or any of its Subsidiaries.
"Ordinary Course of Business" means the ordinary course of the
---------------------------
Seller's or any of its Subsidiaries' business consistent with past practice
(including, without limitation, with respect to collection of accounts
receivable, purchases of inventory and supplies, repairs and maintenance,
payment of accounts payable and accrued expenses, levels of capital expenditures
and operation of cash management practices generally).
"Permitted Encumbrances" shall mean mechanics, carriers, workers,
----------------------
repairers and similar statutory liens arising or incurred in the ordinary course
of business for amounts which are not delinquent and which could not,
individually or in the aggregate, have a Material Adverse Effect on the Seller
or any of its Subsidiaries.
"Person" means an individual, a partnership, a corporation, an
------
association, a limited liability company, a joint stock company, a trust, a
joint venture, an unincorporated organization, a governmental entity or any
department, agency or political subdivision thereof and any other entity.
-3-
<PAGE>
"Proprietary Rights" means all (i) patents, patent applications,
------------------
patent disclosures and inventions, (ii) trademarks, service marks, trade dress,
trade names, logos, internet domain names and corporate names and registrations
and applications for registration thereof together with all of the goodwill
associated therewith, (iii) copyrights (registered or unregistered) and
copyrightable works and registrations and applications for registration thereof,
(iv) mask works and registrations and applications for registration thereof, (v)
computer software, data, data bases and documentation thereof, (vi) trade
secrets and other confidential information (including, without limitation,
ideas, formulas, compositions, inventions (whether patentable or unpatentable
and whether or not reduced to practice), know-how, manufacturing and production
processes and techniques, research and development information, drawings,
specifications, designs, plans, proposals, technical data, copyrightable works,
financial and marketing plans and customer and supplier lists and information),
(vii) other intellectual property rights and (viii) copies and tangible
embodiments thereof (in whatever form or medium).
"Release" has the meaning set forth in CERCLA.
-------
"Subsidiary" means, with respect to any Person, any corporation a
----------
majority of the total voting power of shares of stock of which is entitled
(without regard to the occurrence of any contingency) to vote in the election of
directors, managers or trustees thereof is at the time owned or controlled,
directly or indirectly, by that Person or one or more of the other Subsidiaries
of that Person or a combination thereof, or any partnership, limited liability
company, association or other business entity a majority of the partnership or
other similar ownership interest of which is at the time owned or controlled,
directly or indirectly, by that Person or one or more Subsidiaries of that
Person or a combination thereof. For purposes of this definition, a Person is
deemed to have a majority ownership interest in a partnership, limited liability
company, association or other business entity if such Person is allocated a
majority of the gains or losses of such partnership, limited liability company,
association or other business entity or is or controls the managing director or
general partner of such partnership, limited liability company, association or
other business entity.
"Tax Returns" means returns, declarations, reports, claims for refund,
-----------
information returns or other documents (including any related or supporting
schedules, statements or information) filed or required to be filed in
connection with the determination, assessment or collection of Taxes of any
party or the administration of any laws, regulations or administrative
requirements relating to any Taxes.
"Taxes" means any federal, state, local, or foreign income, gross
-----
receipts, license, payroll, employment, excise, severance, stamp, occupation,
premium, windfall profits, environmental, customs duties, capital stock,
franchise, profits, withholding, social security, unemployment, disability, real
property, personal property, sales, use, transfer, registration, value added,
alternative or add-on minimum, or other tax, fee, assessment or charge of any
kind whatsoever, including any interest, penalty, or addition thereto, whether
disputed or not.
"Total Assets" means (i) the book value of the Acquired Assets,
------------
determined in accordance with GAAP, applied on a consistent basis.
-4-
<PAGE>
"Transaction Documents" means this Agreement, and all other
---------------------
agreements, instruments, certificates and other documents to be entered into or
delivered by any Party in connection with the transactions contemplated to be
consummated pursuant to this Agreement.
"Treasury Regulations" means the United States Treasury Regulations
--------------------
promulgated pursuant to the Code.
1.2 Other Definitional Provisions.
-----------------------------
(a) Accounting Terms. Accounting terms which are not otherwise
----------------
defined in this Agreement have the meanings given to them under GAAP. To the
extent that the definition of accounting term that is defined in this Agreement
is inconsistent with the meaning of such term under GAAP, the definition set
forth in this Agreement will control.
(b) "Hereof," etc. The terms "hereof," "herein" and "hereunder" and
------------
terms of similar import are references to this Agreement as a whole and not to
any particular provision of this Agreement. Section, clause, Schedule and
Exhibit references contained in this Agreement are references to Sections,
clauses, Schedules and Exhibits in or to this Agreement, unless otherwise
specified.
(c) Successor Laws. Any reference to any particular Code section or
--------------
any other law or regulation will be interpreted to include any revision of or
successor to that section regardless of how it is numbered or classified.
1.3 Cross Reference of Other Definitions. Each capitalized term
------------------------------------
listed below is defined in the corresponding Section of this Agreement:
Term Section
- ---- -------
Accounts Receivable 2.3(d)
Allocation 9.13
Acquired Assets 2.1(a)
Actual Total Assets 2.3(b)
Agreement Preface
Applicable Limitation Date 8.1
Assumed Liabilities 2.1(c)
Business Recitals
Cash Portion 2.2
Closing 2.5(a)
Closing Date 2.5(a)
Closing Review 2.3(b)
Closing Transactions 2.5(b)
COBRA 5.18(a)
Confidential Information 9.10(c)
Continuing Employees 9.11(b)
Draft Balance Sheet 2.3(b)
-5-
<PAGE>
ERISA 5.18(a)
Estimated Total Assets 2.3(a)(i)
Excluded Assets 2.1(b)
Excluded Employees 9.11(b)
Excluded Liabilities 2.1(d)
Financial Statements 5.6(a)
Firm 2.3(b)
Holdback 2.2
HSR Act 3.1(f)
Improvements 5.10(f)
K. McNabb Employment Agreement 3.1(k)
Latest Balance Sheet 5.6(a)
Lease 3.1(m)
Leased Real Property 5.10(b)
Leases 5.10(b)
Licenses 5.16
Noncompetition Agreement 3.1(o)
Objection Notice 2.3(a)
Owned Real Property 5.10(a)
Party Preface
Pending Claim 2.3(d)
Plans 5.18(a)
Prime Rate 2.3(c)
Purchase Price 2.2
Purchaser Preface
Real Property Permits 5.10(f)
Receivables Determination Date 2.3(d)
Remaining Holdback 2.4
S. McNabb Employment Agreement 3.1(l)
Seller Preface
Stockholder Preface
Unassigned Contracts 9.14
Uncollected Receivable Amount 2.3(d)
WARN 5.17
ARTICLE II
PURCHASE AND SALE; ASSUMPTION OF CERTAIN LIABILITIES; CLOSING
2.1 Purchase and Sale.
-----------------
(a) Acquired Assets. Upon the terms and subject to the condition
---------------
s set forth in this Agreement, at the Closing the Seller shall sell, assign,
transfer and deliver to the Purchaser, and the Purchaser shall purchase, all
properties, assets, rights and interests of every kind and nature, whether
tangible or intangible, and wherever located and by whomever possessed, owned
by the Seller as of the Closing Date, except as set forth in Section 2.1(b)
below (collectively, the "Acquired Assets"), including, without limitation:
---------------
-6-
<PAGE>
(i) all accounts and notes receivables (whether current or
noncurrent);
(ii) all Cash, securities and other investments;
(iii) all Proprietary Rights, along with all income,
royalties, damages and payments due or payable as of the Closing or
thereafter, including, without limitation, damages and payments for past,
present or future infringements or misappropriations thereof, the right to
sue and recover for past infringements or misappropriations thereof and any
and all corresponding rights that, now or hereafter, may be secured
throughout the world;
(iv) all of the Seller's rights existing under leases,
contracts, licenses, permits, distribution arrangements, sales and purchase
agreements, accounts receivable, other agreements and business
arrangements, including, without limitation, all contracts and agreements
described on the Contracts Schedule attached hereto;
------------------
(v) all rental equipment owned by the Seller wherever
located;
(vi) all real property owned or leased by the Seller, and all
plants, buildings and other improvements located on such owned or leased
property, and all easements, licenses, rights of way, permits and all
appurtenances to such owned or leased property, including, without
limitation, all appurtenant rights in and to public streets, whether or not
vacated (collectively, the "Real Property");
-------------
(vii) all leasehold improvements and all machinery, equipment
(including all transportation and office equipment), fixtures, trade
fixtures, tools, dyes and furniture owned by the Seller wherever located,
including, without limitation, all such items which are located in any
building, warehouse, office or other space leased, owned or occupied by the
Seller or used in connection with the Real Property;
(viii) all inventories of work in process, semi-finished and
finished goods, stores, replacement and spare parts, packaging materials,
operating supplies, and fuels, owned by the Seller wherever located;
(ix) all office supplies, production supplies, spare parts,
other miscellaneous supplies, and other tangible property of any kind
wherever located, including, without limitation, all property of any kind
located in any building, office or other space leased, owned or occupied by
the Seller or in any warehouse where any of the Seller's properties and
assets may be situated;
(x) all prepayments and prepaid expenses;
(xi) all vehicles owned or leased by the Seller wherever
located;
-7-
<PAGE>
(xii) all of the Seller's claims, causes of action, choses in
action, rights of recovery and rights of set-off of any kind;
(xiii) the right to receive and retain mail, accounts
receivable payments and other communications relating to the Business;
(xiv) the right to bill and receive payment for products
shipped or delivered and services performed but unbilled or unpaid as of
the Closing;
(xv) all lists, records and other information pertaining to
accounts, personnel and referral sources, all lists and records pertaining
to suppliers and customers; and all books, ledgers, files and business
records of every kind; whether evidenced in writing, electronically
(including, without limitation, by computer) or otherwise;
(xvi) all advertising, marketing and promotional materials
and all other printed or written materials;
(xvii) all permits, licenses, certifications and approvals
from all permitting, licensing, accrediting and certifying agencies, and
the rights to all data and records held by such permitting, licensing and
certifying agencies;
(xviii) all telephone numbers (e.g. "800" numbers) used by the
Seller;
(xix) all goodwill as a going concern and all other
intangible properties;
(xx) the name "Eagle Scaffolding Equipment"; and
(xxi) except as specified in Section 2.1(b) below, all other
property owned by the Seller, or in which it has an interest on the Closing
Date, including, without limitation, all fixed assets included on the
Latest Balance Sheet and any and all subsequent improvements or additions
thereon through the Closing Date.
(b) Excluded Assets. Notwithstanding Section 2.1(a) above, the
---------------
following assets are expressly excluded from the purchase and sale contemplated
hereby and, as such, are not Acquired Assets (collectively, the "Excluded
--------
Assets"):
(i) all monies to be received by the Seller from the
Purchaser;
(ii) all rights of the Seller under this Agreement;
(iii) all qualifications to do business as a foreign
corporation;
(iv) all arrangements with registered agents relating to
foreign qualifications;
(v) all taxpayer and other identification numbers; and
-8-
<PAGE>
(vi) all seals, minute books, stock transfer books, blank
stock certificates, and other documents relating to the organization,
maintenance, and existence of the Seller as a corporation.
(c) Assumed Liabilities. Subject to Section 2.1(d) below, as
-------------------
additional consideration for the Acquired Assets, at the Closing the Purchaser
will assume all liabilities and obligations of the Seller pursuant to executory
contracts, orders and commitments covering the purchase of inventory, equipment
and/or supplies or the sale or rental of equipment, merchandise or services
which are described on the attached Contracts Schedule (the "Assumed
------------------ -------
Liabilities").
(d) Excluded Liabilities. Except as set forth in Section 2.1(c)
--------------------
above, the Purchaser shall not assume or become liable for, and shall not be
deemed to have assumed or have become liable for, any of the Seller's
liabilities and obligations not expressly assumed by the Purchaser pursuant to
Section 2.1(c) above, whether accrued, absolute or contingent, whether known or
unknown, whether disclosed or undisclosed, whether due or to become due and
whether related to the Acquired Assets or otherwise, and regardless of when
asserted, including, without limitation, any liabilities or obligations arising
from or relating to the Acquired Assets or Seller's operation of the Business
prior to the Closing Date (the "Excluded Liabilities").
--------------------
2.2 PURCHASE PRICE FOR ACQUIRED ASSETS. The aggregate purchase
----------------------------------
price to be paid to Sellers for the Acquired Assets (the "Purchase Price") will
--------------
consist of the assumption by Purchaser of the Assumed Liabilities and the
payment of $2,800,000, which amount shall be paid as follows: (a) the Purchaser
shall deliver to the Sellers $2,744,000 in cash (as adjusted pursuant to Section
2.3 below) in cash (as adjusted, the "Cash Portion"); and (b) the Purchaser
------------
shall maintain $56,000 in a book entry account of the Purchaser (the
"Holdback"). The Holdback shall be available to satisfy any amounts owing to
--------
the Purchaser pursuant to Section 2.3 and/or Section 9.2. The Purchase Price
will be allocated among the Sellers in the manner set forth in Schedule of
-----------
Stockholders attached hereto.
- ------------
2.3 Purchase Price Adjustments.
--------------------------
(a) Closing Date Adjustments. At the Closing, the Purchase Price
------------------------
will be adjusted dollar-for-dollar as set forth in this Section 2.3(a).
(i) Total Assets. Not more than ten (10) Business Days,
------------
but in no event less than five (5) Business Days, before the Closing Date,
the Seller and the Purchaser will, in good faith and in accordance with the
GAAP, jointly estimate the Total Assets as of the close of business on the
day before the Closing Date on a reasonable basis using the Seller's then
available financial information; provided, however, that if the Seller and
-------- -------
the Purchaser cannot agree on an estimate of the Total Assets, such
estimate will be deemed to be equal to the average of the Seller's and the
Purchaser's good faith determinations thereof. The amount of the Total
Assets as finally estimated pursuant to this Section 2.3(a), is referred to
herein as the "Estimated Total Assets." At the Closing, if the Estimated
----------------------
Total Assets is less than the Baseline Total Assets, then the Purchase
Price will be decreased by the amount of such deficiency, and if the
Estimated Total Assets is greater than the Baseline Total Assets, then the
Purchase Price will be increased by the amount of such excess.
-9-
<PAGE>
(ii) Indebtedness. At the Closing, the Purchase Price will
------------
be decreased dollar-for-dollar by an amount equal to the amount necessary
to discharge fully the then outstanding balance of the Seller's and its
Subsidiaries' Indebtedness secured by any of the Acquired Assets
(including, without limitation, prepayment penalties and premiums).
(b) Post-Closing Determination. Within 90 days after the Closing
--------------------------
Date, the Purchaser and its auditors will conduct a review (the "Closing
-------
Review") of the Total Assets as of the close of business on the day before the
Closing Date and will prepare and deliver to the Seller a computation of the
amount of the Total Assets as of the close of business on the day before the
Closing Date (the "Draft Balance Sheet"). The Purchaser and its auditors will
-------------------
make available to the Seller and its auditors all records and work papers used
in preparing the Draft Balance Sheet. If the Seller disagrees with the
computation of the Total Assets reflected on the Draft Balance Sheet, the Seller
may, within thirty (30) days after receipt of the Draft Balance Sheet, deliver a
notice (an "Objection Notice") to the Purchaser setting forth the Seller's
----------------
calculation of the amount of the Total Assets as of the close of business on the
day before the Closing Date. The Purchaser and the Seller will use reasonable
best efforts to resolve any disagreements as to the computation of the Total
Assets, but if they do not obtain a final resolution within thirty (30) days
after the Purchaser has received the Objection Notice, the Purchaser and the
Seller will jointly retain an independent accounting firm of recognized national
standing (the "Firm") to resolve any remaining disagreements. If the Purchaser
----
and the Seller are unable to agree on the choice of the Firm, then the Firm will
be a so-called "big-six" accounting firm (or successor thereof) selected by lot
(after excluding one firm designated by the Purchaser and one firm designated by
the Seller). The Purchaser and the Seller will direct the Firm to render a
determination within 30 days of its retention and the Purchaser, the Seller, the
Stockholders and their respective agents will cooperate with the Firm during its
engagement. The Firm will consider only those items and amounts in the Draft
Balance Sheet set forth in the Objection Notice which the Purchaser and the
Seller are unable to resolve. In resolving any disputed item, the Firm may not
assign a value to any item greater than the greatest value for such item claimed
by either party or less than the smallest value for such item claimed by either
party. The Firm's determination will be based solely on presentations by the
Purchaser and the Seller (i.e., not on independent review), and on the
definition of the Total Assets included herein. The determination of the Firm
will be conclusive and binding upon the Purchaser, the Seller and the
Stockholders. The Purchaser and the Seller shall bear the costs and expenses of
the Firm based on the percentage which the portion of the contested amount not
awarded to each party bears to the amount actually contested by such party. The
amount of the Total Assets, as finally determined pursuant to this Section
2.3(b), is referred to herein as the "Actual Total Assets."
-------------------
(c) Post-Closing Adjustment.
-----------------------
(i) Payment by the Purchaser. If the Actual Total Assets is
------------------------
greater than the Estimated Total Assets, the Purchaser will, within five
(5) Business Days after the determination thereof, pay to the Seller an
amount equal to the sum of (A) the Actual Total Assets minus the Estimated
Total Assets plus (B) interest on such difference from the Closing Date to
----
the date of payment at an interest rate equal to the "Prime Rate" as
----------
listed in the Wall Street Journal on the Closing Date (the "Prime Rate").
Such payment will be made by wire transfer or delivery of other immediately
available funds.
-10-
<PAGE>
(ii) Payment by the Stockholders. If the Actual Total
---------------------------
Assets is less than the Estimated Total Assets, the Seller will, within
five (5) Business Days after the determination thereof, pay to the
Purchaser an amount equal to (A) the Estimated Total Assets minus the
Actual Total Assets plus (B) interest on such difference from the Closing
----
Date to the date of payment at an interest rate equal to the Prime Rate.
Such payment will be made by wire transfer or delivery of other immediately
available funds.
(iii) Dispute. If, pursuant to Section 2.3(b) above, there
-------
dispute as to the final determination of the Actual Total Assets, the
Purchaser and the Seller shall promptly pay to the other, as appropriate,
such amounts as are not in dispute, pending final determination of such
dispute pursuant to Section 2.3(b).
(d) Accounts Receivable Adjustment. Notwithstanding anything
------------------------------
herein to the contrary, and in addition to any other adjustments set forth in
this Agreement, the Cash Portion will be reduced dollar-for-dollar by the
aggregate amount of the net notes and accounts receivable of the Seller in
existence as of the Closing (the "Accounts Receivable"), which are uncollected
-------------------
by the Purchaser (the "Uncollected Receivables Amount") as of the 90th day
------------------------------
following the Closing Date (the "Receivables Determination Date"). If there
------------------------------
is an Uncollected Receivables Amount, the Purchaser shall be entitled to
receive the Uncollected Receivables Amount from the Holdback within two (2)
Business Days after the Receivables Determination Date; provided, however,
that if the amount then left in the Holdback is less than the amount of the
Uncollected Receivables Amount, the Seller shall pay to the Purchaser, within
two (2) Business Days after the Receivables Determination Date, the amount by
which the Holdback is less than Uncollected Receivables Amount by wire
transfer or delivery of other immediately available funds. For the purpose of
determining amounts collected by the Purchaser with respect to the Accounts
Receivable, (i) in the absence of a bona fide dispute between an account
debtor and the Purchaser regarding receivables of such account debtor accrued
prior to the Closing Date, all payments by an account debtor shall first be
applied to the oldest outstanding invoice due from that account debtor, and
(ii) in the case of a dispute between the Purchaser and an account debtor with
respect to a particular invoice, all payments shall be first applied to the
next oldest invoice due from that account debtor. The Purchaser shall not be
required to take any action out of the ordinary course of business to collect
any of the Accounts Receivable. To the extent that the Purchaser has not
collected the full amount of the Accounts Receivable and the Purchaser has
been compensated therefor in accordance with this Section, the Purchaser shall
assign any such uncollected Accounts Receivable to the Seller.
2.4 DISTRIBUTION OF HOLDBACK. On the 180th day after the Closing
------------------------
Date, the Purchaser shall pay to the Seller an amount equal to the amount of the
Holdback, if any, remaining after (i) all amounts owing to the Purchaser
pursuant to Section 2.3 have been satisfied and (ii) all claims of the Purchaser
under Section 9.2 which have theretofore been finally resolved have been
satisfied (the "Remaining Holdback") less any amount for which the Purchaser
------------------
claims, prior to such 180th day, that it is entitled to receive indemnification
pursuant to Section 9.2 (each, a "Pending Claim"). As soon as practicable
-------------
following final resolution of all Pending Claims, the Purchaser shall pay to the
Seller an aggregate amount equal to the portion, if any, of the Holdback which
remains after payment of the Remaining Holdback and final resolution of all
Pending Claims.
-11-
<PAGE>
2.5 Closing Transactions.
--------------------
(a) Closing. The closing of the transactions contemplated by this
-------
Agreement (the "Closing") shall take place at the offices of Kirkland & Ellis,
-------
200 East Randolph Drive, Chicago, Illinois 60601, commencing at 10:00 a.m. on
the business day following the satisfaction or waiver of all conditions to the
obligations of the Parties to consummate the transactions contemplated hereby
(other than conditions with respect to actions the respective Parties will take
at the Closing itself), or at such other place or on such other date as may be
mutually agreeable to the Purchaser and the Seller; provided that in any event,
if the Purchaser's senior lenders require that the Closing take place at the
offices of their attorneys, the Parties agree that the Closing shall take place
at such offices. The date and time of the Closing are herein referred to as the
"Closing Date."
------------
(b) Closing Transactions. Subject to the conditions set forth
--------------------
in this Agreement, the Parties shall consummate the following transactions (the
"Closing Transactions") on the Closing Date:
--------------------
(i) the Stockholders shall cause the Seller to, and the
Seller shall convey to the Purchaser good and marketable title to all of
the Acquired Assets, free and clear of all Liens, and deliver to the
Purchaser warranty deeds, bills of sale, assignment of leases and contracts
and all other instruments of conveyance which are necessary or desirable to
effect transfer of the Acquired Assets, in form and substance satisfactory
to the Purchaser;
(ii) the Purchaser shall deliver to the Seller such
instruments of assumption as are required in order for the Purchaser to
assume the Assumed Liabilities;
(iii) the Seller shall repay, or cause to be repaid, all
amounts necessary to discharge fully the then outstanding balance of the
Seller's Indebtedness (including, without limitation, prepayment penalties
and premiums) by wire transfer of immediately available funds as directed
by the holders of such Indebtedness at or prior to the Closing, and the
Seller shall deliver to Purchaser all appropriate payoff letters and shall
make arrangements reasonably satisfactory to Purchaser for such holders to
deliver all related lien releases and canceled notes at the Closing;
(iv) The Purchaser shall deliver to the Seller the Purchase
Price by wire transfer of immediately available funds; and
(v) the Seller and the Purchaser, as applicable, shall
deliver the opinions, certificates and other documents and instruments
required to be delivered by or on behalf of such Party under Article III.
-12-
<PAGE>
ARTICLE III
CONDITIONS TO CLOSING
---------------------
3.1 Conditions to the Purchaser's Obligations. The obligation
-----------------------------------------
of the Purchaser to consummate the transactions contemplated by this Agreement
is subject to the satisfaction of the following conditions as of the Closing
Date:
(a) The representations and warranties set forth in Article V
hereof shall be true and correct in all material respects at and as of the
Closing Date as though then made and as though the Closing Date were substituted
for the date of this Agreement throughout such representations and warranties
(without taking into account any disclosures made by the Seller or the
Stockholders to the Purchaser pursuant to Sections 4.1(g) or 5.25 hereof);
(b) The Seller and each Stockholder shall have performed and
complied with all of the covenants and agreements required to be performed by
each of them under this Agreement on or prior to the Closing;
(c) All consents by third parties that are required for the
transfer of the Acquired Assets to the Purchaser and the consummation of the
other transactions contemplated hereby or that are required in order to prevent
a breach of, a default under, a termination or modification of, or any
acceleration of, any obligations under any material contract to which the Seller
or any of its Subsidiaries is a party shall have been obtained, all on terms
reasonably satisfactory to the Purchaser;
(d) All governmental filings, authorizations and approvals that
are required for the transfer of the Acquired Assets to the Purchaser and the
consummation of the other transactions contemplated hereby shall have been duly
made and obtained on terms reasonably satisfactory to the Purchaser;
(e) The purchase of Acquired Assets by the Purchaser hereunder
shall not be prohibited by any applicable law or governmental regulation, shall
not subject the Purchaser to any penalty, liability or other onerous condition
under or pursuant to any applicable law or governmental regulation, and shall be
permitted by laws and regulations of the jurisdictions to which the Purchaser is
subject;
(f) No action, suit, or proceeding shall be pending or threatened
before any court or quasi-judicial or administrative agency of any federal,
state, local, or foreign jurisdiction or before any arbitrator wherein an
unfavorable judgment, decree, injunction, order or ruling would prevent the
performance of this Agreement or any of the transactions contemplated hereby,
declare unlawful the transactions contemplated by this Agreement, cause such
transactions to be rescinded or materially and adversely affect the right of the
Purchaser to own, operate or control the Acquired Assets, and no judgment,
decree, injunction, order or ruling shall have been entered which has any of the
foregoing effects;
(g) Since the date hereof, there shall have been no Material
Adverse Effect;
(j) Payoff letters with respect to all of the Seller's and its
Subsidiaries' Indebtedness outstanding as of the Closing and releases of any and
all Liens, including appropriate
-13-
<PAGE>
UCC termination statements, held by third parties against the Acquired Assets
shall have been obtained, all on terms reasonably satisfactory to the Purchaser;
(h) Purchaser shall have received an opinion, dated the Closing
Date, of Jeffrey Shaner, counsel to the Seller and the Stockholders, in form and
substance satisfactory to Purchaser;
(i) On or prior to the Closing Date, the Stockholders shall have
delivered to Purchaser all of the following:
(i) a certificate from the Seller and the Stockholders in a form
reasonably satisfactory to the Purchaser, dated the Closing Date, stating
that the preconditions specified in Sections 3.1(a) through (i) have been
satisfied;
(ii) copies of all third party and governmental consents,
approvals, filings, releases and terminations required in connection with
the consummation of the transactions contemplated herein;
(iii) certified copies of the resolutions of the Stockholders and
the Seller's board of directors approving the transactions contemplated by
this Agreement;
(iv) certificates of the secretary of state of the State of Nevada
and any other state where the Seller or any of its Subsidiaries is
qualified to do business providing that the Seller or such Subsidiary is in
good standing;
(v) landlord consents and estoppel certificates from the Seller's
and any of its Subsidiaries' landlords in form and substance satisfactory
to the Purchaser; and
(vi) such other documents or instruments as the Purchaser may
reasonably request to effect the transactions contemplated hereby;
(j) Robert Kenneth McNabb and the Purchaser shall have entered
into an agreement relating to his employment with the Purchaser substantially in
the form of Exhibit A attached hereto, and such employment agreement shall be
---------
in full force and effect (the "K. McNabb Employment Agreement").
------------------------------
(k) Robert Steven McNabb and the Purchaser shall have entered into an
agreement relating to his employment with the Purchaser substantially in the
form of Exhibit B attached hereto, and such employment agreement shall be in
---------
full force and effect (the "S. McNabb Employment Agreement").
------------------------------
(l) The Stockholders and the Seller shall have entered into a lease
agreement with respect to the property located at 3629 West Hacienda, Las Vegas,
Nevada substantially in the form of Exhibit C attached hereto (the "Lease");
---------- -----
-14-
<PAGE>
(m) The Seller shall have obtained a non-disturbance agreement in form
and substance satisfactory to the Purchaser and the Purchaser's lender from each
lender encumbering each parcel of Leased Real Property;
(n) The Purchaser shall have obtained debt financing for the
transactions contemplated herein and post-Closing working capital requirements
in amounts and on terms satisfactory to the Purchaser;
(o) The Purchaser, National Equipment Services, Inc. and the
Stockholders shall have entered into a noncompetition agreement substantially in
the form of Exhibit D attached hereto (the "Noncompetition Agreement"), and such
---------- ------------------------
Noncompetition Agreement shall be in full force and effect;
(p) All proceedings to be taken by the Seller, any of its Subsidiaries
and the Stockholders in connection with the consummation of the Closing
Transactions and the other transactions contemplated hereby and all
certificates, opinions, instruments and other documents required to be delivered
by the Seller, any of its Subsidiaries and the Stockholders to effect the
transactions contemplated hereby reasonably requested by the Purchaser shall be
reasonably satisfactory in form and substance to the Purchaser.
Any condition specified in this Section 3.1 may be waived by the Purchaser;
provided that no such waiver shall be effective against the Purchaser unless it
is set forth in a writing executed by the Purchaser.
3.2 Conditions to the Seller's Obligation. The obligation of
-------------------------------------
the Seller to consummate the transactions contemplated by this Agreement is
subject to the satisfaction of the following conditions as of the Closing Date:
(a) The representations and warranties set forth in Article VI shall
be true and correct in all material respects at and as of the Closing Date as
though then made and as though the Closing Date were substituted for the date of
this Agreement throughout such representations and warranties (without taking
into account any disclosures made by the Purchaser to the Seller pursuant to
Sections 4.3(a) and 6.7 hereof);
(b) The Purchaser shall have performed and complied with all of the
covenants and agreements required to be performed by it under this Agreement on
or prior to the Closing;
(c) All governmental filings, authorizations and approvals that are
required for the transfer of the Acquired Assets to the Purchaser and the
consummation of the other transactions contemplated hereby shall have been duly
made and obtained on terms reasonably satisfactory to the Seller;
(d) No action, suit, or proceeding shall be pending before any court
or quasi-judicial or administrative agency of any federal, state, local, or
foreign jurisdiction or before any arbitrator wherein an unfavorable judgment,
decree, injunction, order or ruling would prevent the performance of this
Agreement or any of the transactions contemplated hereby, declare unlawful the
-15-
<PAGE>
transactions contemplated by this Agreement, cause such transactions to be
rescinded or materially and adversely affect the right of the Purchaser to own,
operate or control the Acquired Assets, and no judgment, decree, injunction,
order or ruling shall have been entered which has any of the foregoing effects;
(e) The Purchaser and K. McNabb shall have entered into the K. McNabb
Employment Agreement;
(f) The Purchaser and S. McNabb shall have entered into the S. McNabb
Employment Agreement;
(g) On or prior to the Closing Date, the Purchaser shall have
delivered to the Seller all of the following:
(i) a certificate from the Purchaser in a form reasonably satisfactory
to the Seller, dated the Closing Date, stating that the preconditions
specified in Sections 3.2(a) through (d), inclusive, have been satisfied;
(ii) certificates of the secretary of state of the State of Delaware
providing that the Purchaser is in good standing;
(iii) certified copies of the resolutions of the Purchaser's board of
directors approving the transactions contemplated by this Agreement;
(iv) such other documents or instruments as the Seller may reasonably
request to effect the transactions contemplated hereby; and
(h) All proceedings to be taken by the Purchaser in connection with
the consummation of the Closing Transactions and the other transactions
contemplated hereby and all certificates, opinions, instruments and other
documents required to be delivered by the Purchaser to effect the transactions
contemplated hereby reasonably requested by the Seller shall be reasonably
satisfactory in form and substance to the Seller.
Any condition specified in this Section 3.2 may be waived by the Seller;
provided that no such waiver shall be effective unless it is set forth in a
writing executed by the Seller.
ARTICLE IV
COVENANTS PRIOR TO CLOSING
4.1 AFFIRMATIVE COVENANTS OF THE SELLER AND EACH STOCKHOLDER.
--------------------------------------------------------
Prior to the Closing, unless the Purchaser otherwise agrees in writing and
except as expressly contemplated by this Agreement, the Stockholders shall cause
the Seller and each of its Subsidiaries to, the Seller and each of its
Subsidiaries shall and in the case of Sections 4.1(f), (g), (h) and (m) each
Stockholder also shall:
-16-
<PAGE>
(a) conduct its business and operations only in the Ordinary Course of
Business;
(b) keep in full force and effect its corporate existence and all
rights, franchises and intellectual property relating or pertaining to its
business and use its reasonable best efforts to cause its current insurance (or
reinsurance) policies not to be canceled or terminated or any of the coverage
thereunder to lapse;
(c) use its reasonable best efforts to carry on the business of the
Seller and of each of its Subsidiaries in the same manner as presently conducted
and to keep the Seller's and each of its Subsidiaries' business organization and
properties intact, including its present business operations, physical
facilities, working conditions and employees and its present relationships with
lessors, licensors, suppliers and customers and others having business relations
with it;
(d) maintain the material assets of the Seller and each of its
Subsidiaries in good repair, order and condition (normal wear and tear excepted)
consistent with current needs, replace in accordance with prudent practices its
inoperable, worn out or obsolete assets with assets of good quality consistent
with prudent practices and current needs and, in the event of a casualty, loss
or damage to any of such assets or properties prior to the Closing Date, either
repair or replace such damaged property or use the proceeds of such insurance in
such other manner as mutually agreed upon by the Seller and the Purchaser;
(e) encourage employees to continue their employment with the
Purchaser and its Subsidiaries after the Closing;
(f) maintain the books, accounts and records of the Seller and each of
its Subsidiaries in accordance with past custom and practice as used in the
preparation of the Financial Statements;
(g) promptly (once the Seller or any Stockholder obtains knowledge
thereof) inform the Purchaser in writing of any variances from the
representations and warranties contained in Article V hereof or any breach of
any covenant hereunder by the Seller or the Stockholders;
(h) cooperate with the Purchaser and use reasonable best efforts to
cause the conditions to the Purchaser's obligation to close to be satisfied
(including, without limitation, the execution and delivery of all agreements
contemplated hereunder to be so executed and delivered and the making and
obtaining of all third party and governmental notices, filings, authorizations,
approvals, consents, releases and terminations);
(i) use reasonable best efforts to obtain all third party and
governmental approvals and consents necessary or desirable to consummate the
transactions contemplated hereby and to cause the other conditions to the
Purchaser's obligations hereunder to be satisfied;
(j) maintain the existence of and use reasonable best efforts to
protect all Proprietary Rights used in the business of the Seller and each of
its Subsidiaries;
-17-
<PAGE>
(k) maintain the existence of and protect all of the governmental
permits, licenses, approvals and other authorizations of the business of the
Seller and each of its Subsidiaries;
(l) comply with all applicable laws, ordinances, and regulations in
the operation of the business of the Seller and each of its Subsidiaries; and
(m) cooperate with the Purchaser in the Purchaser's investigation of
the business and properties of the Seller and each of its Subsidiaries, to
permit the Purchaser and its employees, agents, accounting, legal and other
authorized representatives to (i) have full access to the premises, books and
records of the Seller and each of its Subsidiaries at reasonable hours, (ii)
visit and inspect any of the properties of the Seller and each of its
Subsidiaries, and (iii) discuss the affairs, finances and accounts of the Seller
and each of its Subsidiaries with the directors, officers, partners, key
employees, key customers, key sales representatives, key suppliers and
independent accountants of the Seller and each of its Subsidiaries.
4.2 Negative Covenants of the Seller and Each Stockholder.
-----------------------------------------------------
Prior to the Closing, unless Purchaser otherwise agrees in writing and except as
expressly contemplated by this Agreement, each Stockholder shall cause the
Seller and each of its Subsidiaries to not and Seller and each of its
Subsidiaries shall not:
(a) take any action that would require disclosure under Section 5.8;
(b) make any loans, enter into any transaction with any Insider or
make or grant any increase in any employee's or officer's compensation or make
or grant any increase in any employee benefit plan, incentive arrangement or
other benefit covering any of the employees of the Seller or its Subsidiaries;
(c) establish or, except in the Ordinary Course of Business,
contribute to any pension, retirement, profit sharing or stock bonus plan or
multiemployer plan covering the employees of the Seller or its Subsidiaries;
(d) except as specifically contemplated by this Agreement, enter into
any contract, agreement or transaction, other than in the Ordinary Course of
Business and at arm's length with unaffiliated Persons;
(e) declare, pay, make or otherwise effectuate any dividends,
distributions, redemptions, equity repurchases or other transactions involving
the Seller's or any of its Subsidiaries' capital stock or equity securities
(except with respect to (i) dividends paid for the purpose of reimbursing any
Stockholder for individual income tax liabilities related to the Seller or (ii)
dividends relating to the accumulated adjustments account);
(f) engage in any activity other than in the Ordinary Course of
Business which would accelerate the collection of its accounts or notes
receivable, delay the payment of its accounts payable, delay its capital
expenditures, or reduce or otherwise restrict the amount of inventory on hand;
or
-18-
<PAGE>
(g) sell, transfer, contribute, distribute, or otherwise dispose of
any securities, capital stock or assets (other than marketable securities) of
the Seller or of its Subsidiaries, or agree to do any of the foregoing, to any
Person, or negotiate or have any discussions with any Person with respect to any
of the foregoing, other than in the Ordinary Course of Business.
4.3 Covenants of Purchaser. Prior to the Closing, the Purchaser
----------------------
shall:
(a) promptly (once it obtains knowledge thereof) inform the Seller in
writing of any variances from the representations and warranties contained in
Article VI or any breach of any covenant hereunder by Purchaser; and
(b) cooperate with Seller and use its reasonable best efforts to cause
the conditions to the Seller's obligation to close to be satisfied (including,
without limitation, the execution and delivery of all agreements contemplated
hereunder to be so executed and delivered and the making and obtaining of all
third party and governmental filings, authorizations, approvals, consents,
releases and terminations).
ARTICLE V
REPRESENTATIONS AND WARRANTIES
CONCERNING THE SELLER AND THE STOCKHOLDERS
------------------------------------------
As a material inducement to Purchaser to enter into this Agreement, the
Seller and the Stockholders hereby jointly and severally represents and warrants
that:
5.1 Organization and Corporate Power. The Seller is a
--------------------------------
corporation duly organized, validly existing and in good standing under the laws
of the State of Nevada and is qualified to do business in every jurisdiction in
which it is required to be qualified. All jurisdictions in which the Seller is
qualified to do business are set forth on the "Organization Schedule" attached
---------------------
hereto. The Seller has full power and authority and all licenses, permits and
authorizations necessary to own and operate its properties and to carry on its
business as now conducted. Correct and complete copies of the Seller's and each
of its Subsidiaries' articles of incorporation and by-laws have been furnished
to the Purchaser, which documents reflect all amendments made thereto at any
time prior to the date of this Agreement. Correct and complete copies of the
minute books containing the records of meetings of the stockholders and board of
directors, the stock certificate books and the stock record books of the Seller
and each of its Subsidiaries have been furnished to the Purchaser. Neither the
Seller nor any of its Subsidiaries is in default under or in violation of any
provision of its articles of incorporation or by-laws.
5.2 Authorization of Transactions. The Seller and the
-----------------------------
Stockholders have full power and authority to execute and deliver the
Transaction Documents to which they are a party and to consummate the
transactions contemplated hereby and thereby. The Stockholders and the board of
directors of the Seller have duly approved the Transaction Documents to which
the Stockholders and the Seller are a party and have duly authorized the
execution and delivery of such Transaction Documents and the consummation of the
transactions contemplated thereby. No other corporate proceedings on the part
of the Stockholders or the Seller are necessary to approve and authorize the
-19-
<PAGE>
execution and delivery of the Transaction Documents to which the Stockholders
and the Seller are a party and the consummation of the transactions contemplated
thereby. All Transaction Documents to which the Stockholders and the Seller are
a party have been duly executed and delivered by the Stockholders and the Seller
and constitute the valid and binding agreements of the Stockholders and the
Seller, enforceable against the Stockholders and the Seller in accordance with
their terms.
5.3 Capitalization. The authorized, issued and outstanding
--------------
stock of the Seller consists of 10,000 shares of Common Stock, no par value, of
which 3,250 shares are issued and outstanding. All of the issued and
outstanding shares of the Seller's capital stock have been duly authorized, are
validly issued, fully paid, and nonassessable, and are held of record and
beneficially by the Stockholders in the amounts set forth on the Schedule of
-----------
Stockholders and are not subject to, nor were they issued in violation of, any
- ------------
preemptive rights or rights of first refusal, and are owned of record and
beneficially by the respective Stockholders as set forth on the Schedule of
-----------
Stockholders free and clear of all Liens. There are no outstanding or
- ------------
authorized options, warrants, rights, contracts, calls, puts, rights to
subscribe, conversion rights or other agreements or commitments to which the
Seller is a party or which are binding upon the Seller providing for the
issuance, disposition or acquisition of any of its capital stock (other than
this Agreement). There are no outstanding or authorized stock appreciation,
phantom stock or similar rights with respect to the Seller or any of its
Subsidiaries. Except as set forth on the Schedule of Stockholders, there are no
------------------------
voting trusts, proxies or any other agreements or understandings with respect to
the voting of the capital stock of the Seller or any of its Subsidiaries.
Neither the Seller nor any of its Subsidiaries is subject to any obligation
(contingent or otherwise) to repurchase or otherwise acquire or retire any
shares of its capital stock.
5.4 Subsidiaries; Investments. The attached "Subsidiaries
------------------------- ------------
Schedule" correctly sets forth the name of each of the Seller's direct or
- --------
indirect Subsidiaries, the jurisdiction of its incorporation, the number of
authorized, issued and outstanding shares of capital stock of such Subsidiary
and the Persons owning the outstanding capital stock of such Subsidiary. Each
Subsidiary is duly organized, validly existing and in good standing under the
laws of the jurisdiction of its incorporation, possesses all requisite corporate
power and authority and all material licenses, permits and authorizations
necessary to own its properties and to carry on its businesses as now being
conducted and is qualified to do business in every jurisdiction in which its
ownership of property or the conduct of business requires it to qualify. All of
the outstanding shares of capital stock of each Subsidiary are validly issued,
full paid and nonassessable, and all such shares are owned by the Seller or
another Subsidiary free and clear of any Lien and not subject to any option or
right to purchase any such shares. Except as set forth on the Subsidiaries
------------
Schedule, neither the Seller nor any of its Subsidiaries owns or holds the right
- --------
to acquire any shares of stock or any other security or interest in any other
Person.
5.5 Absence of Conflicts. Except as set forth on the "Conflicts
-------------------- ---------
Schedule" attached hereto, the execution, delivery and performance of the
- --------
Transaction Documents and the consummation of the transactions contemplated
thereby by the Seller and each Stockholder do not and shall not (a) conflict
with or result in any breach of any of the terms, conditions or provisions of,
(b) constitute a default under, (c) result in a violation of, (d) give any third
party the right to modify, terminate or accelerate any obligation under, (e)
result in the creation of any Lien upon the Acquired Assets or (f) require any
authorization, consent, approval, exemption or other action by or
-20-
<PAGE>
notice or declaration to, or filing with, any court or administrative or other
governmental body or agency, under the provisions of the articles of
incorporation or by-laws of the Seller or any of its Subsidiaries or any
indenture, mortgage, lease, loan agreement or other agreement or instrument to
which the Seller, any of its Subsidiaries or such Stockholder is bound or
affected, or any law, statute, rule or regulation to which the Seller, any of
its Subsidiaries or such Stockholder is subject or any judgment, order or decree
to which the Seller, any of its Subsidiaries or such Stockholder is subject.
5.6 Financial Statements and Related Matters.
----------------------------------------
(a) Financial Statements. Attached hereto as the "Financial
-------------------- ---------
Statements Schedule" are copies of the Seller's and its Subsidiaries' (i)
- -------------------
unaudited balance sheet as of November 30, 1997 (the "Latest Balance Sheet") and
--------------------
the related statement of income for the eleven-month period then ended and (ii)
audited balance sheets and statements of income for the fiscal years ended
December 31, 1996, 1995 and 1994. Each of the foregoing financial statements
(including in all cases the notes thereto, if any) (the "Financial Statements")
--------------------
is accurate and complete, is consistent with the Seller's books and records
(which, in turn, are accurate and complete), presents fairly the Seller's
financial condition and results of operations as of the times and for the
periods referred to therein, and, except as set forth on the "Financial
---------
Statements Schedule," has been prepared in accordance with GAAP, subject in the
- -------------------
case of unaudited financial statements to changes resulting from normal year-end
adjustments for recurring accruals (which shall not be material individually or
in the aggregate) and to the absence of footnote disclosure.
(b) Receivables. The Seller's and its Subsidiaries notes and accounts
-----------
receivable are valid receivables, current, and are subject to no valid
counterclaims or setoffs, at the aggregate amount recorded on the Seller's and
its Subsidiaries' books and records as of the Closing, net of an amount of
allowances for doubtful accounts which relate to those receivables computed in a
manner consistent with GAAP and the accounting practices used in the preparation
of the Latest Balance Sheet.
(c) Inventory. The Seller's and its Subsidiaries' inventory, net of
---------
the reserves applicable to such inventory, consists of a quantity and quality
which, except as reflected in such reserve, is usable and saleable in the
Ordinary Course of Business, and the items of such inventory are not defective,
slow-moving, obsolete or damaged and are merchantable and fit for their
particular use. The Seller and each of its Subsidiaries has good title to such
inventory, free and clear of all Liens (other than Permitted Encumbrances).
5.7 Absence of Undisclosed Liabilities. Neither the Seller nor
----------------------------------
any of its Subsidiaries has any obligations or liabilities (whether accrued,
absolute, contingent, unliquidated or otherwise, whether or not known, whether
due or to become due and regardless of when asserted) arising out of
transactions entered into at or prior to the Closing, or any action or inaction
at or prior to the Closing, or any state of facts existing at or prior to the
Closing, except (i) obligations under executory contracts or commitments
described on the Contracts Schedule attached hereto or under executory contracts
------------------
and commitments which are not required to be disclosed thereon (but not
liabilities for breaches thereof), (ii) liabilities reflected on the liabilities
side of the Latest Balance Sheet, and (iii) liabilities which have arisen after
the date of the Latest Balance Sheet in the Ordinary Course of Business or
otherwise in accordance with the terms and conditions of this Agreement
-21-
<PAGE>
(none of which is a liability for breach of contract, breach of warranty, tort
or infringement or a claim or lawsuit or an environmental liability).
5.8 Absence of Certain Developments. Except as set forth on the
-------------------------------
"Developments Schedule" attached hereto and except as expressly contemplated by
---------------------
this Agreement, since August 31, 1997, neither the Seller nor any of its
Subsidiaries has:
(a) suffered any change that has had or could reasonably be expected
to have a Material Adverse Effect or suffered any theft, damage, destruction or
casualty loss in excess of $50,000, to its assets, whether or not covered by
insurance or suffered any substantial destruction of its books and records;
(b) redeemed or repurchased, directly or indirectly, any shares of
capital stock or other equity security or declared, set aside or paid any
dividends or made any other distributions (whether in cash or in kind) with
respect to any shares of its capital stock or other equity security;
(c) issued, sold or transferred any equity securities, any securities
convertible, exchangeable or exercisable into shares of its capital stock or
other equity securities, or warrants, options or other rights to acquire shares
of its capital stock or other of its equity securities;
(d) incurred or become subject to any liabilities, except liabilities
incurred in the Ordinary Course of Business;
(e) subjected any portion of its properties or assets to any Lien
(other than Permitted Encumbrances)
(f) sold, leased, assigned or transferred (including, without
limitation, transfers to Stockholders or any Insider) a portion of its tangible
assets, except for sales of inventory in the Ordinary Course of Business, or
canceled without fair consideration any material debts or claims owing to or
held by it;
(g) sold, assigned, licensed or transferred (including, without
limitation, transfers to Stockholders or any Insider) any Proprietary Rights
owned by, issued to or licensed to it or disclosed any confidential information
(other than pursuant to agreements requiring the disclosure to maintain the
confidentiality of and preserving all its rights in such confidential
information) or received any confidential information of any third party in
violation of any obligation of confidentiality;
(h) suffered any extraordinary losses or waived any rights of material
value;
(i) entered into, amended or terminated any material lease, contract,
agreement or commitment, or taken any other action or entered into any other
transaction other than in the Ordinary Course of Business;
(j) entered into any other material transaction, or materially changed
any business practice;
-22-
<PAGE>
(k) made or granted any bonus or any wage, salary or compensation
increase to any director, officer, employee or sales representative, group of
employees or consultant or made or granted any increase in any employee benefit
plan or arrangement, or amended or terminated any existing employee benefit plan
or arrangement or adopted any new employee benefit plan or arrangement;
(l) made any other change in employment terms for any of its
directors, officers, and employees outside the Ordinary Course of Business;
(m) conducted its cash management customs and practices other than in
the Ordinary Course of Business (including, without limitation, with respect to
collection of accounts receivable, purchases of inventory and supplies, repairs
and maintenance, payment of accounts payable and accrued expenses, levels of
capital expenditures and operation of cash management practices generally);
(n) made any capital expenditures or commitments for capital
expenditures that aggregate in excess of $20,000;
(o) made any loans or advances to, or guarantees for the benefit of,
any Person;
(p) made charitable contributions, pledges, association fees or dues
in excess of $10,000; or
(q) committed to do any of the foregoing.
5.9 Assets. The Seller and each of its Subsidiaries have good
------
and marketable title to, or a valid leasehold interest in, the properties and
assets used by them, located on their premises or shown on the Latest Balance
Sheet or acquired thereafter, free and clear of all Liens, except for Permitted
Encumbrances and except for properties and assets disposed of in the ordinary
course of business since the date of the Latest Balance Sheet. The Seller's and
each of its Subsidiaries' buildings, equipment and other tangible assets are in
good operating condition and are fit for use in the ordinary course of business.
The Seller and each of its Subsidiaries owns or leases all buildings, machinery,
equipment, and other tangible assets necessary for the conduct of its business
as presently conducted. The Acquired Assets constitute all of the assets and
rights necessary for the conduct of the Business as it is presently conducted.
5.10 Title to Properties.
-------------------
(a) Owned Properties. The Seller does not own any real property.
----------------
(b) Leased Properties. The "Leases Schedule" sets forth a list of all
----------------- ---------------
of the leases and subleases (the "Leases") and each leased and subleased parcel
------
of real property in which the Seller or any of its Subsidiaries has a leasehold
and subleasehold interest (the "Leased Real Property"). Each of the Leases is
--------------------
in full force and effect and the Seller or its Subsidiary holds a valid and
existing leasehold or subleasehold interest under each of the Leases. The
Seller has delivered to the Purchaser true, correct, complete and accurate
copies of each of the Leases described in the Leases
------
-23-
<PAGE>
Schedule. With respect to each Lease listed on the Leases Schedule: (i) the
- -------- ---------------
Lease is legal, valid, binding, enforceable and in full force and effect; (ii)
the Lease will continue to be legal, valid, binding, enforceable and in full
force and effect on identical terms following the Closing; (iii) neither the
Seller nor, to the knowledge of the Seller or any Stockholder, any other party
to the Lease is in breach or default, and no event has occurred which, with
notice or lapse of time, would constitute such a breach or default or permit
termination, modification or acceleration under the Lease; (iv) no party to the
Lease has repudiated any provision thereof; (v) there are no disputes, oral
agreements, or forbearance programs in effect as to the Lease; (vi) the Lease
has not been modified in any respect, except to the extent that such
modifications are disclosed by the documents delivered to the Purchaser; and
(vii) neither the Seller nor any of its Subsidiaries has assigned, transferred,
conveyed, mortgaged, deeded in trust or encumbered any interest in the Lease.
(c) Real Property Disclosure. Except as disclosed on the Leases
------------------------ ------
Schedule, there is no Real Property leased or owned by the Seller or any of its
- --------
Subsidiaries used in their businesses.
(d) No Proceedings. There are no proceedings in eminent domain or
--------------
other similar proceedings pending or, to the knowledge of the Seller or any
Stockholder, threatened, affecting any portion of the Leased Real Property.
There exists no writ, injunction, decree, order or judgment outstanding, nor any
litigation, pending or threatened, relating to the ownership, lease, use,
occupancy or operation by any person of the Leased Real Property.
(e) Condition and Operation of Improvements. All buildings and all
---------------------------------------
components of all buildings, structures and other improvements included within
the Leased Real Property (the "Improvements"), including, without limitation,
------------
the roofs and structural elements thereof and the heating, ventilation, air
conditioning, air pollution emission capture and abatement, plumbing,
electrical, mechanical, sewer, waste water and paving and parking equipment
systems and facilities included therein, are in good condition and repair and
adequate to operate such facilities as currently used and there are no facts or
conditions affecting any of the Improvements which would, individually or in the
aggregate, interfere in any significant respect with the use, occupancy or
operation thereof as currently used, occupied or operated or intended to be
used, occupied or operated. No Improvement or portion thereof is dependent for
its access, operation or utility on any land, building or other improvement not
included in the Leased Real Property.
(f) Permits. All certificates of occupancy, permits, licenses,
-------
franchises, approvals and authorizations (collectively, the "Real Property
-------------
Permits") of all governmental authorities having jurisdiction over the Leased
- -------
Real Property, required or appropriate to have been issued to the Seller or any
of its Subsidiaries to enable the Leased Real Property to be lawfully occupied
and used for all of the purposes for which it is currently occupied and used
have been lawfully issued and are, as of the date hereof, in full force and
effect. The Seller has delivered complete and correct copies of the Real
Property Permits to the Purchaser. Neither the Seller nor any of its
Subsidiaries has received or been informed by a third party of the receipt by it
of any notice from any governmental authority having jurisdiction over the
Leased Real Property threatening a suspension, revocation, modification or
cancellation of any Real Property Permit and, to the knowledge of the Seller or
any Stockholder, there is no basis for the issuance of any such notice or the
taking of any such action.
-24-
<PAGE>
(g) Compliance with Laws. Neither the Seller nor any of its
--------------------
Subsidiaries has received any notice of violation or claimed violation of any
Real Property Law. There is no pending or, to the knowledge of the Seller or
any Stockholder, any anticipated change in any Real Property Law that will have
or result in a significant adverse effect upon the ownership, alteration, use,
occupancy or operation of the Leased Real Property or any portion thereof. No
current use by the Seller or its Subsidiary of the Leased Real Property is
dependent on a nonconforming use or other approval from a governmental
authority, the absence of which would significantly limit the use of any of the
properties or assets in the operation of the business of the Seller or any of
its Subsidiaries.
5.1 Taxes. Except as set forth on the attached "Taxes
----- -----
Schedule,"
(a) the Seller and each of its Subsidiaries has timely filed all Tax
Returns which are required to be filed, and all such Tax Returns are true,
complete and accurate in all respects and have been prepared in compliance with
applicable law;
(b) all Taxes due and payable by the Seller and each of its
Subsidiaries, whether or not shown on a Tax Return, have been paid by the Seller
or each such Subsidiary and no Taxes are delinquent;
(c) the amount accrued as a current liability for taxes on the Latest
Balance Sheet shall be sufficient to pay in full all Taxes for taxable periods
(or portions thereof) ending on or before the date of the Latest Balance Sheet,
whether or not such Taxes are due on or before such date and, since the date of
the Latest Balance Sheet, neither the Seller nor any of its Subsidiaries have
incurred any liability for Taxes other than in the Ordinary Course of Business;
(d) no deficiency for any amount of Tax which has not been resolved
has been asserted or assessed by a taxing authority against the Seller or any of
its Subsidiaries, and neither the Seller nor any Stockholder has knowledge that
any such assessment or asserted Tax liability shall be made;
(e) there is no action, suit, taxing authority proceeding or audit
now in progress, pending or, to the knowledge of the Seller or any Stockholder,
threatened against or with respect to the Seller or any of its Subsidiaries;
(f) neither the Seller nor the Stockholders reasonably expect any
taxing authority to claim or assess any additional Taxes in respect of the
Seller or any of its Subsidiaries for any period;
(g) neither the Seller nor any of its Subsidiaries has (A) waived any
statute of limitations, (B) agreed to any extension of the period for assessment
or collection or (C) executed or filed any power of attorney, in each case with
respect to any Taxes which waiver, agreement or power of attorney is currently
in force;
(h) neither the Seller nor any of its Subsidiaries has been a member
of an Affiliated Group (as defined in Section 1504 of the Code), or any similar
group defined under local, state or foreign Tax law and neither the Seller nor
any of its Subsidiaries has any liability for Taxes
-25-
<PAGE>
of any Person other than the Seller or its Subsidiaries under Treasury
Regulations Section 1.1502-6 or any similar provision of local, state or foreign
Tax law;
(i) neither the Seller nor any of its Subsidiaries is a party to or
bound by any Tax allocation, sharing, indemnity or similar agreement or
arrangement with any Person and neither the Seller nor any of its Subsidiaries
has current or potential contractual obligation to indemnify any other Person
with respect to Taxes;
(j) neither the Seller nor any of its Subsidiaries has any obligation
to make any payment that could be non-deductible under Section 280G of the Code
(or any corresponding provision of state, local or foreign Tax law);
(k) no claim has ever been made by a taxing authority in a
jurisdiction where the Seller or any of its Subsidiaries does not pay Taxes or
file Tax Returns that the Seller or any such Subsidiary is or may be subject to
Taxes assessed by such jurisdiction;
(l) the Seller and each of its Subsidiaries have withheld and paid
all Taxes required to have been withheld and paid in connection with amounts
paid or owing to any employee, creditor, independent contractor or other third
party;
(m) a valid election to be an S Corporation (as defined in Section
1361 of the Code and any corresponding provision of state, local or foreign law)
has been in effect with respect to the Seller at all times since June 11, 1993;
(n) the Taxes Schedule contains a list of states, territories and
--------------
jurisdictions (whether foreign or domestic) in which the Seller and each of its
Subsidiaries are required to file Tax Returns relating to their respective
businesses; and
(o) neither the Seller nor any of its Subsidiaries will be required
to include any amount in taxable income for any taxable period (or portion
thereof) ending after the Closing Date that is attributable to any taxable
period (or portion thereof) ending on or before the Closing Date as a result of
(i) any change in method of accounting for a taxable period ending on or prior
to the Closing Date, (ii) any "closing agreement," as described in Section 7121
of the Code (or any corresponding provision of state, local or foreign income
Tax law), entered into on or before the Closing Date, (iii) any installment sale
made on or before the Closing Date, or (iv) any deferred intercompany gain
described in Treasury Regulation Section 1.15102-13 or any excess loss account
described in Treasury Regulation Section 1.1502-19 and 1.1502-32 (or any
corresponding or similar provision or administrative rule of federal, state,
local or foreign income tax law) arising on or before the Closing Date.
5.12 Contracts and Commitments.
-------------------------
(a) Except as specifically contemplated by this Agreement and except
as set forth on the "Contracts Schedule" attached hereto, neither the Seller nor
------------------
any of its Subsidiaries is a party to or bound by, whether written or oral, any:
-26-
<PAGE>
(i) collective bargaining agreement or contract with any labor union
or any bonus, pension, profit sharing, retirement or any other form of
deferred compensation plan or any stock purchase, stock option,
hospitalization insurance or similar plan or practice, whether formal or
informal;
(ii) any contract for the employment of any officer, individual
employee or other person on a full-time or consulting basis or any
severance agreements;
(iii) agreement or indenture relating to the borrowing of money or to
mortgaging, pledging or otherwise placing a Lien on any of its assets;
(iv) contract under which the Seller or any of its Subsidiaries has
advanced or loaned any other Person amounts in the aggregate exceeding
$25,000;
(v) agreements with respect to the lending or investing of funds;
(vi) license or royalty agreements;
(vii) guaranty of any obligation, other than endorsements made for
collection;
(viii) management, consulting, advertising, marketing, promotion,
technical services, advisory or other contract or other similar arrangement
relating to the design, marketing, promotion, management or operation of
the Business;
(ix) outstanding powers of attorney executed on behalf of the Seller;
(x) lease or agreement under which it is lessee of, or holds or
operates, any personal property owned by any other party calling for
payments in excess of $10,000 annually;
(xi) lease or agreement under which it is lessor of or permits any
third party to hold or operate any property, real or personal, owned or
controlled by it;
(xii) contract or group of related contracts with the same party
continuing over a period of more than six months from the date or dates
thereof, not terminable by it on 30 days or less notice without penalties
or involving more than $10,000;
(xiii) any confidentiality agreement or similar arrangement;
(xiv) contract which prohibits it from freely engaging in business
anywhere in the world; or
(xv) other agreement material to it whether or not entered into in
the Ordinary Course of Business.
-27-
<PAGE>
(b) Except as disclosed on the Contracts Schedule, (i) no contract or
------------------
commitment required to be disclosed on the Contracts Schedule has been breached
------------------
or canceled by the other party and neither the Seller nor any Stockholder has
knowledge of any anticipated breach by any other party to any contract set forth
on the Contracts Schedule, (ii) no customer or supplier has indicated in writing
------------------
or orally to the Seller, any of its Subsidiaries or any Stockholder that it
shall stop or decrease the rate of business done with the Seller or any of its
Subsidiaries or that it desires to renegotiate its contract or current
arrangement with the Seller or any of its Subsidiaries, (iii) the Seller and
each of its Subsidiaries have performed all the obligations required to be
performed by them in connection with the contracts or commitments required to be
disclosed on the Contracts Schedule and are not in default under or in breach of
------------------
any contract or commitment required to be disclosed on the Contracts Schedule,
------------------
and no event has occurred which with the passage of time or the giving of notice
or both would result in a default or breach thereunder, (iv) neither the Seller
nor any of its Subsidiaries has any present expectation or intention of not
fully performing any obligation pursuant to any contract set forth on the
Contracts Schedule, and (vi) each agreement is legal, valid, binding,
- ------------------
enforceable and in full force and effect and will continue as such following the
consummation of the transactions contemplated hereby.
(c) The Seller has provided the Purchaser with a true and correct copy
of all written contracts which are required to be disclosed on the Contracts
---------
Schedule, in each case together with all amendments, waivers or other changes
- --------
thereto (all of which are disclosed on the Contracts Schedule). The Contracts
------------------ ---------
Schedule contains an accurate and complete description of all material terms of
- --------
all oral contracts referred to therein.
5.13 Proprietary Rights.
------------------
(a) The attached "Proprietary Rights Schedule" contains a complete and
---------------------------
accurate list of all (a) patented or registered Proprietary Rights owned or used
by the Seller or any of its Subsidiaries, (b) pending patent applications and
applications for registrations of other Intellectual Property Rights filed by
the Seller or any of its Subsidiaries , (c) unregistered trade names, internet
domain names and corporate names owned or used by the Seller or any of its
Subsidiaries and (d) unregistered trademarks, service marks, and computer
software owned or used by the Seller or any of its Subsidiaries. The
Proprietary Rights Schedule also contains a complete and accurate list of all
- ---------------------------
licenses and other rights granted by the Seller or any of its Subsidiaries to
any third party with respect to any Proprietary Rights and all licenses and
other rights granted by any third party to the Seller or any of its Subsidiaries
with respect to any Proprietary Rights, in each case identifying the subject
Proprietary Rights. Except as set forth on the Proprietary Rights Schedule, the
---------------------------
Seller and each of its Subsidiaries own, free of all Liens (except Permitted
Encumbrances), all right, title and interest to, or have the right to use
pursuant to a valid written license, all Proprietary Rights necessary for the
operation of their businesses as presently conducted and such rights will be
owned or made available for use by the Seller and each of its Subsidiaries after
the Closing on terms and conditions identical to those under which they owned or
used such rights prior to the Closing. Except as set forth on the Proprietary
-----------
Rights Schedule, the loss or expiration of any Proprietary Rights or related
- ---------------
group of Proprietary Rights owned or used by the Seller or any of its
Subsidiaries has not had a Material Adverse Effect on the conduct of their
businesses and is not pending or, to the knowledge of the Seller or any
Stockholder, threatened or reasonably foreseeable.
-28-
<PAGE>
(b) Except as set forth on the Proprietary Rights Schedule, (i) the
---------------------------
Seller and each of its Subsidiaries owns and possesses without restriction as to
use, all right, title and interest in and to the Proprietary Rights necessary
for the operation of the Seller's and each of its Subsidiaries' businesses as
currently conducted; (ii) neither the Seller nor any of its Subsidiaries has
received any notices of invalidity, infringement or misappropriation from any
third party with respect to any such Proprietary Rights; (iii) neither the
Seller nor any of its Subsidiaries has interfered with, infringed upon,
misappropriated or otherwise come into conflict with any Proprietary Rights of
any third parties; and (iv) to the knowledge of the Seller or any Stockholder,
no third party has interfered with, infringed upon, misappropriated, or
otherwise come into conflict with any Proprietary Rights of the Seller or its
Subsidiaries.
(c) None of the computer software, computer firmware, computer
hardware (whether general or special purpose) or other similar or related items
of automated, computerized or software systems that are used or relied on by the
Seller or by any of its Subsidiaries in the conduct of their respective
businesses will malfunction, will cease to function, will generate incorrect
data or will produce incorrect results when processing, providing or receiving
(i) date-related data from, into and between the twentieth and twenty-first
centuries or (ii) date-related data in connection with any valid date in the
twentieth and twenty-first centuries.
(d) The transactions contemplated by this Agreement shall have no
adverse effect on the Seller's or any of its Subsidiaries' right, title and
interest in and to any of their Proprietary Rights. The Seller and each of its
Subsidiaries has taken all necessary and desirable actions to maintain and
protect their Proprietary Rights and shall continue to maintain and protect
those rights prior to the Closing so as to not adversely affect the validity or
enforcement of such Proprietary Rights.
5.14 Litigation; Proceedings. There are no actions, suits,
-----------------------
complaints, charges, proceedings, orders, investigations or claims pending or,
to the knowledge of the Seller or any Stockholder, threatened against or
affecting the Seller or any of its Subsidiaries (or to the knowledge of the
Seller or any Stockholder, pending or threatened against or affecting any of the
officers, directors or key employees of the Seller or any of its Subsidiaries
with respect to its businesses or proposed business activities) at law or in
equity, or before or by any governmental department, commission, board, bureau,
agency or instrumentality (including, without limitation, any actions, suits,
complaints, charges, proceedings or investigations with respect to the
transactions contemplated by this Agreement); nor have there been any such
actions, suits, proceedings, orders, investigations or claims pending against or
affecting the Seller or any of its Subsidiaries during the past three years; and
neither the Seller nor any of its Subsidiaries is subject to any grievance
arbitration proceedings under collective bargaining agreements or otherwise or,
to the knowledge of the Seller or any Stockholder, any governmental
investigations or inquiries. Neither the Seller nor any of its Subsidiaries is
subject to any judgment, order or decree of any court or other governmental
agency (or settlement enforceable therein), and neither the Seller nor any of
its Subsidiaries has received any opinion or memorandum or legal advice from
legal counsel to the effect that it is exposed, from a legal standpoint, to any
liability or disadvantage which may be material to its business.
-29
<PAGE>
5.15 Brokerage. Except as set forth on the "Brokerage Schedule"
--------- ------------------
attached hereto, there are no claims for brokerage commissions, finders' fees or
similar compensation in connection with the transactions contemplated by this
Agreement based on any arrangement or agreement made by or on behalf of the
Seller, any of its Subsidiaries or any Stockholder.
5.16 Governmental Licenses and Permits. The "Permits Schedule"
--------------------------------- ----------------
attached hereto contains a complete listing and summary description of all
permits, licenses, certificates, approvals and other authorizations of any
governmental entity or any department, agency or political subdivision thereof,
or other similar rights (collectively, the "Licenses") owned or possessed by the
--------
Seller or any of its Subsidiaries or used by it in the conduct of its
businesses. Except as indicated on the Permits Schedule, the Seller and each of
----------------
its Subsidiaries own or possess all right, title and interest in and to all of
the Licenses that are necessary to conduct their businesses as presently
conducted, including, without limitation, all Licenses required under any
federal, state or local law relating to public health and safety, employee
health and safety, pollution or protection of the environment. The Seller and
each of its Subsidiaries are in compliance with the terms and conditions of such
Licenses and have received no notices that they are in violation of any of the
terms or conditions of such Licenses. The Seller and each of its Subsidiaries
have taken all necessary action to maintain such Licenses. No loss or
expiration of any such License is threatened, pending or reasonably foreseeable
other than expiration in accordance with the terms thereof. Except as indicated
on the Permits Schedule, all of the Licenses shall survive the transactions
----------------
contemplated hereby.
5.17 Employees. Except as set forth on the "Employees Schedule"
--------- ------------------
attached hereto, to the knowledge of the Seller or any Stockholder, no key
executive employee and no group of employees or independent contractors of the
Seller or any of its Subsidiaries has any plans to terminate his, her or its
employment or relationship as an independent contractor with the Seller or any
of its Subsidiaries. The Seller and each of its Subsidiaries have complied and
remain in compliance with all applicable laws relating to the employment of
personnel and labor. Neither the Seller nor any of its Subsidiaries is a party
to or bound by any collective bargaining agreement, nor has such party
experienced any strikes, grievances, unfair labor practices claims or other
material employee or labor disputes. Neither the Seller nor any of its
Subsidiaries has engaged in any unfair labor practice. Neither the Seller nor
any Stockholder has knowledge of any organizational effort presently being made
or threatened by or on behalf of any labor union with respect to employees of
the Seller or any of its Subsidiaries. Neither the Seller nor any of its
Subsidiaries has implemented any plant closing or mass layoff of employees as
those terms are defined in the Worker Adjustment Retraining and Notification Act
of 1988, as amended ("WARN"), or any similar state or local law or regulation,
----
and no layoffs that could implicate such laws or regulations will have been
implemented before Closing without advance notification to the Purchaser.
5.18 Employee Benefit Matters.
------------------------
(a) With respect to current or former employees of the Seller and each
of its Subsidiaries, neither the Seller nor any of its Subsidiaries maintains or
contributes to or has any actual or potential liability with respect to any (i)
deferred compensation or bonus or retirement plans or arrangements, (ii)
qualified or nonqualified defined contribution or defined benefit plans or
arrangements which are employee pension benefit plans (as defined in Section
3(2) of the Employee
-30-
<PAGE>
Retirement Income Security Act of 1974, as amended ("ERISA")), or (iii) employee
-----
welfare benefit plans, (as defined in Section 3(1) of ERISA), stock option or
stock purchase plans, or material fringe benefit plans or programs whether in
writing or oral and whether or not terminated. Neither the Seller nor any of its
Subsidiaries has ever contributed to any multiemployer pension plan (as defined
in Section 3(37) of ERISA), and neither the Seller nor any of its Subsidiaries
has ever maintained or contributed to any defined benefit plan (as defined in
Section 3(35) of ERISA). The plans, arrangements, programs and agreements
referred to the preceding two sentences are referred to collectively as the
-----
"Plans." Neither the Seller nor any of its Subsidiaries maintains or contributes
to any Plan which provides health, accident or life insurance benefits to former
employees, their spouses or dependents, other than in accordance with Section
4980B of the Code ("COBRA").
-----
(b) The Seller and each of its Subsidiaries has not incurred and has
no reason to expect that it will incur, any liability to the Pension Benefit
Guaranty Corporation (other than routine premium payments ) or otherwise under
Title IV of ERISA (including any withdrawal liability) or under the Code with
respect to any employee pension benefit plan (as defined in Section 3(2) of
ERISA) that the Seller or any member of its "controlled group" (within the
meaning of Code Section 414) maintains or ever has maintained or to which any of
them contributes, ever has contributed, or ever has been required to contribute.
5.19 Insurance. The "Insurance Schedule" attached hereto lists
--------- ------------------
and briefly describes each insurance policy maintained by the Seller and each of
its Subsidiaries with respect to its properties, assets and business, together
with a claims history for the past five years. All of such insurance policies
are in full force and effect, and neither the Seller nor any of its Subsidiaries
is in default with respect to its obligations under any such insurance policies
and neither the Seller nor any of its Subsidiaries has been denied insurance
coverage. Except as set forth on the Insurance Schedule, neither the Seller nor
------------------
any of its Subsidiaries has any self-insurance or co-insurance programs, and the
reserves set forth on the Latest Balance Sheet are adequate to cover all
anticipated liabilities with respect to self-insurance or coinsurance programs.
5.20 Officers and Directors; Bank Accounts. The "Officers,
------------------------------------- ---------
Directors and Bank Accounts Schedule" attached hereto lists all officers and
- ------------------------------------
directors of the Seller and each of its Subsidiaries, and all bank accounts,
safety deposit boxes and lock boxes (designating each authorized signatory with
respect thereto) for the Seller and each of its Subsidiaries.
5.21 Affiliate Transactions. Except as disclosed on the
----------------------
"Affiliated Transactions Schedule" attached hereto, no Insider is a party to any
- ---------------------------------
agreement, contract, commitment or transaction with the Seller or any of its
Subsidiaries or which is pertaining to the business of the Seller or any of its
Subsidiaries or has any interest in any property, real or personal or mixed,
tangible or intangible, used in or pertaining to the business of the Seller or
any of its Subsidiaries.
5.22 Compliance with Laws. The Seller, each of its Subsidiaries
--------------------
and their officers, directors, partners, agents and employees have complied with
and are in compliance with all applicable laws, regulations and ordinances of
foreign, federal, state and local governments and all agencies thereof which are
applicable to the business, business practices (including, but not limited to,
the Seller's and its Subsidiaries' marketing and sales of its products and
services) or any owned or leased properties of the Seller or any of
-31-
<PAGE>
its Subsidiaries and to which the Seller or any of its Subsidiaries may be
subject, and no claims have been filed against the Seller or any of its
Subsidiaries alleging a violation of any such laws or regulations, and neither
the Seller nor any of its Subsidiaries has received notice of any such
violations.
5.23 ENVIRONMENTAL MATTERS. Except as set forth on the
---------------------
"Environmental Schedule" attached hereto:
- -----------------------
(a) The Seller and each of its Subsidiaries have complied with and are
currently in compliance with all Environmental and Safety Requirements, and
neither the Seller nor any of its Subsidiaries has received any oral or written
notice, report or information regarding any liabilities (whether accrued,
absolute, contingent, unliquidated or otherwise) or any corrective,
investigatory or remedial obligations arising under Environmental and Safety
Requirements which relate to the Seller or any of its Subsidiaries or any of its
properties or facilities.
(b) Without limiting the generality of the foregoing, the Seller and
each of its Subsidiaries have obtained and complied with, and are currently in
compliance with, all permits, licenses and other authorizations that may be
required pursuant to any Environmental and Safety Requirements for the occupancy
of their properties or facilities or the operation of their business. A list of
all such permits, licenses and other authorizations which are material to the
Seller or any of its Subsidiaries is set forth on the Environmental Schedule.
----------------------
(c) Neither this Agreement or the other Transaction Documents nor the
consummation of the transactions contemplated hereby and thereby shall impose
any obligations on the Seller or its Subsidiaries or otherwise for site
investigation or cleanup, or notification to or consent of any government
agencies or third parties under any Environmental and Safety Requirements
(including, without limitation, any so called "transaction-triggered" or
"responsible property transfer" laws and regulations).
(d) None of the following exists at any property or facility owned,
occupied or operated by the Seller or any of its Subsidiaries: (i) underground
storage tanks or surface impoundments; (ii) asbestos-containing material in any
form or condition; (iii) materials or equipment containing polychlorinated
biphenyls; or (iv) landfills.
(e) Neither the Seller nor any of its Subsidiaries has treated,
stored, disposed of, arranged for or permitted the disposal of, transported,
handled or Released any substance (including, without limitation, any hazardous
substance) or owned, occupied or operated any facility or property, so as to
give rise to liabilities of the Seller or any of its Subsidiaries for response
costs, natural resource damages or attorneys' fees pursuant to CERCLA or any
other Environmental and Safety Requirements.
(f) Without limiting the generality of the foregoing, no facts, events
or conditions relating to the past or present properties, facilities or
operations of the Seller or any of its Subsidiaries shall prevent, hinder or
limit continued compliance with Environmental and Safety Requirements, give rise
to any corrective, investigatory or remedial obligations pursuant to
Environmental and Safety Requirements
-32-
<PAGE>
or give rise to any other liabilities (whether accrued, absolute, contingent,
unliquidated or otherwise) pursuant to Environmental and Safety Requirements,
including, without limitation, those liabilities relating to onsite or offsite
Releases or threatened Releases of hazardous materials, substances or wastes,
personal injury, property damage or natural resources damage.
(g) Neither the Seller nor any of its Subsidiaries has, either
expressly or by operation of law, assumed or undertaken any liability or
corrective investigatory or remedial obligation of any other Person relating to
any Environmental and Safety Requirements.
(h) No Environmental Lien has attached to any property owned, leased
or operated by the Seller or any of its Subsidiaries.
5.24 Disclosure. Neither this Agreement, the other Transaction
----------
Documents, nor any of the schedules, attachments or Exhibits hereto, contain any
untrue statement of a material fact or omit a material fact necessary to make
each statement contained herein or therein, not misleading; There is no fact
which has not been disclosed to the Purchaser of which the Seller or any
Stockholder has knowledge which has a Material Adverse Effect or could
reasonably be anticipated to have a Material Adverse Effect.
5.25 Closing Date. All of the representations and warranties
------------
contained in this Article V and elsewhere in this Agreement and all information
delivered in any schedule, attachment or Exhibit hereto or in any writing
delivered to the Purchaser are true and correct on the date of this Agreement
and shall be true and correct on the Closing Date, except to the extent that the
Seller or any Stockholder has advised the Purchaser otherwise in writing prior
to the Closing.
ARTICLE VI
REPRESENTATIONS AND WARRANTIES CONCERNING THE PURCHASER
-------------------------------------------------------
As a material inducement to the Seller to enter into this Agreement,
the Purchaser hereby represents and warrants to the Seller that:
6.1 Organization and Corporate Power. The Purchaser is a
--------------------------------
corporation duly organized, validly existing and in good standing under the laws
of the State of Delaware, with full corporate power and authority to enter into
this Agreement and the other agreements contemplated hereby to which the
Purchaser is a party and perform its obligations hereunder and thereunder.
6.2 Authorization of Transaction. The execution, delivery and
----------------------------
performance of this Agreement and the other agreements contemplated hereby to
which the Purchaser is a party have been duly and validly authorized by all
requisite corporate action on the part of the Purchaser, and no other corporate
proceedings on its part are necessary to authorize the execution, delivery or
performance of this Agreement. This Agreement constitutes, and each of the
other agreements contemplated hereby to which the Purchaser is a party shall
when executed constitute, a valid and binding obligation of the Purchaser,
enforceable in accordance with their terms.
6.3 No Violation. The Purchaser is not subject to or obligated
------------
under its certificate of incorporation, its by-laws, any applicable law, or rule
or regulation of any governmental authority,
-33-
<PAGE>
or any agreement or instrument, or any license, franchise or permit, or subject
to any order, writ, injunction or decree, which would be breached or violated by
its execution, delivery or performance of this Agreement and the other
agreements contemplated hereby to which the Purchaser is a party.
6.4 Governmental Authorities and Consents. The Purchaser is not
-------------------------------------
required to submit any notice, report or other filing with any governmental
authority in connection with the execution or delivery by it of this Agreement
and the other agreements contemplated hereby to which the Purchaser is a party
or the consummation of the transactions contemplated hereby or thereby. No
consent, approval or authorization of any governmental or regulatory authority
or any other party or person is required to be obtained by the Purchaser in
connection with its execution, delivery and performance of this Agreement and
the other agreements contemplated hereby to which the Purchaser is a party or
the transactions contemplated hereby or thereby.
6.5 Litigation. There are no actions, suits, proceedings or
----------
orders pending or, to the Purchaser's knowledge, threatened against or affecting
the Purchaser at law or in equity, or before or by any federal, state, municipal
or other governmental department, commission, board, bureau, agency or
instrumentality, domestic or foreign, which would adversely affect the
Purchaser's performance under this Agreement and the other agreements
contemplated hereby to which the Purchaser is a party or the consummation of the
transactions contemplated hereby or thereby.
6.6 Brokerage. There are no claims for brokerage commissions,
---------
finders' fees or similar compensation in connection with the transactions
contemplated by this Agreement based on any arrangement or agreement made by or
on behalf of the Purchaser.
6.7 Closing Date. All of the representations and warranties
------------
contained in this Article VI and elsewhere in this Agreement and all information
delivered in any schedule, attachment or Exhibit hereto or in any writing
delivered to Stockholders are true and correct on the date of this Agreement and
shall be true and correct on the Closing Date, except to the extent that the
Purchaser has advised Stockholders otherwise in writing prior to the Closing.
ARTICLE VII
TERMINATION
-----------
7.1 Termination. This Agreement may be terminated at any time
-----------
prior to the Closing:
(a) by mutual written consent of the Seller and the Purchaser;
(b) by the Seller or the Purchaser if there has been a material
misrepresentation or breach on the part of the other Party of the
representations, warranties or covenants set forth in this Agreement or if
events have occurred which have made it impossible to satisfy a condition
precedent to the terminating Party's obligations to consummate the transactions
contemplated hereby unless such terminating Party's willful or knowing breach of
this Agreement has caused the condition to be unsatisfied;
-34-
<PAGE>
(c) by the Purchaser, at any time on or prior to December 31, 1997, if
the Purchaser is not satisfied with the results of its legal, accounting,
business, tax, environmental and other due diligence review of the Business;
(d) by the Seller or the Purchaser if the Closing has not occurred on
or prior to January 15, 1998; provided, however, that neither the Purchaser nor
the Seller shall be entitled to terminate this Agreement pursuant to this
Section 7.1(c) if such Party's willful or knowing breach of this Agreement has
prevented the consummation of the transactions contemplated hereby at or prior
to such time.
7.2 Effect of Termination. In the event of termination of this
---------------------
Agreement by either the Seller or the Purchaser as provided in Section 7.1, this
Agreement shall forthwith become void and there shall be no liability on the
part of any Party to any other Party under this Agreement, except that the
provisions of Section 9.7 and Article X shall continue in full force and effect
and except that nothing herein shall relieve any Party from liability for any
breach of this Agreement prior to such termination.
ARTICLE VII
SURVIVAL
--------
8.1 Survival. All representations, warranties, covenants and
--------
agreements set forth in this Agreement or in any writing or certificate
delivered in connection with this Agreement shall survive the Closing Date and
the consummation of the transactions contemplated hereby and shall not be
affected by any examination made for or on behalf of any Party, the knowledge of
any of such Party's officers, directors, stockholders, employees or agents, or
the acceptance of any certificate or opinion. Notwithstanding the foregoing, no
Party shall be entitled to recover for any Loss unless written notice of a claim
thereof is delivered to the other Party prior to the Applicable Limitation Date.
For purposes of this Agreement, the term "Applicable Limitation Date" shall mean
--------------------------
the third anniversary of the Closing Date; provided that the Applicable
Limitation Date with respect to the following Losses shall be as follows: (i)
with respect to any Loss arising from or related to a breach of the
representations and warranties of the Seller and Stockholders set forth in
Sections 5.11 (Taxes) and 5.18 (Employee Benefits Matters), the Applicable
Limitation Date shall be the 60th day after expiration of the statute of
limitations (including any extensions thereto to the extent that such statute of
limitations may be tolled) applicable to the Tax or ERISA statute, regulation or
other authority which gave rise to such Loss, (ii) with respect to any Loss
arising from or related to a breach of the representations and warranties of the
Seller and Stockholders set forth in Section 5.23 (Environmental), the
Applicable Limitation Date shall be the fifth anniversary of the Closing Date,
and (iii) with respect to any Loss arising from or related to a breach of the
representations and warranties of the Seller and Stockholders set forth in
Section 5.1 (Organization and Corporate Power), Section 5.2 (Authorization of
Transactions), Section 5.3 (Capitalization), Section 5.5 (Absence of Conflicts),
or Section 5.15 (Brokerage) and with respect to any Loss arising from or related
to a breach of the representations and warranties of Purchaser set forth in
Section 6.1 (Organization and Corporate Power), 6.2 (Authorization of
Transactions), 6.3 (No Violation) or 6.6 (Brokerage), there shall be no
Applicable Limitation Date (i.e., such representations and warranties shall
survive forever).
-35-
<PAGE>
ARTICLE IX
ADDITIONAL AGREEMENTS
---------------------
9.1 Continuing Assistance. Subsequent to the Closing, the
---------------------
Seller, the Stockholders and the Purchaser (at their own cost) shall assist each
other (including making records available) in the preparation of their
respective Tax Returns and the filing and execution of Tax elections, if
required, as well as any audits or litigation that ensue as a result of the
filing thereof, to the extent that such assistance is reasonably requested.
9.2 Tax Matters.
-----------
(a) All transfer, documentary, sales, use, stamp, registration and
other such Taxes and fees (including any penalties and interest thereon)
incurred in connection with this Agreement shall be paid by the Seller or the
Stockholders when due, and the Seller and the Stockholders shall, at his or its
own expense, file all necessary Tax Returns and other documentation with respect
to all such transfer, documentary, sales, use, stamp, registration and other
Taxes and fees, and if required by applicable law, the Purchaser shall, and
shall cause its affiliates to, join in the execution of any such Tax Returns and
other documentation.
(b) All real property taxes, personal property taxes, ad valorem
-- -------
obligations and similar taxes imposed on a periodic basis, in each case levied
with respect to the Acquired Assets, other than conveyance taxes provided for in
Section 9.2(a), for a taxable period which includes (but does not end on) the
Closing Date shall be apportioned between the Seller and the Purchaser as of the
Closing Date based on the number of days of such taxable period included in the
pre-Closing Tax period and the number of days of such taxable period included in
the post-Closing period. Seller shall be liable for the proportionate amount of
such Taxes that is attributable to the pre-Closing Tax period. Within 90 days
after the Closing, the Seller and the Purchaser shall present a reimbursement to
which each is entitled under this Section 9.2(b) together with such supporting
evidence as is reasonably necessary to calculate the proration amount. The
proration amount shall be paid by the party owing it to the other within 10 days
after delivery of such statement. Thereafter, the Seller shall notify the
Purchaser upon receipt of any bill for real or personal property taxes relating
to the Acquired Assets, part or all of which are attributable to the post-
Closing Tax period, and shall promptly deliver such bill to the Purchaser who
shall pay the same to the appropriate taxing authority, provided that if such
bill covers the pre-Closing Tax period, the Seller shall also remit prior to the
due date of assessment to the Purchaser payment for the proportionate amount of
such bill that is attributable to the pre-Closing Tax period. In the event that
either the Seller or the Purchaser shall thereafter make a payment for which it
is entitled to reimbursement under this Section 9.2(b), the other party shall
make such reimbursement promptly but in no event later than 30 days after the
presentation of a statement setting forth the amount of reimbursement to which
the presenting party is entitled along with such supporting evidence as is
reasonably necessary to calculate the amount of reimbursement. Any payment
required under this Section 9.2(b) and not made within 10 days of delivery of
the statement shall bear interest at the rate per annum determined, from time to
time, under the provisions of Section 6621(a)(2) of the Code for each day until
paid.
9.3 Press Releases and Announcements. Prior to the Closing
--------------------------------
Date, no press releases related to this Agreement and the transactions
contemplated herein, or other announcements
-41-
<PAGE>
to the employees, customers or suppliers of the Seller shall be issued without
the mutual approval of all Parties, except for any public disclosure which any
Party in good faith believes is required by law or regulation (in which case the
disclosure shall be prepared jointly by the Seller and the Purchaser). After the
Closing Date, no press releases related to this Agreement and the transactions
contemplated herein, or other announcements to the employees, customers or
suppliers of the Seller shall be issued without the Purchaser's consent (which
shall not be unreasonably withheld).
9.4 Further Transfers. The Seller shall execute and deliver
-----------------
such further instruments of conveyance and transfer and take such additional
action as the Purchaser may reasonably request to effect, consummate, confirm or
evidence the transfer to the Purchaser of the Acquired Assets and any other
transactions contemplated hereby.
9.5 Specific Performance. The Seller and the Stockholders
--------------------
acknowledge that the Seller's Business is unique and recognizes and affirms that
in the event of a breach of this Agreement by the Seller or the Stockholders,
money damages may be inadequate and the Purchaser may have no adequate remedy at
law. Accordingly, the Seller and the Stockholders agree that the Purchaser
shall have the right, in addition to any other rights and remedies existing in
its favor, to enforce its rights and the Seller's and the Stockholders'
obligations hereunder not only by an action or actions for damages but also by
an action or actions for specific performance, injunctive and/or other equitable
relief.
9.6 Transition Assistance. Neither the Seller nor any
---------------------
Stockholder shall in any manner take any action which is designed, intended, or
might be reasonably anticipated to have the effect of discouraging customers,
suppliers, lessors, licensors and other business associates from maintaining the
same business relationships with the Purchaser after the date of this Agreement
as were maintained with the Seller prior to the date of this Agreement.
9.7 Expenses. Except as otherwise provided herein, the Seller
--------
and the Stockholders and the Purchaser shall pay all of their own fees, costs
and expenses (including, without limitation, fees, costs and expenses of legal
counsel, investment bankers, brokers or other representatives and consultants
and appraisal fees, costs and expenses) incurred in connection with the
negotiation of the this Agreement and the other agreements contemplated hereby,
the performance of its obligations hereunder and thereunder, and the
consummation of the transactions contemplated hereby and thereby.
9.8 Exclusivity. Until this Agreement is terminated by its
-----------
terms, neither the Seller nor any Stockholder (and neither the Seller nor any
Stockholder shall cause or permit any Insider or agent or any other Person
acting on behalf of any Stockholder, the Seller, or its Affiliates to), (a)
solicit, initiate or encourage the submission of any proposal or offer from any
Person (including any of them) relating to any (i) liquidation, dissolution or
recapitalization of, (ii) merger or consolidation with or into, (iii)
acquisition or purchase of assets of or any equity interest in or (iv) similar
transaction or business combination involving the Seller or (b) participate in
any discussions or negotiations regarding, furnish any information with respect
to, assist or participate in, or facilitate in any other manner any effort or
attempt by any other Person to do or seek any of the foregoing. The Seller and
each Stockholder agree that they will discontinue immediately any negotiations
or discussion with respect to any of the foregoing. Until this Agreement is
-42-
<PAGE>
terminated by its terms, the Stockholders and the Seller shall notify the
Purchaser immediately if any Person makes any proposal, offer, inquiry or
contact with respect to any of the foregoing.
9.9 Books and Records. Unless otherwise consented to in writing
-----------------
by the Seller or the Purchaser (as the case may be), the Purchaser and the
Seller will not, for a period of seven years following the date hereof, destroy,
alter or otherwise dispose of any of the books and records of the Seller
acquired by the Purchaser hereunder or retained by the Seller or any Stockholder
without first offering to surrender to the Seller, the Stockholders or the
Purchaser such books and records or any portion thereof of which the Seller, the
Stockholders or the Purchaser may intend to destroy, alter or dispose. The
Purchaser, the Seller and the Stockholders will allow the other party's
representatives, attorneys and accountants access to such books and records,
upon reasonable request for during such party's normal business hours, for the
purpose of examining and copying the same in connection with any matter whether
or not related to or arising out of this Agreement or the transactions
contemplated hereby.
9.10 CONFIDENTIALITY. The Seller and each Stockholder shall
---------------
treat and hold as confidential any information concerning the business and
affairs of the Business that is not already generally available to the public
(the "Confidential Information"), refrain from using any of the Confidential
------------------------
Information except in connection with this Agreement, and deliver promptly to
the Purchaser or destroy, at the request and option of the Purchaser, all
tangible embodiments (and all copies) of the Confidential Information which are
in his possession or under his control. In the event that the Seller or any
Stockholder is requested or required (by oral question or request for informa
tion or documents in any legal proceeding, interrogatory, subpoena, civil
investigative demand, or similar process) to disclose any Confidential
Information, the Seller or such Stockholder shall notify the Purchaser promptly
of the request or requirement so that the Purchaser may seek an appropriate
protective order or waive compliance with the provisions of this Section 9.10.
If, in the absence of a protective order or the receipt of a waiver hereunder,
the Seller or any Stockholder is, on the advice of counsel, compelled to
disclose any Confidential Information to any tribunal or else stand liable for
contempt, the Seller or such Stockholder may disclose the Confidential
Information to the tribunal; provided that such disclosing Stockholder or the
Seller shall use his or its reasonable best efforts to obtain, at the request of
the Purchaser, an order or other assurance that confidential treatment shall be
accorded to such portion of the Confidential Information required to be
disclosed as the Purchaser shall designate. The Seller and each Stockholder
acknowledges and agrees that in the event of a breach by any Stockholder of any
of the provisions of this Section 9.10, monetary damages shall not constitute a
sufficient remedy. Consequently, in the event of any such breach, the Seller,
Purchaser and/or their respective successors or assigns may, in addition to
other rights and remedies existing in their favor, apply to any court of law or
equity of competent jurisdiction for specific performance and/or injunctive or
other relief in order to enforce or prevent any violations of the provisions
hereof, in each case without the requirement of posting a bond or proving actual
damages.
9.11 EMPLOYEES.
---------
(a) The Seller has provided the Purchaser with a true, correct and
complete list of all of the Seller's employees indicating the rate of pay of
-43-
<PAGE>
each such employee during the twelve months preceding the date hereof and the
status of each such employee as active, on leave, full-time, part-time or
otherwise.
(b) Except for the employees set forth on the "Excluded Employees
------------------
Schedule" attached hereto (the "Excluded Employees"), the Purchaser will offer
- -------- ------------------
at-will employment to all active full-time employees of Seller as of the Closing
Date (the "Continuing Employees") on terms and conditions which, in the
--------------------
aggregate, are substantially equivalent to those applicable to such persons'
terms and conditions of employment with the Seller immediately prior to the
Closing Date. Nothing in this Section 9.11 shall obligate Purchaser to continue
to employ any Continuing Employee for any period of time.
(c) The Seller will be responsible for and shall pay (and the
Stockholders shall cause the Seller to pay) to Seller's employees (i) all
amounts of wages, bonuses and other renumeration (including, without limitation,
discretionary benefits and bonuses) payable to such employees with respect to
the period ending on the day prior to the Closing Date, (ii) any workers'
compensation claims, amounts payable under Plans maintained by Seller and other
amounts payable on an ongoing basis to such employees in connection with events
or incidents occurring prior to the Closing Date, except to the extent that such
amounts are paid under insurance, (iii) amounts equal to the vacation pay, sick
leave pay and floating holiday pay earned or accrued by such employees as of the
close of business on the Closing Date, whether or not such pay is vested or has
been accrued on the books of the Seller at such close of business, based upon
the remuneration of such employees, normally used in computing such vacation
pay, sick leave pay and floating holiday pay and (iv) all severance payments, if
any, due to such employees as a result of the termination of their employment
with the Seller. Seller shall also be responsible for and shall pay any related
payroll burden (including, without limitation, FICA and other employment taxes)
with respect to payments made under this Section 9.11(c).
9.12 SELLER'S NAME CHANGE. As soon as practicable after the
--------------------
Closing, the Seller will change its corporate name to a name which is not (and
which is not confusingly similar to) "Eagle Scaffolding Equipment Co." it being
the intent of the Parties that from and after the Closing the Purchaser will
have the sole right as against the Seller and all other Persons to conduct
business under such name and that the Purchaser will commence doing so at the
time of the Closing.
9.13 ALLOCATION OF PURCHASE PRICE. The allocation ("Allocation")
---------------------------- ----------
of the Purchase Price among the Acquired Assets shall be made as set forth on
the "Purchase Price Allocation Schedule" attached hereto. The Allocation shall
----------------------------------
be determined jointly by the Purchaser and the Seller reasonably and in good
faith, and such Allocation shall be used by the Parties in preparing (a) Form
8594, Asset Acquisition Statement, for each of the Purchaser and the Seller, and
(b) all Tax Returns. Each of the Purchaser and the Seller shall file Form 8594,
prepared in accordance with this Section, with its federal income Tax Return for
its Tax period including the Closing Date.
9.14 Third Party Consents. Notwithstanding anything to the
--------------------
contrary contained in this Agreement, this Agreement shall not constitute an
agreement to transfer, sell or otherwise assign any instrument, contract, lease,
license, permit or other agreement or arrangement which is not permitted to be
assigned in connection with a transaction of the type contemplated by this
Agreement (collectively, the "Unassigned Contracts"). The beneficial interest
--------------------
-44-
<PAGE>
in and to each Unassigned Contract shall in any event pass to the Purchaser at
the Closing; and the Seller covenants and agrees to cooperate with the Purchaser
in any lawful and economically feasible arrangement to provide the Purchaser
with the Seller's entire interest in the benefits under each of the Unassigned
Contracts. If and only if the Purchaser receives the economic benefits under an
Unassigned Contract, the Purchaser agrees to accept the burdens and perform the
obligations under such Unassigned Contract as subcontractor of the Seller.
Furthermore, if the other party(ies) to an Unassigned Contract subsequently
consent to the assignment of such contract to the Purchaser (without
modification thereto which is adverse to the Purchaser), the Purchaser shall
thereupon agree to assume and perform all liabilities and obligations arising
thereunder after the date of such consent, at which time such Unassigned
Contract shall be deemed an Acquired Asset. The Seller agrees to indemnify the
Purchaser and hold it harmless against any Losses which the Purchaser may
suffer, sustain or become subject to, as a result of any claims by any party to
any of the Unassigned Contracts for breach of contract in connection with the
consummation of the transactions contemplated by this Agreement.
9.15 Bulk Sales Law. The Seller will bear any loss, liability,
--------------
obligation or cost suffered by the Seller or the Purchaser as a result of the
Parties' noncompliance with any provision of any bulk sales law which is
applicable to the transfer of the Acquired Assets pursuant to this Agreement.
ARTICLE X
MISCELLANEOUS
-------------
10.1 Amendment and Waiver. This Agreement may be amended and any
--------------------
provision of this Agreement may be waived, provided that any such amendment or
waiver shall be binding upon a Party only if such amendment or waiver is set
forth in a writing executed by Purchaser, the Seller and the Stockholders. No
course of dealing between or among any persons having any interest in this
Agreement shall be deemed effective to modify, amend or discharge any part of
this Agreement or any rights or obligations of any Party under or by reason of
this Agreement.
10.2 Notices. All notices, demands and other communications
-------
given or delivered under this Agreement shall be in writing and shall be deemed
to have been given when personally delivered, mailed by first class mail, return
receipt requested, or delivered by express courier service or telecopied (with
hard copy to follow). Notices, demands and communications to the Stockholders,
the Seller and the Purchaser shall, unless another address is specified in
writing, be sent to the address or telecopy number indicated below:
Notices to the Seller and the Stockholders with a copy to:
- ------------------------------------------ --------------
c/o Robert Kenneth McNabb Jeffrey Shaner
3629 West Hacienda 715 South 6th
Las Vegas, Nevada 89118 Las Vegas, Nevada 89101
-45-
<PAGE>
Notices to Purchaser: with a copy to:
- -------------------------------------- --------------------------------------
BAT Acquisition Corp. Kirkland & Ellis
1800 Sherman Avenue 200 East Randolph Drive
Suite 100 Chicago, Illinois 60601
Evanston, IL 60201 Attention: Sanford E. Perl, Esq.
Attention: Kevin Rodgers Telecopy: (312) 861-2200
Telecopy: (847) 733-1078
10.3 Binding Agreement; Assignment. This Agreement and all of
-----------------------------
the provisions hereof shall be binding upon and inure to the benefit of the
Parties and their respective successors and permitted assigns; provided that
neither this Agreement nor any of the rights, interests or obligations hereunder
may be assigned by the Seller or any Stockholder without the prior written
consent of Purchaser or by Purchaser (except as otherwise provided in this
Agreement) without the prior written consent of the Seller; provided further
that:
(a) the Purchaser may at any time prior to the Closing, at its sole
discretion, assign, in whole or in part, its rights and obligations pursuant to
this Agreement to one or more of its Affiliates;
(b) the Purchaser may assign its rights under this Agreement for
collateral security purposes to any lender providing financing to Purchaser or
any of its Affiliates and any such lender may exercise all of the rights and
remedies of the Purchaser hereunder; and
(c) the Purchaser may assign its rights under this Agreement, in whole
or in part, to any subsequent purchaser of the Purchaser or any material portion
of its assets (whether such sale is structured as a sale of stock, a sale of
assets, a merger or otherwise).
10.4 Severability. Whenever possible, each provision of this
------------
Agreement shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement is held to be prohibited
by or invalid under applicable law, such provision shall be ineffective only to
the extent of such prohibition or invalidity, without invalidating the remainder
of such provisions or the remaining provisions of this Agreement.
10.5 No Strict Construction. The language used in this Agreement
----------------------
shall be deemed to be the language chosen by the Parties to express their mutual
intent, and no rule of strict construction shall be applied against any person.
10.6 Captions. The captions used in this Agreement are for
--------
convenience of reference only and do not constitute a part of this Agreement and
shall not be deemed to limit, characterize or in any way affect any provision of
this Agreement, and all provisions of this Agreement shall be enforced and
construed as if no caption had been used in this Agreement.
10.7 Entire Agreement. This Agreement and the documents referred
----------------
to herein contain the entire agreement between the Parties and supersede any
-46-
<PAGE>
prior understandings, agreements or representations by or between the Parties,
written or oral, which may have related to the subject matter hereof in any way.
10.8 Counterparts. This Agreement may be executed in multiple
------------
counterparts, each of which shall be deemed an original but all of which taken
together shall constitute one and the same instrument.
10.9 Governing Law. All questions concerning the construction,
-------------
validity and interpretation of this Agreement shall be governed by and construed
in accordance with the domestic laws of the State of Illinois, without giving
effect to any choice of law or conflict of law provision (whether of the State
of Illinois or any other jurisdiction) that would cause the application of the
laws of any jurisdiction other than the State of Illinois.
10.10 Parties in Interest. Nothing in this Agreement, express or
-------------------
implied, is intended to confer on any person other than the Parties and their
respective successors and assigns any rights or remedies under or by virtue of
this Agreement.
* * * * *
-47-
<PAGE>
IN WITNESS WHEREOF, the Parties have executed this Asset Purchase Agreement as
of the date first written above.
BAT ACQUISITION CORP.
By: /s/ Kevin P. Rodgers
--------------------------------------------
Its: CEO
--------------------------------------------
McNABB ENTERPRISES, INC.
By: /s/ R. K. McNabb
--------------------------------------------
Its: President
--------------------------------------------
STOCKHOLDERS: /s/ Robert Kenneth McNabb
--------------------------------------------------
Robert Kenneth McNabb
/s/ Robert Steven McNabb
--------------------------------------------------
Robert Steven McNabb
-48-
<PAGE>
Exhibit 10.22
ASSET PURCHASE AGREEMENT
------------------------
THIS AGREEMENT IS MADE this 21 day of January, 1998, by and among NES
Michigan Acquisition Corp., a Delaware corporation ("Purchaser"), Grand Hi-
Reach, Inc., a Michigan corporation ("Seller"), and Allen Baker ("Shareholder").
In consideration of the mutual covenants, agreements and warranties herein
contained and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
DEFINITIONS
-----------
The following terms shall have the meanings set forth herein for the
purposes of the transactions described in this Agreement:
"Acquired Assets" shall have the meaning given to it in Section 1.1.
-----------
"Agreement" shall mean this Asset Purchase Agreement, including all
Exhibits and Schedules hereto.
"Applicable Law" shall mean any federal, state, local or other law,
statute, regulation, rule, policy, guideline, ordinance (zoning or otherwise),
by-law, order, judgment, decree or restriction of any kind (including, without
limitation, any environmental law) applicable to or binding on Purchaser,
Seller, Shareholder, the Business, the Byron Center Property or any of the
Acquired Assets.
"Assumed Obligations" shall have the meaning given to it in Section 1.4.
-----------
"Assumed Warranties" shall mean the warranties of Seller outstanding on the
Closing Date for used equipment previously sold by it and not covered by a
manufacturer's warranty.
"Base Amount" shall mean $5,747,000.
"Book Value" shall mean net book value (ie. book value of Acquired Assets
--
less book value of Assumed Obligations of all Acquired Assets determined in
accordance with GAAP, consistently applied.
"Bulk Sales Laws" shall mean the laws of any jurisdiction relating to bulk
sales or transfers that are applicable to the sale of the Acquired Assets
hereunder.
"Business" shall mean the business and operations of Seller, wherever
conducted.
"Byron Center Property" shall mean the real property and improvements
commonly known as 430 100th Street, Byron Center, Michigan.
1
<PAGE>
"Closing" shall mean the consummation of the transactions contemplated
herein in accordance with Section 10 hereof.
----------
"Closing Date" shall mean the date on which the Closing occurs or is to
occur.
"Closing Statement" shall have the meaning given it in Section 2.3.
-----------
"Code" shall mean the Internal Revenue Code of 1986, as amended.
"Contract" shall mean any contract, lease, commitment, sales order,
purchase order, indenture, mortgage, note, bond, instrument, license or other
agreement relating to the Business including, without limitation, any Purchase
Order or Customer Contract.
"Customer Contract" shall have the meaning set forth in Section 1.2(b).
--------------
"Disbursement Date" shall have the meaning given to it in Section 2.1(b).
--------------
"Encumbrance" shall mean any encumbrance or restriction of any kind,
including, without limitation, any pledge, security interest, lien, charge,
encumbrance, mortgage, hypothecation, trust deed, easement, lease, sublease,
claim, right of way, covenant, option, condition, right of first refusal or
restriction (whether on sale, transfer, disposition or otherwise, whether
imposed by agreement, law or otherwise and whether of record or otherwise).
"Environmental Law" shall mean any law, statute, regulation, rule, order,
consent decree, settlement agreement or governmental requirement which relates
to or otherwise imposes liability or standards of conduct concerning discharges,
releases or threatened releases of noises, odors or any pollutants, contaminants
or hazardous or toxic wastes, substances or materials into ambient air, water or
land, or otherwise relating to the manufacture, processing, generation,
distribution, use, treatment, storage, disposal, cleanup, transport or handling
of pollutants, contaminants or hazardous or toxic wastes, substances or
materials, including (but not limited to) the Comprehensive Environmental
Response, Compensation and Liability Act of 1980, as amended, the Resource
Conservation and Recovery Act of 1976, as amended, any other so-called
"Superfund" or "Superlien" law, the Toxic Substances Control Act, or any other
similar Federal, state or local statutes.
"Environmental Permit" shall mean any Permit required by or pursuant to any
applicable Environmental Law.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974, as
amended.
"Excluded Assets" shall have the meaning given to it in Section 1.3.
-----------
"Fleet" shall have the meaning given it in Section 1.1(a).
--------------
2
<PAGE>
"GAAP" shall mean the U.S. generally accepted accounting principles at the
time in effect, consistently applied for the periods in question.
"General Holdback" shall mean five percent (5%) of the Purchase Price.
"Inventory" shall have the meaning given to it in Section 1.1(b).
--------------
"Losses" shall mean all liabilities, losses, costs, fines, damages,
penalties or expenses (including, without limitation, reasonable attorneys' fees
and costs of investigation and litigation).
"Management Non-Competition Agreement" shall mean the non-competition
agreement in the form of Exhibit C hereto.
---------
"Other Contracts" shall have the meaning given to it in Section 1.2(c)
--------------
"Permits" shall have the meaning given to it in Section 1.2(d).
--------------
"Purchase Orders" shall have the meaning given to it in Section 1.2(a).
--------------
"Purchase Price" shall mean $9,600,000, subject to adjustment as provided
in Section 2.
---------
"Real Property" shall mean the Byron Center Property and Wixom Property.
"Seller's Plans" shall have the meaning given to it in Section 3.13(a).
---------------
"Shareholder Non-Competition Payment" shall mean $150,000.
"Tax Authority" shall mean any governmental agency having jurisdiction over
the payment of Taxes by Seller and shall include, without limitation, the
Michigan Department of Revenue.
"Tax Certificates" shall mean certificates issued by the Michigan
Department of Revenue either certifying that no Taxes are due, through and
including the Closing Date, from Seller, or setting forth the amount of Taxes
that are due from Seller through and including the Closing Date.
"Taxes" shall mean all taxes, including, without limitation, income, gross
receipts, net proceeds, ad valorem, turnover, real and personal property
(tangible and intangible), sales, use, franchise, excise, value added, stamp,
leasing, lease, user, transfer, fuel, excess profits, occupational and interest
equalization, windfall profits, payroll, severance and employees' income
withholding and Social Security taxes imposed by the United States or by any
state, municipality, subdivision or instrumentality of the United States or by
any other Tax Authority, including all applicable penalties and interest.
"To the knowledge of" shall mean to the knowledge of the party in question
after reasonable due investigation.
3
<PAGE>
"Wixom Property" shall mean the real property and improvements commonly
known as 48596 Downing, Wixom, Michigan 48393.
SECTION 1. Purchase and Sale; Liabilities
------------------------------
1.1 Acquired Assets. At the Closing, Seller shall sell, assign, transfer
---------------
and deliver to Purchaser, and Purchaser shall purchase, acquire and take
assignment and delivery of, all of the assets of Seller, wherever located
(collectively, the "Acquired Assets"), except for the Excluded Assets. The
Acquired Assets include, without limitation, the following:
(a) All new or used machinery, equipment, vehicles (including, without
limitation, automobiles, trucks, tractors and trailers and title to
equipment that may be subject to a capital or finance lease naming Seller
as lessee) that are leased by Seller to its customers in the ordinary
course of business including, without limitation, those items set forth on
Schedule 1.1 (the "Fleet");
------------
(b) All new or used machinery, equipment, vehicles (including, without
limitation, automobiles, trucks, tractors and trailers), attachments or
spare parts held for sale or resale by Seller (the "Inventory");
(c) All accounts receivables, trade receivables, notes receivables and
other receivables arising out of the operation of the Business on or before
the Closing Date;
(d) All cash, certificates of deposit, bank deposits and other cash
equivalents, together with all accrued but unpaid interest thereon, and
including any security deposit under any Customer Contract;
(e) All patents, patent registrations or applications, copyrights,
copyright registrations or applications, trademarks, trademark registration
or applications, tradenames, trade secrets, inventions, processes, designs,
know-how, formulae and all phone numbers and facsimile numbers for the Real
Property, including, without limitation, the name "Grand Hi-Reach";
(f) All confidential information, price lists, marketing information,
advertising materials, historical and financial records and files, and
other proprietary information and all environmental control, monitoring and
test records;
(g) All sales, rental, and maintenance records for each item of the
Fleet and otherwise, customer lists and files (including customer credit
and collection information and customer addresses), historical records and
files and other proprietary information;
(h) All warranties, indemnities or other rights relating to the Acquired
Assets;
(i) All goodwill, if any, related to or used in connection with the
Business; and
4
<PAGE>
(j) All other assets, tangible or intangible, of Seller relating to or
used in connection with the Business (except for the Excluded Assets),
including, without limitation, furniture, tools and shop equipment.
1.2 Assignment of Contracts, Leases and Other Assets. At the Closing,
------------------------------------------------
Seller shall assign and transfer to Purchaser, effective as of the Closing Date,
all of Seller's right, title and interest in and to, and Purchaser will take
assignment of the following (and all of the following shall be deemed included
in the term "Acquired Assets"):
(a) All open purchase orders, contracts, leases and agreements for the
purchase or lease of goods or materials by Seller and set forth on Schedule
--------
1.2 (a) attached hereto (the "Purchase Orders");
-------
(b) All open leases, contracts and agreements for the lease, service or
sale of units of the Fleet and other goods and services with customers and
any deposits under such leases, contracts and agreements (the "Customer
Contracts");
(c) All Contracts with suppliers related to the Fleet and other
Contracts listed on Schedule 1.2(c) (the "Other Contracts") and all such
---------------
other Contracts as shall be entered into between the date hereof and the
Closing Date which fall into the categories set forth in clauses (a) or (b)
above or in this clause (c) and have been entered into in the ordinary
course of business or such other Contracts which shall be expressly
designated in writing by Purchaser prior to the Closing; and
(d) All permits, licenses, consents, approvals, certificates, variances
or other authorizations required in connection with the operation of the
Business under any Applicable Law (the "Permits").
1.3 Excluded Assets. The following assets of Seller (collectively, the
---------------
"Excluded Assets") shall be retained by Seller and are not being sold or
assigned to Purchaser hereunder:
(a) The Byron Center Property;
(b) One (1) Chevy Blazer Asset No. 20875, one (1) Chevy Suburban, Asset
No. 43198, one (1) Utility Trailer, Asset No. 01374 and one (1) 1996
Polaris 4 Wheeler, Asset No. 2935958;
(c) All corporate seals, articles of incorporation, minute books, stock
books, tax returns or similar records pertaining to the corporate
organization of Seller; and
(d) life insurance policies on Allen Baker.
1.4 Assumed Obligations. At the Closing, Purchaser shall assume, and
-------------------
agree to pay, perform, fulfill and discharge, from and after the Closing Date,
the obligations of Seller (the "Assumed Obligations") that are required to be
performed, and which accrue, after the Closing Date under (a) the Purchase
Orders, Customer Contracts or Other Contracts (excluding indemnities,
5
<PAGE>
warranties, services, breach of contract claims or other obligations relating to
goods sold or leased on or before the Closing Date or to matters occurring or
which should have occurred on or before the Closing Date), except where the
consent of a third party is required for the assignment of such order or
contract and such consent has not been obtained and Seller has failed to provide
Purchaser the practical benefit of such order or contract and (b) the terms of
the Assumed Warranties, provided, that, Purchaser shall have no obligation under
this Section 1.4(b) for any warranty claim under the Assumed Warranties asserted
--------------
(i) in violation of the applicable warranty requirements or (ii) for the first
time on or after 180 days from the Closing Date.
1.5 No Other Liabilities Assumed. Anything in this Agreement to the
----------------------------
contrary notwithstanding, neither Purchaser nor any of its affiliates shall
assume, and shall not be deemed to have assumed, any debt, claim, obligation or
other liability of Seller, Shareholder or any of their respective affiliates
whatsoever other than as specifically set forth in Section 1.4. Without
-----------
limiting the generality of the foregoing exclusion, Purchaser is assuming no
obligation for, and shall have no responsibility with respect to, any such
party's accounts payable, warranty obligations, taxes, labilities under
Environmental Laws or liabilities to or with respect to employees or under or
with respect to any employee benefit plan, policy, program or arrangement.
Purchaser shall be under no obligation to hire any of Seller's employees,
including, without limitation, any obligation for employment compensation,
benefits or severance.
SECTION 2. Purchase Price and Payment.
--------------------------
2.1 Payment of Purchase Price.
-------------------------
(a) On the Closing Date, Purchaser shall pay Seller an amount equal
to the Purchase Price less the General Holdback and the Shareholder Non-
Competition Payment.
(b) On the Disbursement Date (as defined below), (i) if the Book
Value stated in the Closing Statement exceeds the Base Amount, Purchaser
shall pay to Seller the General Holdback (less amounts retained by
Purchaser to satisfy claims pursuant to Section 12 or paid or payable by
----------
Purchaser to a Tax Authority on Seller's account) and the amount by which
the Book Value stated in the Closing Statement exceeds the Base Amount,
or (ii) if Base Amount exceeds the Book Value stated in the Closing
Statement, Purchaser shall pay Seller the General Holdback less (A) the
amount by which the Base Amount exceeds the Book Value stated in the
Closing Statement and (B) amounts retained by Purchaser to satisfy claims
----------
pursuant to Section 12 or paid or payable by Purchaser to a Tax Authority
on Seller's account. If the General Hold back is not sufficient to cover
the amount, if any, by which the Base Amount exceeds the Book Value stated
in the Closing Statement, Seller shall pay to Purchaser the amount of such
deficiency on the date that the Book Value is determined in accordance
with this Agreement. Neither party shall be required to make any payment
of any amount subject to arbitration pursuant to Section 2.2 until the
-----------
conclusion of such arbitration. The "Disbursement Date" shall mean the
later of (i) the 120th day after the Closing Date, and (ii) the date
Purchaser receives either a Tax Certificate showing that no Taxes are due
from Seller or appropriate release documents from the proper Tax
Authorities.
6
<PAGE>
2.2 Shareholder Non-Competition Payment. On the Closing Date, Purchaser
-----------------------------------
shall pay the Shareholder Non-Competition Payment to the Shareholder on behalf
of the Shareholder and the Company.
2.3 Closing Statement.
-----------------
(a) Within 90 days after the Closing Date, Purchaser shall prepare
and deliver to Seller a detailed statement (the "Closing Statement") setting
forth the Book Value of the Acquired Assets. The Closing Statement shall be
prepared at Purchaser's expense in accordance with GAAP and in a manner
consistent with Seller's past practices and the terms of this Agreement. Upon
Purchaser's request, Seller shall make available to Purchaser and its
accountants such documents as Purchaser may reasonably request in connection
with the preparation of the Closing Statement.
(b) Within thirty (30) days after receipt of the Closing Statement,
Seller shall deliver to Purchaser a written statement describing its objections,
if any, thereto. Unless Seller so objects within such period, the Closing
Statement shall become final and binding upon all parties. If Seller objects
within such period, such objection shall be resolved by Coopers & Lybrand,
Chicago office which shall be instructed to resolve such dispute within thirty
(30) days. The resolution of disputes by the arbitrating accounting firm so
selected shall be set forth in writing and shall be conclusive and binding upon
the parties and the Closing Statement shall become final and binding upon the
date of such resolution. The fees and expenses of such accounting firm shall be
paid one-half by Purchaser and one-half by Seller.
(c) The parties shall prorate the personal property tax assessed on
the Acquired Assets by the state of Michigan or any locality with respect to the
1998 calendar year. Seller is responsible for that portion of the 1998 personal
property tax multiplied by a fraction, the numerator of which is the number days
in 1998 that Seller owned the Acquired Assets and the denominator of which is
365. Purchaser shall be responsible for the remainder of such tax.
2.4 Allocation of Purchase Price. Purchaser and Seller shall allocate
----------------------------
the Purchase Price as set forth on Schedule 2.4 hereto. Such allocation is
------------
intended to comply with the requirements of Section 1060 of the Code. Seller
and Purchaser shall file Form 8594 with their respective Tax Returns
consistently with such allocation. Purchaser and Seller shall treat and report
the transaction contemplated by this Agreement in all respects consistently for
purposes of any federal, state or local tax, including, without limitation, the
calculation of gain, loss and basis with reference to the Purchase Price
allocation made pursuant to this Section 2.4. The parties hereto shall not take
-----------
any actions or positions inconsistent with the obligations set forth herein.
2.5 Manner of Payments. All payments required by this Section 2 shall be
------------------ ---------
by wire transfer of same day funds to an account designated by the party
entitled to payment.
2.6 Procedures for Assets not Transferable. If any of the contracts or
--------------------------------------
agreements or any other property or rights included in the Acquired Assets are
not assignable or transferable without the consent of a third party, Seller
shall diligently use all commercially reasonable efforts to obtain such consents
prior to the Closing Date and Purchaser shall use all commercially reasonable
efforts to assist in that endeavor. If any such consent cannot be obtained
prior to the Closing Date and the
7
<PAGE>
Closing occurs, this Agreement and the related instruments of transfer shall not
constitute an assignment or transfer thereof, and Purchaser shall not assume
Seller's obligations with respect thereto, but Seller shall diligently use all
commercially reasonable efforts to obtain such consent as soon as possible after
the Closing Date or otherwise obtain for Purchaser the practical benefit of such
property or rights and Purchaser shall use all commercially reasonable efforts
to assist in that endeavor. Purchaser shall perform the Assumed Obligations
pertaining to any contract or agreement for which Seller obtains a consent to
transfer or otherwise obtains the practical benefit for Purchaser.
SECTION 3. Representations and Warranties of Seller and Shareholder. Each of
--------------------------------------------------------
Seller and Shareholder, being obligated jointly and severally, represent and
warrant to Purchaser as follows:
3.1 Due Incorporation. Seller is a corporation duly organized, validly
-----------------
existing and in good standing under the laws of Michigan with all requisite
corporate power and authority to own, lease and operate the Acquired Assets.
Seller is duly organized and in good standing as a foreign corporation
authorized to do business in each jurisdiction where the failure to be qualified
would have a material adverse effect on the Business or the Acquired Assets.
Shareholder is the only shareholder of Seller.
3.2 Due Authorization. Seller and Shareholder have full power and
-----------------
authority to enter into this Agreement and to carry out the transactions
contemplated herein. The execution, delivery and performance of this Agreement
has been duly authorized by all necessary corporate and shareholder action on
the part of Seller. This Agreement has been duly and validly executed and
delivered by Seller and Shareholder, and constitutes the legal, valid and
binding obligation of each of them, enforceable against each of them in
accordance with its terms. The execution, delivery and performance by Seller
and Shareholder of this Agreement and all other instruments, agreements,
certificates and documents contemplated hereby (a) except as set forth on
Schedule 3.2, do not violate or constitute a default under any Applicable Law or
- ------------
any Contract to which Seller or Shareholder is a party, or by which any of them
or any of the Acquired Assets are bound; or (b) except as set forth on Schedule
--------
3.2, will not result in the creation of any Encumbrance upon the Acquired
- ---
Assets, or permit the acceleration of the maturity of the indebtedness of Seller
relating to, or indebtedness secured by, the Acquired Assets. Except as set
forth on Schedule 3.2, no notice to, filing with, authorization of, exemption
------------
by, or consent of any person or entity is required in order for Seller or
Shareholder to consummate the transactions contemplated hereby.
3.3 No Adverse Change. Since August 31, 1997, there has not been (a) any
-----------------
material adverse change in the financial condition, results of operations,
properties or prospects of the Business, (b) except as set forth on Schedule
--------
3.3(b), any material loss or damage or other adverse change to any of the
- ------
Acquired Assets; (c) any sale, transfer or disposition of the Acquired Assets,
other than sales or leases of Inventory in the ordinary course of business; (d)
any Encumbrance placed on any of the Acquired Assets; or (e) any changes in the
accounting systems, policies or practices of the Business.
3.4 Title to Assets. Seller has good and valid title to the Acquired
---------------
Assets, subject to the Encumbrances set forth on Schedule 3.4. At and as of the
------------
Closing, Seller shall convey the Acquired Assets (and, with respect to Acquired
Assets subject to capital leases or finance leases, cause to be conveyed) to
Purchaser by bills of sale, documents of title and instruments of assignment and
8
<PAGE>
transfer effective to vest in Purchaser good and valid record, beneficial and
marketable title to all of the Acquired Assets, free and clear of any
Encumbrance. The Acquired Assets and the Excluded Assets constitute all assets
necessary for the conduct of the Business, as currently operated. Schedule 3.4
------------
sets forth the location of each unit of the Fleet.
3.5 Taxes. All Taxes of Seller have been properly determined in
-----
accordance with applicable rules and regulations and have been timely paid in
full. Seller has duly and timely filed all Tax Returns of every nature required
to be filed by it, in every jurisdiction in which the same may have been so
required, and has paid all Taxes disclosed on such returns. All Taxes that
Seller is required by law to withhold or collect, including, without limitation,
sales and use taxes, and amounts required to be withheld for Taxes of employees,
have been duly withheld or collected and, to the extent required, have been paid
over to the proper governmental authorities.
3.6 Contracts. Schedule 3.6 sets forth a true and correct copy of the
--------- ------------
equipment lease form and equipment sale form used with such customers (which
form varies from customer to customer only as to type of equipment, name of
customer, term and price).
3.7 No Defaults or Violations. Seller has not materially breached any
-------------------------
provision of, nor is in material default under the terms of, any Contract to
which it is a party or by which it or the Acquired Assets are bound (including,
without limitation, the Purchase Orders, Customer Contracts and Other
Contracts), and, to the knowledge of Seller, no other party to any such Contract
is in breach or default either in the payment of money or any other material
respect. Neither Seller, the Acquired Assets nor the Business is in any
material violation or default of, or with respect to, any Applicable Law, and no
notice from any governmental agency has been served upon Seller claiming any
violation of any Applicable Law or asserting any assessment or penalty which
would have a material adverse effect on the Acquired Assets. No condition or
set of facts exists which, with notice, lapse of time or both, would constitute
a breach of the representations and warranties in this Section 3.
---------
3.8 Certain Environmental Matters. Except as disclosed on Schedule 3.8
----------------------------- ------------
attached hereto: (a) Seller has obtained all Environmental Permits required for
the operation of the Business or the Acquired Assets and such Environmental
Permits are valid and in full force and effect; (b) neither the Business, any of
the Acquired Assets nor the Real Property violate any applicable Environmental
Law or Environmental Permit in effect as of the date hereof and, to the
knowledge of Seller and Shareholder, no condition or event has occurred which,
with notice, lapse of time or both, would constitute any such violation; (c)
neither the Seller nor, to the knowledge of Seller and Shareholder, any other
person has stored or used any pollutants, contaminants or hazardous or toxic
wastes, substances or materials on or at the Real Property; (d) Seller has not
received notice from any person advising that any of the Real Property or
Acquired Assets or the operation of the Business violates any Environmental Law
or any Environmental Permit or that any Seller is responsible (or potentially
responsible) for the cleanup of any pollutants, contaminants or hazardous or
toxic wastes, substances or materials at, on or beneath the Real Property or at,
on or beneath any land
9
<PAGE>
adjacent thereto or any other property and, to the knowledge of Seller and
Shareholder, no such notice is threatened; (e) Seller and Shareholder are not
aware of any fact or circumstance that would give rise to any claim, suit,
proceeding or investigation related to the manufacture, distribution, use,
treatment, storage, disposal, discharge or release of any industrial, toxic or
hazardous substance or waste in connection with the Business, the Acquired
Assets or the Real Property; (f) neither Seller nor, to the knowledge of Seller
and Shareholder, any other person has buried, dumped, disposed, spilled or
released any pollutants, contaminants or hazardous or toxic wastes, substances
or materials on, beneath or about the Property or any property adjacent thereto
or any other property; (g) neither the Real Property nor any land adjacent
thereto has been used for the disposal, processing or treatment of waste or as a
dump site; and (h) no storage tanks are or, to the knowledge of Seller and
Shareholder, have been on, at or under the Real Property. Seller has timely
filed all reports required to be filed with respect to the Real Property, the
Acquired Assets and the operation of the Business and has generated and
maintained all required data, documentation and records under any applicable
Environmental Laws and Environmental Permits with respect thereto.
3.9 Permits. Seller holds all of the Permits described on Schedule 3.9
------- ------------
attached hereto (each of which is in full force and effect), and no other
Permits are currently necessary for the lawful operation of the Business or the
Acquired Assets. Seller has not received notice of revocation or modification
of any Permit.
3.10 Litigation. Except as set forth on Schedule 3.10, there are no
---------- -------------
actions, suits, proceedings or governmental investigations pending or, to the
knowledge of Seller and Shareholder, threatened against or affecting Seller,
Shareholder, the Business, any of the Acquired Assets, the Byron Center
Property, the Wixom Property or relating to the transactions contemplated by
this Agreement. Seller is not subject to any order, judgment, decree,
stipulation or consent of or with any governmental agency that has or may have a
material adverse effect on the Acquired Assets or the transactions contemplated
by this Agreement.
3.11 Insurance Policies. Schedule 3.11 attached hereto contains an
------------------ -------------
accurate and complete list of all insurance carried by Seller with respect to
the Business and the Acquired Assets. Except as set forth on Schedule 3.11, no
-------------
claims have been made against such insurance in the three (3) year period prior
to the date hereof. All such insurance is in full force and effect and all
premiums due to date have been paid.
3.12 Customers. No customer to which Seller has sold or leased units of
---------
the Fleet or rendered services during the past twelve (12) months has, during
the past twelve (12) months, discontinued or materially limited its leases or
purchases from the Business. Seller has not received any notice and has no
knowledge that any customer intends to terminate or materially reduce its leases
or purchases from the Business in the future. There is no Customer or group of
related Customers who accounted for more than 5% of the revenues of the Business
during the past twelve (12) months. The Business is conducted from no locations
other than the Byron Center Property and the Wixom Property.
10
<PAGE>
3.13 Employee Benefit Plans and Employment Agreements.
------------------------------------------------
(a) Schedule 3.13 is a list of all employee contracts, and
-------------
employee benefit plans, programs, policies and arrangements (including all
collective bargaining, stock purchase, stock option, employment,
compensation, deferred compensation, pension, retirement, severance,
termination, separation, vacation, sickness, health, welfare and bonus
plans, arrangements, and agreements) whether or not such contracts, plans,
policies or arrangements constitute "employee benefit plans" within the
meaning of Section 3(3) of ERISA under or with respect to which Seller has
any obligation or liability that relates to the Business (collectively, the
"SELLER'S PLANS").
(b) Seller has provided access to Purchaser of true and correct
copies of each of Seller's Plans and all contracts relating thereto, or to
the funding thereof, including, without limitation, all trust agreements,
insurance contracts, administration contracts, investment management
agreements, subscription and participation agreements, and recordkeeping
agreements, each as in effect on the date hereof, and an accurate
description of any Seller's Plans that are not in written form. To the
extent applicable, a true and correct copy of the most recent annual
report, actuarial report, summary plan description, and Internal Revenue
Service determination letter with respect to each of Seller's Plans has
been supplied to Purchaser by Seller and there have been no material
changes in the financial condition of any of Seller's Plans from that
stated in the applicable annual reports and actuarial reports supplied.
(c) With respect to each of Seller's Plans and except as set forth
on Schedule 3.13:
-------------
(i) no such Seller's Plan is a multiemployer plan (as defined in
Section 3(37) of ERISA) or is subject to title IV of ERISA;
(ii) to Seller's knowledge, each such Seller's Plan complies and has
been administered in form and in operation in all material
respects with all applicable requirements of law, including, to
the extent applicable, sections 401(a) and 501(a) of the Code;
to Seller's knowledge, no event has occurred which will or could
cause any such Seller's Plan to fail to comply with such
requirements and there have been no amendments to such plans
which are employee benefit pension plans (as defined in Section
3(2) of ERISA) which are not the subject of a favorable
determination letter issued with respect thereto by the Internal
Revenue Service;
(iii) to Seller's knowledge, there are no actions, suits or claims
(other than routine claims for benefits) pending or threatened
involving any
11
<PAGE>
such Seller's Plan or the assets thereof and no facts exist
which could give rise to any such actions, suits or claims
(other than routine claims for benefits);
(iv) to Seller's knowledge, there have been no "prohibited
transactions" (as described in section 406 of ERISA or section
4975 of the Code) with respect to any of Seller's Plans and
Seller has not engaged in any prohibited transaction, which
could reasonably be expected to have a material adverse effect
on Seller;
(v) Seller does not have any liability or contingent liability for
providing, under any of Seller's Plans or otherwise, any post-
retirement medical or life insurance benefits, other than
statutory liability for providing group health plan continuation
coverage under Part 6 of Title I of ERISA and Section 4980B of
the Code, which could reasonably be expected to have a material
adverse effect on Seller; and
(vi) there have been no acts or omissions by Seller which have given
rise to or may give rise to fines, penalties, taxes or related
charges under section 502 of ERISA or Chapters 43, 47, 68 or 100
of the Code for which Purchaser may be liable on account of the
execution of this Agreement or the consummation of the
transaction contemplated hereby, which could reasonably be
expected to have a material adverse effect on Seller.
3.14 Employees. Schedule 3.14 contains a true, complete and
--------- -------------
accurate list of the names, titles, annual compensation and all current bonuses
for each employee of the Seller who has an annual base salary of $25,000 or
more. Except as disclosed on Schedule 3.14, there is no, and during the past
-------------
two years there has been no, labor strike, picketing, dispute, slow-down, work
stoppage, union organization effort, grievance filing or proceeding, or other
labor difficulty actually pending or, to the knowledge of Seller and
Shareholder, threatened against or involving the Seller. Except as set forth in
Schedule 3.14, Seller is not a party to any collective bargaining agreement
- -------------
pertaining to the conduct of the Business and no such agreement determines the
terms and conditions of the employment of employees of the Business. Except as
set forth in Schedule 3.14 no collective bargaining agent has been certified as
-------------
a representative of any of employees of the Business and no representation
campaign or election is now in progress with respect to any employees of the
Business. Seller is in compliance with its obligations, if any, pursuant to the
Worker Adjustment and Retraining Notification Act of 1988 ("WARN ACT") and all
other obligations, if any, arising under any other applicable Law relating to
the termination of employees of the Business. Except as set forth on Schedule
--------
3.14, Seller has not received notice that any key employee of the Business
- ----
intends to terminate his employment with Seller or would not be willing to work
for Purchaser.
3.15 Seller's Warranties. Schedule 3.15 contains a list of each
------------------- -------------
express warranty, if any, given by Seller on units of the Fleet sold or leased
or services performed by Seller, that is outstanding on the Closing Date.
Seller has provided Purchaser with access to a true and complete copy of each
such warranty.
12
<PAGE>
3.16 Manufacturers' Warranties. Schedule 3.16 contains a list of
------------------------- -------------
each express warranty, if any, given by any manufacturer with respect to any of
the Acquired Assets, that is outstanding on the Closing Date. Seller has
provided Purchaser with access to a true and complete copy of each such warranty
and, to the extent assignable, each such warranty shall be assigned to Purchaser
at Closing, at no additional cost to Purchaser.
3.17 Brokers. No broker or finder has acted for Seller in
-------
connection with this Agreement or the transactions contemplated hereby and no
broker or finder is entitled to any brokerage or finder's fee, by virtue of an
agreement with Seller or Shareholder.
3.18 No Other Agreement. Neither Seller nor Shareholder has any
------------------
contract, agreement, arrangement or understanding with respect to the sale or
other disposition of any of the Acquired Assets or capital stock of Seller,
except as set forth in this Agreement.
3.19 Assumed Warranties. Each of the Assumed Warranties has a
------------------
warranty duration period of no greater than six months from the date of sale by
Seller. The Assumed Warranties provide for the repair of any mechanical
breakdown of equipment sold, except that caused by operator abuse or neglect.
Aggregate claims against warranties given by Seller on sales of used equipment
similar to the coverage afforded and equipment covered by the Assumed Warranties
have not exceeded the following amounts for the following calendar years: 1997-
$5,000; 1996 - $5,000; 1995 -$5,000; 1994 - $5,000; and 1993 - $5,000. There is
currently no claim pending or threatened on any of the Assumed Warranties. To
the knowledge of Seller and Shareholder, there exists no defect or other matter
with respect to the used equipment covered by the Assumed Warranties that could
reasonably be expected to result in a material claim thereunder.
3.20 Accuracy of Statements. Neither this Agreement nor any
----------------------
statement, list, certificate or other information furnished or to be furnished
by or on behalf of Seller or Shareholder to Purchaser in connection with this
Agreement or any of the transactions contemplated hereby contains any untrue
statement of a material fact regarding Seller, Shareholder, the Acquired Assets
or the Business or omits to state a material fact necessary to make the
statements regarding Seller, Shareholder, the Acquired Assets or the Business
contained herein or therein, in light of the circumstances in which they are
made, not misleading.
Each of the foregoing representations and warranties shall be deemed remade by
Seller and Shareholder, jointly and severally, on the Closing Date. No
investigation or due diligence by Purchaser shall limit, modify or negate any of
the foregoing representations and warranties.
13
<PAGE>
SECTION 4. Representations and Warranties of Purchaser. Purchaser represents
-------------------------------------------
and warrants to Seller and Shareholder as follows:
4.1 Due Incorporation. Purchaser is a corporation duly organized,
-----------------
validly existing and in good standing under the laws of the State of Delaware
with all requisite corporate power and authority to own, lease and operate its
properties and to carry on its business as now being conducted.
4.2 Due Authorization. Purchaser has full power and authority to
-----------------
enter into this Agreement and to carry out its obligations under this Agreement.
The execution, delivery and performance of this Agreement by Purchaser has been
duly authorized by all necessary corporate action on the part of Purchaser.
This Agreement has been duly executed and delivered by Purchaser and constitutes
the legal, valid and binding obligation of Purchaser, enforceable against
Purchaser in accordance with its terms. The execution and delivery of this
Agreement does not, and the consummation of the transactions contemplated hereby
will not, violate or constitute a default under any Applicable Law or any
Contract to which Purchaser is a party. Except as set forth on Schedule 4.2, no
------------
notice to, filing with, authorization of, exemption by or consent of any person
or entity is required in order for Purchaser to consummate the transactions
contemplated hereby, except as shall have been obtained on or prior to the
Closing Date.
4.3 Litigation. Except as set forth on Schedule 4.3, there are no
---------- ------------
actions, suits, proceedings or governmental investigations pending or, to the
knowledge of Purchaser, threatened against or affecting Purchaser relating to
the transactions contemplated by this Agreement. Purchaser is not subject to
any order, judgment, decree, stipulation or consent of or with any governmental
agency that has or may have a material adverse effect on the transactions
contemplated by this Agreement.
4.4 Brokers. No broker or finder has acted for Purchaser in
-------
connection with this Agreement or the transactions contemplated hereby and no
broker or finder is entitled to any brokerage or finder's fee, by virtue of an
agreement with Purchaser.
Each of the foregoing representations and warranties shall be deemed remade by
Purchaser on the Closing Date.
SECTION 5. Covenants of Seller and Shareholder.
-----------------------------------
Seller and Shareholder each agree that:
5.1 Implementing Agreement. Seller and Shareholder shall each
----------------------
take all reasonably necessary action to fulfill their respective obligations
under this Agreement and to consummate the transactions contemplated herein.
5.2 Access to Information. Seller and Shareholder shall each
---------------------
ensure Purchaser and Purchaser's representatives access during normal business
hours to all the Acquired Assets (wherever located) and the facilities,
properties, books, contracts, commitments and records of Seller. Seller's
officers and employees shall be available as Purchaser shall reasonably request.
Purchaser and its
14
<PAGE>
representatives shall be furnished with information concerning the Business as
Purchaser shall reasonably request.
5.3 Ordinary Course. Seller shall (a) operate the Business only
---------------
in the usual, regular and ordinary course and manner consistent with past custom
and practice, (b) not incur any indebtedness other than to finance its working
capital needs in the ordinary course of business, (c) pay all accounts payable,
purchase inventory, collect all accounts receivable, and make capital
expenditures in the ordinary course of business consistent with past custom and
practice, (d) use all commercially reasonable efforts to maintain its business
and employees, customers, assets and operations as an ongoing business in
accordance with past custom and practice, and (e) not enter into any agreements
with respect to the foregoing.
5.4 Consents and Approvals. At its own cost, Seller shall make
----------------------
all filings, applications, statements and reports to all Governmental
Authorities that are required to be made prior to the Closing Date pursuant to
any Applicable Law in connection with this Agreement and the transactions
contemplated hereby. Seller shall use all commercially reasonable efforts to
obtain all necessary consents and approvals to consummate the transactions
contemplated hereby. At Purchaser's request and expense, Seller shall enforce,
to the extent possible, any warranty pertaining to the Acquired Assets that has
not been assigned to Purchaser. Shareholder shall execute and deliver all
landlord lien waiver documentation required for the Byron Center Property by
Purchasers lender.
5.5 Compliance with Laws. Seller shall duly comply with all
--------------------
Applicable Laws.
5.6 No Modifications. Seller shall not modify, amend or otherwise
----------------
alter or change any of the material terms or provisions of any Purchase Orders,
Customer Contracts or Other Contracts.
5.7 State Tax Notification Requirements. Promptly after the
-----------------------------------
Closing, Seller shall:
(a) request from the Michigan Department of Revenue the statement
or certificate described in the Michigan Sales and Use Tax Act and request
the Michigan Department of Revenue to make a determination as to whether
Seller owes any tax, penalty or interest under the Michigan Sales and Use
Tax Act; and
(b) comply with the requirements of any similar provision under the
laws of any other state that may be applicable to the transaction
contemplated this Agreement.
5.8 Approval of Certain Contracts. Without the prior consent of
-----------------------------
Purchaser, Seller shall not enter into any new contract relating to or binding
the Acquired Assets outside of the ordinary course of business.
SECTION 6. Covenants of Purchaser.
----------------------
Purchaser agrees that from the date hereof to the Closing Date, Purchaser
shall make all filings, applications, statements and reports to all Governmental
Authorities that are required to be made prior to the Closing Date by or on
behalf of Purchaser pursuant to any applicable statute, rule or regulation in
connection with this Agreement and the transactions contemplated hereby.
15
<PAGE>
Purchaser shall use its reasonable commercial efforts to obtain all necessary
consents and approvals to consummate the transactions contemplated hereby.
SECTION 7. Purchaser's Conditions Precedent.
--------------------------------
The obligations of Purchaser under Section 2 of this Agreement are, at
---------
the option of Purchaser, subject to satisfaction of the following conditions
precedent on or before the Closing Date (any of which may be waived by
Purchaser):
7.1 Warranties True as of Both Present Date and Closing Date. The
--------------------------------------------------------
representations and warranties of Seller and Shareholder contained herein shall
be true on and as of the date of this Agreement, and shall also be true on and
as of the Closing Date with the same force and effect as though made on and as
of the Closing Date, and an executive officer of Seller shall deliver to
Purchaser a certification of the same.
7.2 Compliance with Agreements and Covenants; Certificate. Seller
-----------------------------------------------------
and Shareholder shall have performed all of their respective obligations and
agreements and complied with all of their respective covenants contained in this
Agreement required to be performed and complied with on or prior to the Closing
Date; and shall have delivered to Purchaser a certificate, dated as of the
Closing Date, signed by Shareholder and an executive officer of Seller,
certifying compliance with Section 7.1 and this Section 7.2.
----------- -----------
7.3 Consents and Approvals. Consents and approvals in writing
----------------------
reasonably satisfactory to Purchaser shall have been received by Seller from (a)
each party to any of the Assumed Obligations whose consent and approval is
required for the transfer and assignment to Purchaser of such Assumed
Obligations, (b) any governmental agency whose consent and approval is required
for the consummation of the transactions contemplated hereby, including, without
limitation the transfer and assignment of the Permits to Purchaser, and (c) any
lenders, lessors or other persons whose consent or approval is required for the
consummation of the transactions contemplated hereby.
7.4 No Material Change. Neither the Business, the results of
------------------
operations thereof or the properties or prospects thereof, nor any of the
Acquired Assets shall have been materially and adversely affected as of the
Closing Date in any way and no event shall have occurred which, in the judgment
of Purchaser, may have a material adverse effect on the Business or the
prospects thereof.
7.5 Actions or Proceedings. No action, proceeding or claim shall
----------------------
have been instituted or threatened which would enjoin, restrain or prohibit, or
might result in damages in respect of, and no court order shall have been
entered which enjoins, restrains or prohibits, the consummation of the
transactions contemplated by this Agreement.
7.6 Due Diligence Review. Purchaser and its employees, agents,
--------------------
investment advisors and accounting and legal representatives shall have
completed their business and legal due diligence review of Seller and all
aspects of the Business and the Acquired Assets, and the results of such review
shall be satisfactory to Purchaser in its sole discretion.
16
<PAGE>
7.7 Release of Encumbrances on Acquired Assets. All Encumbrances
------------------------------------------
on the Acquired Assets shall have been released and Seller shall have delivered
evidence thereof acceptable to Purchaser in its sole discretion.
7.8 Opinion of Counsel. Purchaser shall have received
------------------
an opinion, dated the Closing Date, of Miller, Johnson, Snell and Cummiskey,
counsel for Seller, addressing the matters at the second and third sentences of
Section 3.2.
- -----------
7.9 Seller's Authority Documents. Seller shall have delivered to
----------------------------
Purchaser: (a) a copy of the articles of incorporation of Seller certified as
of a recent date by the Michigan Department of Consumer and Industry Services
Corporation, Securities and Land Development Bureau, (b) a copy of the by-laws
of Seller, certified as of the Closing Date by the Secretary of Seller as true
and complete; and (c) a certificate of the Secretary of Seller, dated the
Closing Date, certifying a copy of the resolutions duly adopted by the Board of
Directors and the Shareholders approving this Agreement and the transactions
contemplated hereby as true and complete, as not having been amended or
supplemented and as being in full force and effect on the Closing Date.
7.10 Approvals. The Board of Directors of Purchaser shall have
---------
approved the transactions contemplated by this Agreement.
7.11 Lease of Real Property. Shareholder shall have executed and
----------------------
delivered to Purchaser the lease of the Byron Center Property, in the form of
Exhibit A attached hereto. Purchaser shall have entered into a lease for the
- ---------
Wixom Property on terms acceptable to it.
7.12 Employment Agreement. Purchaser and Shareholder shall have
--------------------
entered into an Employment Agreement in the form of Exhibit B attached hereto.
----------
7.13 Covenant Not to Compete. Purchaser and Allen Baker shall have
-----------------------
entered the Management Non-Competition Agreement.
7.14 Satisfaction of Liabilities. All liabilities and obligations of
---------------------------
the Seller (other than Assumed Obligations) shall have been paid in full and
Seller shall provide evidence reasonable satisfactory to Purchaser of such
satisfaction.
7.15 Other Documents and Agreements. Purchaser shall have
------------------------------
received from Seller appropriate bills of sale and instruments of assignment and
such other documents and agreements necessary to convey the Acquired Assets to
Purchaser in accordance with the terms of this Agreement in such forms as are
reasonably satisfactory to Purchaser and its counsel. Purchaser shall have
received from Seller title certificates for each vehicle or other certificated
asset included within the Acquired Assets and executed originals or duplicate
originals of each Purchase Order and Customer Contract.
SECTION 8. Seller's Conditions Precedent.
-----------------------------
17
<PAGE>
The obligations of Seller and Shareholder under Section 2 of this
---------
Agreement are, at the option of Seller, subject to the satisfaction of the
following conditions precedent on or before the Closing Date (any of which may
be waived by Seller):
8.1 Warranties True as of Both Present Date and Closing Date. The
--------------------------------------------------------
representations and warranties of Purchaser contained herein shall be true on
and as of the date of this Agreement, and shall also be true on and as of the
Closing Date with the same force and effect as though made by Purchaser on and
as of the Closing Date.
8.2 Compliance with Agreements and Covenants; Certificate. Purchaser
-----------------------------------------------------
shall have performed all obligations and agreements and complied with all
covenants contained in this Agreement to be performed and complied with on or
prior to the Closing Date; and Purchaser shall have delivered to Seller and
Shareholder a certificate, dated as of the Closing Date, of an executive officer
of Purchaser, certifying compliance with Section 8.1 and this Section 8.2.
----------- -----------
8.3 Actions or Proceedings. No action, proceeding or claim shall
----------------------
have been instituted or threatened which would enjoin, restrain or prohibit, or
might result in substantial damages in respect of, and no court order shall have
been entered which enjoins, restrains or prohibits, the consummation of the
transactions contemplated by this Agreement.
8.4 Opinion of Counsel. Seller and Shareholder shall have
------------------
received an opinion, dated the Closing Date, of Mayer, Brown & Platt, counsel
for Purchaser, addressing the matters at the second and third sentences of
Section 4.2.
- -----------
8.5 Closing Deliveries. Purchaser shall deliver to Seller
------------------
appropriate instruments of assumption and other documents necessary to assume
the Assumed Obligations in accordance with the terms of this Agreement in such
forms as are reasonably satisfactory to Seller and their counsel. Purchaser
shall make the payments required in Section 2 above.
---------
8.6 Lease of Real Property. Purchaser shall have executed the lease
----------------------
of the Byron Center Property, in the form of Exhibit A attached hereto.
---------
8.7 Employment Agreement. Purchaser and Shareholder shall have
--------------------
entered into an Employment Agreement in the form of Exhibit B attached hereto.
----------
8.8 Purchaser's Authority Documents. Purchaser shall have delivered
-------------------------------
to Seller: (a) a copy of the articles of incorporation of Purchaser certified as
of a recent date by the Secretary of State of Michigan, (b) a copy of the by-
laws of Purchaser, certified as of the Closing Date by the Secretary of
Purchaser, and a certification of the Secretary, certifying a copy of the
resolutions duly adopted by the Board of Directors approving this Agreement and
the transactions contemplated hereby as true and complete, as not having been
amended or supplemented and as being in full force and effect on the Closing
Date.
18
<PAGE>
SECTION 9. Employees and Benefits.
----------------------
Purchaser shall be under no obligation to hire any of the employees of
Seller and shall not assume any obligations with respect to such employees,
including, without limitation, any obligations for employment compensation,
benefits or severance.
SECTION 10. Closing.
-------
The Closing shall take place at the offices of Mayer, Brown & Platt, 190
South LaSalle Street, Chicago, Illinois at 10:00 A.M. on January __, 1998, or at
such other place or on such later date to which the parties hereto shall agree.
SECTION 11. Termination.
-----------
This Agreement may be terminated as follows: (a) with the mutual consent
of Seller and Purchaser; (b) by Purchaser, if any of the conditions provided in
Section 7 shall not have been satisfied on or prior to the date specified for
- ---------
fulfillment thereof, and Purchaser shall not have waived, in writing, such
failure of satisfaction and the Closing shall have occurred; (c) by Seller, if
any of the conditions provided in Section 8 shall not have been satisfied on or
---------
prior to the date specified for fulfillment thereof, and Seller shall not have
waived, in writing, such failure of satisfaction and the Closing shall have
occurred; or (d) on January 15, 1998, if the Closing shall not have taken place
before such date. In the event of any termination pursuant to this Section 11
----------
(other than pursuant to clause (a) or (d) above), written notice setting forth
the reasons thereof shall forthwith be given by Purchaser, if it is the
terminating party, to Seller, or by Seller, if it is the terminating party, to
Purchaser. No termination of this Agreement shall relieve a party of any breach
of this Agreement by it prior to the termination.
SECTION 12. Survival and Indemnification.
----------------------------
12.1 Survival. The representations and warranties of the parties
--------
hereto contained herein or in any other certificate or other writing delivered
pursuant hereto shall survive the Closing until the second anniversary of the
Closing Date; provided, that, the representations and warranties of Seller
contained at Sections 3.2, 3.4, 3.5 and 3.8 will not be subject to such time
------------ --- --- ---
limitation and shall not expire.
12.2 Indemnification by Seller and Shareholder. Seller and
-----------------------------------------
Shareholder, each being obligated jointly and severally, agree to indemnify
Purchaser and each of its affiliates against, and agree to hold it and them
harmless from, any Losses incurred or suffered by Purchaser or any of its
affiliates arising out of any of the following: (a) any breach of or inaccuracy
in any representation or warranty made by Seller or Shareholder pursuant to this
Agreement, and any breach of or failure by Seller or Shareholder to perform any
covenant or obligation of either Seller or Shareholder set out in this
Agreement; (b) any debt, claim, obligation or other liability of Seller or any
of its affiliates other than the Assumed Obligations; (c) any claim relating to
the Business or any of the Acquired Assets (including, without limitation, any
claim based in warranty, contract, tort or strict liability) arising from events
occurring on or before the Closing Date; (d) any claim (i) by any Tax Authority
regarding any Taxes incurred on or prior to the Closing Date in connection with
the Business or the
19
<PAGE>
Acquired Assets or (ii) pursuant to the Bulk Sales Laws of any jurisdiction
regarding transactions contemplated by this Agreement; (e) any obligation or
other liability with respect to any violation by Shareholder or Seller of any
Applicable Law in effect on the date hereof or any condition existing on the
Real Property on the date hereof; or (f) any claims by or liabilities with
respect to any employee of any Seller regarding his or her employment or
termination of employment with Seller. Recovery will be permitted under clause
(a) above only for claims that individually exceed $5,000 and only if the
aggregate of all such claims exceed $50,000. Recovery will be permitted for the
entire amount of each claim in excess of $5,000 once the aggregate of all such
claims exceed $50,000. The liability of Seller and Shareholder under clause (a)
above will be limited to the Purchase Price.
12.3 Indemnification by Purchaser. Purchaser agrees to indemnify
----------------------------
Seller, Shareholder and each of their respective affiliates against, and agrees
to hold it and them harmless from, any Losses incurred or suffered by Seller,
Shareholder or any of their respective affiliates arising out of any of the
following: (a) any breach of or any inaccuracy in any representation or
warranty made by Purchaser pursuant to this Agreement, and any breach of or
failure by Purchaser to perform any covenant or obligation of Purchaser set out
in this Agreement; (b) the Assumed Obligations; or (c) the use or ownership of
any of the Acquired Assets after the Closing Date to the extent such Losses
arise in connection with and relate to periods commencing after the Closing
Date.
12.4 Notice of Claims; Assumption of Defense. The indemnified
---------------------------------------
party shall give prompt notice to the indemnifying party, in accordance with the
terms of Section 14.2, of the assertion of any claim, or the commencement of any
------------
suit, action or proceeding in respect of which indemnity may be sought
hereunder, specifying with reasonable particularity the basis therefor and
giving the indemnifying party such information with respect thereto as the
indemnifying party may reasonably request (but the giving of such notice shall
not be a condition precedent to indemnification hereunder). The indemnifying
party may, at its own expense, (a) participate in and (b) upon notice to the
indemnified party and the indemnifying party's written agreement that the
indemnified party is entitled to indemnification pursuant to Section 12.2 or
------------
Section 12.3 for Losses arising out of such claim, suit, action or proceeding,
- ------------
at any time during the course of any such claim, suit, action or proceeding,
assume the defense thereof; provided that (y) the indemnifying party's counsel
--------
is reasonably satisfactory to the indemnified party and (z) the indemnifying
party shall thereafter consult with the indemnified party upon the indemnified
party's reasonable request for such consultation from time to time with respect
to such claim, suit, action or proceeding. If the indemnifying party assumes
such defense, the indemnified party shall have the right (but not the duty) to
participate in the defense thereof and to employ counsel, at its own expense,
separate from the counsel employed by the indemnifying party. Whether or not
the indemnifying party chooses to defend or prosecute any such claim, suit,
action or proceeding, all of the parties hereto shall cooperate in the defense
or prosecution thereof.
12.5 Settlement or Compromise. Any settlement or compromise made
------------------------
or caused to be made by the indemnified party or the indemnifying party, as the
case may be, of any such claim, suit, action or proceeding of the kind referred
to in Section 12.4 shall also be binding upon the indemnifying party or the
------------
indemnified party, as the case may be, in the same manner as if a final judgment
or decree had been entered by a court of competent jurisdiction in the amount of
such
20
<PAGE>
settlement or compromise. No party shall settle or compromise any claim, suit,
action or proceeding without the prior written consent of the other party, which
shall not be unreasonably withheld.
12.6 Failure of Indemnifying Party to Act. In the event that the
------------------------------------
indemnifying party elects not to assume the defense of any claim, suit, action
or proceeding, such election shall not relieve the indemnifying party of its
obligations hereunder.
SECTION 13. Non-Competition and Confidentiality Agreement.
----------------------------------------------
13.1 Non-Competition Agreement. For a period of five (5) years
-------------------------
after the Closing Date (the "Non-Competition Period"), each of Seller and
Shareholder shall not, within, or within a 250 mile radius of the municipal
boundary of Byron Center, Michigan, Wixom, Michigan or any location from which
Purchaser or its affiliates conduct business on the date hereof (the "Restricted
Area"), directly or indirectly, own, control, manage, participate in, assist,
invest in or permit their names to be used by any person or entity that engages
in or owns, controls, manages, participates in, assists or invests in any
business substantially similar to the Business as conducted at any time during
the three (3) year period prior to the Closing Date (the "Services").
Notwithstanding the foregoing, being a passive owner of not more than 5% of the
outstanding securities of any class of a publicly traded entity engaged in the
provision of the Services in the Restricted Area shall not constitute a
violation of this Section 13.1.
------------
13.2 Non-Solicitation. During the Non-Competition Period, neither
----------------
Seller, Shareholder nor any of their affiliates will, directly or indirectly,
offer employment to or hire any employee of Purchaser.
13.3 Confidentiality. Except as may be required by a governmental
---------------
agency, Seller and Shareholder shall keep confidential all non-public
information concerning the Acquired Assets and not disclose the same to any
other person or entity, or use the same in any way.
13.4 Maximum Duration, Scope. If, at the time of enforcement of this
-----------------------
Section 13, a court shall hold that the duration, scope, area or other
- ----------
restrictions stated herein are unreasonable under circumstances then existing,
the parties agree that the maximum duration, scope, area or other restrictions
reasonable under such circumstances shall be substituted for the stated
duration, scope, area or other restrictions and that the provision at issue be
revised, as of the date of this Agreement, to the minimum extent necessary to
effect such substitution.
13.5 Specific Performance. Each of Seller and Shareholder agree that
--------------------
if either of them breach any of the provisions of this Section 13, money damages
----------
would be inadequate and Purchaser would have no adequate remedy at law.
Accordingly, each of Seller and Shareholder agree that Purchaser shall have the
right, in addition to any other rights and remedies existing in its favor, to an
action for specific performance, injunctive or other equitable relief in order
to enforce or prevent any violations (whether anticipatory, continuing or
future) of the provisions of this Section 13 without the necessity of proving
----------
actual damages or posting bond. In the event of a breach or violation of any of
the provisions of this Section 13, the running of the Non-Competition Period
----------
(but not of Seller's and Shareholder's obligations under this Section 13) shall
----------
be suspended with respect to Seller and Shareholder during the continuance of
any actual breach or violation. In connection
21
<PAGE>
with Purchaser's application for such specific performance, injunctive or other
equitable relief, each of Seller and Shareholder hereby waive the claim or
defense that Purchaser possesses an adequate remedy at law or that bond must be
posted.
SECTION 14. Miscellaneous.
-------------
14.1 Expenses. Each party hereto shall bear its own expenses with
--------
respect to this transaction. Seller and Purchaser shall equally split all taxes
(other than Seller's income taxes) required to be paid in connection with the
transfer and assignment of the Acquired Assets.
14.2 Notices. Any notice, request, instruction or other document
-------
to be given hereunder by a party hereto shall be in writing and shall be deemed
to have been given or delivered, (a) when received if given in person, (b) on
the date of transmission if sent by telex, telecopy or other wire transmission
(receipt confirmed), (c) one (1) day after being sent by reputable overnight
courier, or (d) three (3) days after being deposited in the U.S. mail, certified
or registered mail, postage prepaid. All notices shall be addressed as set forth
below.
If to Seller or Shareholder addressed as follows:
Grand Hi-Reach, Inc.
c/o Allen Baker
9067 River Ridge
Middleville, Michigan 49333
with a copy to:
Miller, Johnson, Snell & Cummiskey, P.L.C.
250 Monroe Avenue, N.W.
Suite 800
Grand Rapids, Michigan 49501-0306
Attention: Richard Postma, Esq.
Facsimile: (616) 831-1701
If to Purchaser, addressed as follows:
NES Michigan Acquisition Corp.
1800 Sherman Avenue, Suite 100
Evanston, Illinois 60201
Attention: Kevin Rodgers
Facsimile: (847) 773-1000
with a copy to:
Mayer, Brown & Platt
190 South LaSalle Street
Chicago, Illinois 60603
Attention: James J. Junewicz, Esq.
22
<PAGE>
Facsimile: (312) 701-7711
or to such other individual or address as a party hereto may designate for
itself by notice given as herein provided.
14.3 Waivers. No waiver by a party of any condition or breach
-------
of any provision of this Agreement shall be effective unless in writing, and no
waiver in any one or more instances shall be deemed to be a further or
continuing waiver of any such condition or breach in other instances or a waiver
of any other condition or breach of any other provision.
14.4 Counterparts. This Agreement may be executed simultaneously in
------------
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument. Executed signatures may
be delivered by facsimile transmission.
14.5 Construction. The Article and Section headings are for
------------
convenience only and shall not be deemed part of this Agreement. Each party and
its counsel have reviewed this Agreement. The language of this Agreement shall
be construed according to its fair meaning. Any rule of construction resolving
ambiguities against the drafting party shall not apply in the interpretation of
this Agreement.
14.6 Applicable Law. This Agreement shall be governed by and construed
--------------
and enforced in accordance with the internal laws, and not the laws of
conflicts, of the State of Illinois.
14.7 Assignment. This Agreement shall be binding upon and inure to the
----------
benefit of the parties hereto and their respective heirs, personal
representatives, successors and assigns; provided, however, that no assignment
-------- -------
shall be made hereof without the prior written consent of the non-assigning
party, except that Purchaser may assign its rights hereunder to any of its
affiliates or to any lender.
14.8 Other Instruments. After the Closing Date, Seller shall execute
-----------------
and deliver to Purchaser such other documents, releases, assignments and other
instruments as may be reasonably required by Purchaser to further effect the
transfer and assignment to Purchaser of, and to vest fully in Purchaser title
to, each of the Acquired Assets.
14.9 Third Party Beneficiaries. This Agreement is not intended to
-------------------------
confer upon any person or entity, other than the parties hereto, any rights or
remedies hereunder.
14.10 Forum. Each party hereto agrees that any suit, action or
-----
proceeding brought by any party against any other party to this Agreement in
connection with or arising out of this Agreement shall be brought solely in the
Federal Courts of the Northern District of Illinois or, if such court lacks
jurisdiction, in the Circuit Court of Cook County, Illinois. Each party hereby
waives any defense or claim of lack of venue, lack of jurisdiction or forum non-
convenience in connection with the foregoing.
14.11 Records. After the Closing, Seller shall make available to
-------
Purchaser, as requested by Purchaser, its agents and representatives or any Tax
Authority or governmental agency, all
23
<PAGE>
information, records or documents relating to the Business or the Acquired
Assets and retained by Seller and shall preserve all such information, records
and documents until six years after the Closing.
14.12 Entire Understanding. This Agreement sets forth the entire
--------------------
agreement and understanding of the parties hereto in respect to the transactions
contemplated hereby and supersedes all prior agreements, arrangements and
understandings relating to the subject matter hereof. This Agreement may be
amended, modified or supplemented only in writing signed by the parties hereto.
24
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed and delivered on the date first above written.
NES MICHIGAN ACQUISITION CORP.
By: /s/ Paul R. Ingersoll
--------------------------------------
Paul R. Ingersoll
Vice President
GRAND HI-REACH, INC.
By: /s/ Allen Baker
---------------------------------------
Allen Baker
President
/s/ Allen Baker
-------------------------------------------
ALLEN BAKER, individually
25
<PAGE>
Exhibit 10.23
-------------
STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT is made as of January 12, 1998, by and
among GENPOWER PUMP & EQUIPMENT CO., INC., a Texas corporation (the "Company"),
-------
the stockholders of the Company listed on the Schedule of Stockholders attached
------------------------
hereto (collectively, the "Sellers" and individually, a "Seller"), and NATIONAL
------- ------
EQUIPMENT SERVICES, INC., a Delaware corporation (the "Purchaser"). The
---------
Company, the Sellers and the Purchaser are referred to herein collectively as
the "Parties" and individually as a "Party." The consummation of the
------- -----
transactions contemplated hereby shall be deemed to have occurred effective as
of 12:01 a.m. on January 1, 1998 (the "Effective Date") for all purposes,
--------------
including without limitation, for accounting purposes.
WHEREAS, the authorized capital stock of the Company consists of
1,000,000 shares of Common Stock, par value $1.00 per share (the "Common
------
Stock"), of which 6,666 2/3 shares are issued and outstanding;
WHEREAS, the Sellers own beneficially and of record 100% of the issued
and outstanding Common Stock; and
WHEREAS, the Purchaser desires to acquire from each Seller, and each
Seller desires to sell to the Purchaser, all of the Common Stock owned by such
Seller (collectively, the "Acquired Stock").
--------------
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Parties agree as follows:
ARTICLE I
DEFINITIONS
1.1 Definitions. For purposes hereof, the following terms, when used
-----------
herein with initial capital letters, shall have the respective meanings set
forth herein:
"Affiliate" of any Person means any other Person controlling,
---------
controlled by or under common control with such first Person, where "control"
-------
means the possession, directly or indirectly, of the power to direct the
management and policies of a Person whether through the ownership of voting
securities or otherwise.
"Affiliated Group" means an affiliated group as defined in Section
----------------
1504 of the Code (or any similar combined, consolidated or unitary group defined
under state, local or foreign income Tax law).
"Agreement" means this Stock Purchase Agreement, including all
---------
Exhibits and Schedules hereto, as it may be amended from time to time in
accordance with its terms.
-1-
<PAGE>
"CERCLA" means the Comprehensive Environmental Response, Compensation
------
and Liability Act of 1980, as amended.
"Code" means the United States Internal Revenue Code of 1986, as
----
amended.
"Environmental Affiliates" of any Person means, with respect to any
------------------------
particular matter, all other Persons whose liabilities or obligations with
respect to that particular matter have been assumed by, or are otherwise deemed
by law to be those of, such first Person.
"Environmental and Safety Requirements" means all federal, state,
-------------------------------------
local and foreign statutes, regulations, ordinances and similar provisions
having the force or effect of law, all judicial and administrative orders and
determinations, all contractual obligations and all common law concerning public
health and safety, worker health and safety and pollution or protection of the
environment, including all such standards of conduct and bases of obligations
relating to the presence, use, production, generation, handling, transport,
treatment, storage, disposal, distribution, labeling, testing, processing,
discharge, release, threatened release, control, or cleanup of any hazardous
materials, substances or wastes, chemical substances or mixtures, pesticides,
pollutants, contaminants, toxic chemicals, petroleum products or by-products,
asbestos, polychlorinated biphenyls (or PCBs), noise or radiation.
"Environmental Lien" means any Lien, whether recorded or unrecorded,
------------------
in favor of any governmental entity or any department, agency or political
subdivision thereof relating to any liability of the Company or any Seller or
any Environmental Affiliate of the Company or any Seller arising under any
Environmental and Safety Requirement.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
-----
amended.
"GAAP" means, at a given time, United States generally accepted
----
accounting principles, consistently applied.
"Indebtedness" of any Person means, without duplication: (a)
------------
indebtedness for borrowed money or for the deferred purchase price of property
or services in respect of which such Person is liable, contingently or
otherwise, as obligor or otherwise (other than trade payables and other current
liabilities incurred in the ordinary course of business) and any commitment by
which such Person assures a creditor against loss, including contingent
reimbursement obligations with respect to letters of credit; (b) indebtedness
guaranteed in any manner by such Person, including a guarantee in the form of an
agreement to repurchase or reimburse; (c) obligations under capitalized leases
in respect of which such Person is liable, contingently or otherwise, as
obligor, guarantor or otherwise, or in respect of which obligations such Person
assures a creditor against loss; and (d) any unsatisfied obligation of such
Person for "withdrawal liability" to a "multiemployer plan," as such terms are
defined under ERISA.
"Insider" means, any officer, director, employee, stockholder, partner
-------
or Affiliate, as applicable, of the Company or any individual related by
marriage or adoption to any such individual or any entity in which any such
Person owns any beneficial interest.
-2-
<PAGE>
"Investment" as applied to any Person means (i) any direct or indirect
----------
purchase or other acquisition by such Person of any notes, obligations,
instruments, stock, securities or ownership interest (including partnership
interests and joint venture interests) of any other Person and (ii) any capital
contribution by such Person to any other Person.
"Licenses" means all permits, licenses, franchises, certificates,
--------
approvals and other authorizations of foreign, federal, state and local
governments or other similar rights.
"Lien" means any mortgage, pledge, security interest, encumbrance,
----
easement, restriction, charge, or other lien.
"Loss" means, with respect to any Person, any diminution in value,
----
consequential or other damage, liability, demand, claim, action, cause of
action, cost, damage, deficiency, Tax, penalty, fine or other loss or expense,
whether or not arising out of a third party claim, including all interest,
penalties, reasonable attorneys' fees and expenses and all amounts paid or
incurred in connection with any action, demand, proceeding, investigation or
claim by any third party (including any governmental entity or any department,
agency or political subdivision thereof) against or affecting such Person or
which, if determined adversely to such Person, would give rise to, evidence the
existence of, or relate to, any other Loss and the investigation, defense or
settlement of any of the foregoing.
"Material Adverse Effect" means any material adverse effect on the
-----------------------
business, financial condition, operations, results of operations, or future
prospects of the Company.
"Operating Income" means the Company's operating income, calculated in
----------------
accordance with GAAP.
"Ordinary Course of Business" means the ordinary course of the
---------------------------
Company's business consistent with past practice (including, without limitation,
with respect to collection of accounts receivable, purchases of inventory and
supplies, repairs and maintenance, payment of accounts payable and accrued
expenses, levels of capital expenditures and operation of cash management
practices generally).
"Person" means an individual, a partnership, a corporation, an
------
association, a limited liability company, a joint stock company, a trust, a
joint venture, an unincorporated organization, a governmental entity or any
department, agency or political subdivision thereof and any other entity.
"Proprietary Rights" means any and all patents, patent applications,
------------------
trademarks, service marks, trademark or service mark applications and
registrations, trade and corporate names, copyrights, copyright applications and
registrations, trade secrets, know-how, technology, computer software and
software systems, business and marketing plans, customer and supplier lists,
confidential information and all other proprietary property, rights and
interests.
"Release" shall have the meaning set forth in CERCLA.
-------
"Subsidiary" means, with respect to any Person, any corporation a
----------
majority of the total voting power of shares of stock of which is entitled
(without regard to the occurrence of any
-3-
<PAGE>
contingency) to vote in the election of directors, managers or trustees thereof
is at the time owned or controlled, directly or indirectly, by that Person or
one or more of the other Subsidiaries of that Person or a combination thereof,
or any partnership, association or other business entity a majority of the
partnership or other similar ownership interest of which is at the time owned or
controlled, directly or indirectly, by that Person or one or more Subsidiaries
of that Person or a combination thereof. For purposes of this definition, a
Person is deemed to have a majority ownership interest in a partnership,
association or other business entity if such Person is allocated a majority of
the gains or losses of such partnership, association or other business entity or
is or controls the managing director or general partner of such partnership,
association or other business entity.
"Tax Returns" means returns, declarations, reports, claims for refund,
-----------
information returns or other documents (including any related or supporting
schedules, statements or information) filed or required to be filed in
connection with the determination, assessment or collection of Taxes of any
party or the administration of any laws, regulations or administrative
requirements relating to any Taxes.
"Taxes" means any federal, state, local, or foreign income, gross
-----
receipts, license, payroll, employment, excise, severance, stamp, occupation,
premium, windfall profits, environmental, customs duties, capital stock,
franchise, profits, withholding, social security, unemployment, disability, real
property, personal property, sales, use, transfer, registration, value added,
alternative or add-on minimum, or other tax, fee, assessment or charge of any
kind whatsoever, including any interest, penalty, or addition thereto, whether
disputed or not.
"Transaction Documents" means this Agreement, and all other
---------------------
agreements, instruments, certificates and other documents to be entered into or
delivered by any Party in connection with the transactions contemplated to be
consummated pursuant to this Agreement.
"Treasury Regulations" means the United States Treasury Regulations
--------------------
promulgated pursuant to the Code.
1.2 Other Definitional Provisions.
-----------------------------
(a) Accounting Terms. Accounting terms which are not otherwise
----------------
defined in this Agreement have the meanings given to them under GAAP. To the
extent that the definition of accounting term that is defined in this Agreement
is inconsistent with the meaning of such term under GAAP, the definition set
forth in this Agreement will control.
(b) "Hereof," etc. The terms "hereof," "herein" and "hereunder" and
-------------
terms of similar import are references to this Agreement as a whole and not to
any particular provision of this Agreement. Section, clause, Schedule and
Exhibit references contained in this Agreement are references to Sections,
clauses, Schedules and Exhibits in or to this Agreement, unless otherwise
specified.
(c) Successor Laws. Any reference to any particular Code section or
--------------
any other law or regulation will be interpreted to include any revision of or
successor to that section regardless of how it is numbered or classified.
-4-
<PAGE>
ARTICLE II
PURCHASE AND SALE OF STOCK
--------------------------
2.1 Stock Purchase. On and subject to the terms and conditions
--------------
set forth in this Agreement, on the Closing Date, the Purchaser shall purchase
from each Seller, and each Seller shall sell and transfer to the Purchaser, all
of the shares of Common Stock owned by such Seller as such ownership is set
forth on the Schedule of Stockholders attached hereto, free and clear of any
------------------------
Liens.
2.2 Purchase Price for Company Stock. The aggregate purchase
--------------------------------
price to be paid to Sellers for the Acquired Stock (the "Purchase Price") is
--------------
$7,850,000, which amount shall be paid as follows: (a) the Purchaser shall
deliver to the Sellers $7,614,500 (as adjusted pursuant to Section 2.3 below) in
cash (as adjusted, the "Cash Portion"); and (b) the Purchaser shall maintain
------------
$235,500 in a book entry account of the Purchaser (the "Holdback"). The
--------
Holdback shall be available to satisfy any amounts owing to the Purchaser
pursuant to Section 9.2. The Purchase Price will be allocated among the Sellers
in the manner set forth in Schedule of Stockholders attached hereto.
------------------------
2.3 Purchase Price Adjustment.
-------------------------
(a) Post-Closing Adjustment for Operating Income. Within 90 days
--------------------------------------------
after the Closing Date, the Purchaser and its auditors will conduct a review
(the "Closing Review") of the Operating Income from August 31, 1997 through the
--------------
later of (i) the calendar month end occurring prior to the Closing and (ii)
January 31, 1998 (the "Operating Income Adjustment Amount") and will prepare and
----------------------------------
deliver to a Representative a computation of the Operating Income Adjustment
Amount as of the close of business on the later of (i) the calendar month end
occurring prior to the Closing and (ii) January 31, 1998 (the "Draft
-----
Computation"). The Purchaser and its auditors will give the Representatives and
their auditors an opportunity to observe the Closing Review and will make
available to such Persons all records and work papers used in preparing the
Draft Computation. If the Representatives disagree with the computation of the
Operating Income Adjustment Amount reflected on the Draft Computation, the
Representatives may, within thirty (30) days after receipt of the Draft
Computation, deliver a notice (an "Objection Notice") to the Purchaser setting
----------------
forth the Representatives' calculation of the amount of the Operating Income
Adjustment Amount. The Purchaser and the Representatives will use reasonable
efforts to resolve any disagreements as to the computation of the Operating
Income Adjustment Amount, but if they do not obtain a final resolution within
30 days after the Purchaser has received the Objection Notice, the Purchaser and
a Representative will jointly retain an independent accounting firm of
recognized national or regional standing (the "Firm") to resolve any remaining
----
disagreements. If the Purchaser and a Representative are unable to agree on the
choice of the Firm, the Firm will be a so-called "big-six" accounting firm (or
successor thereto) selected by lot (after excluding one firm designated by the
Purchaser and one firm designated by a Representative). The Purchaser and a
Representative will direct the Firm to render a determination within 15 days of
its retention and the Purchaser, the Representatives and their respective agents
will cooperate with the Firm during its engagement. The Firm will consider only
those items and amounts in the Draft Computation set forth in the Objection
Notice which the Purchaser and the Representatives are unable to resolve. The
Firm's determination will be based on
-5-
<PAGE>
the definition of Operating Income included herein. The determination of the
Firm will be conclusive and binding upon the Purchaser and the Sellers. The
Purchaser and the Sellers shall bear the costs and expenses of the Firm based on
the percentage which the portion of the contested amount not awarded to each
Party bears to the amount actually contested by such Party. The amount of the
Operating Income Adjustment Amount, as finally determined pursuant to this
Section 2.3(a), is referred to herein as the "Actual Operating Income Adjustment
---------------------------------
Amount." If the Actual Operating Income Amount is greater than zero, Purchaser
- ------
shall pay to the Sellers an amount equal to the Actual Operating Income Amount
by wire transfer or delivery of other immediately available funds, within two
(2) Business Days after the date on which the Actual Operating Income Adjustment
Amount is finally determined.
(b) Accounts Receivable Adjustment. Notwithstanding anything herein
------------------------------
to the contrary, and in addition to any other adjustments set forth in this
Agreement, the Purchase Price will be reduced dollar-for-dollar by the aggregate
amount of the net notes and accounts receivable of the Company in existence as
of the Closing (the "Accounts Receivable"), which are uncollected by the Company
-------------------
(the "Uncollected Receivables Amount") as of the 120th day following the Closing
------------------------------
Date (the "Receivables Determination Date"). "Accounts Receivable Write-offs"
------------------------------ ------------------------------
shall mean any accounts receivable of the Company which the Company has written
off and which are not reflected on the Company balance sheet dated as of January
9, 1998. If there is an Uncollected Receivables Amount, the Purchaser shall be
entitled to receive the Uncollected Receivables Amount less any payment the
----
Company has received which is specifically designated as payment of an Accounts
Receivable Write-off (such difference, the "Uncollected Receivables Net
---------------------------
Amount"), from the Holdback within two (2) Business Days after the Receivables
Determination Date; provided, however, that if the Uncollected Receivables Net
Amount is less than zero, the Purchaser shall not be obligated to make any
payments and shall be entitled to keep amount by which the payments received on
Accounts Receivable Write-offs exceeds the Uncollected Receivables Amount. If
the amount then left in the Holdback is less than the amount of the Uncollected
Receivables Net Amount, a Representative shall pay to the Purchaser, within two
(2) Business Days after the Receivables Determination Date, the amount by which
the Holdback is less than Uncollected Receivables Net Amount by wire transfer or
delivery of other immediately available funds. For the purpose of determining
amounts collected by the Company with respect to the Accounts Receivable, (i) in
the absence of a bona fide dispute between an account debtor and the Company
regarding receivables of such account debtor accrued prior to the Closing Date,
all payments by an account debtor shall first be applied to the oldest
outstanding invoice due from that account debtor, and (ii) in the case of a
dispute between the Company and an account debtor with respect to a particular
invoice, all payments shall be first applied to the next oldest invoice due from
that account debtor. The Company shall not be required to bring any suit or take
any other action out of the Ordinary Course of Business to collect any of the
Accounts Receivable. To the extent that the Company has not collected the full
amount of the Accounts Receivable and the Purchaser has been compensated
therefor in accordance with this Section, the Company shall assign any such
uncollected Accounts Receivable to the Sellers.
2.4 DISTRIBUTION OF HOLDBACK. On the 150th day after the Closing
------------------------
Date, the Purchaser shall pay to a Representative an amount equal to the amount
of the Holdback, if any, remaining after all claims of the Purchaser under
Section 9.2 which have theretofore been finally resolved have been satisfied
(the "Remaining Holdback") less any amount for which the Purchaser claims, prior
------------------
to such 150th day, that it is entitled to receive indemnification pursuant to
Section 9.2 (each, a "Pending Claim"). As soon as practicable following final
-------------
resolution of all Pending Claims,
-6-
<PAGE>
the Purchaser shall pay to a Representative an aggregate amount equal to the
portion, if any, of the Holdback which remains after payment of the Remaining
Holdback and final resolution of all Pending Claims.
2.5 Closing Transactions.
--------------------
(a) Closing. The closing of the transactions contemplated by this
-------
Agreement (the "Closing") shall take place at the offices of Kirkland & Ellis,
-------
200 East Randolph Drive, Chicago, Illinois 60601, commencing at 10:00 a.m. on
January 12, 1998, or at such other place or on such other date as may be
mutually agreeable to the Purchaser and a Representative. The date and time of
the Closing are herein referred to as the "Closing Date." The Closing shall be
------------
deemed effective as of the Effective Date.
(b) Closing Transactions. Subject to the conditions set forth in this
---------------------
Agreement, the Parties shall consummate the following transactions (the "Closing
-------
Transactions") on the Closing Date:
- ------------
(i) each Seller shall deliver to the Purchaser certificates
representing the Acquired Stock owned by such Seller, duly endorsed for
transfer or accompanied by duly executed stock powers with all requisite
state and federal transfer stamps affixed thereto, and with signatures
guaranteed by a commercial bank or by a member firm of the New York Stock
Exchange;
(ii) The Purchaser shall deliver to Sellers the Cash Portion and the
Noncompete Payment (as defined in Section 10.11(a) below) in the manner set
forth on the Schedule of Stockholders in immediately available funds; and
------------------------
(iii) the Company, the Sellers and the Purchaser, as applicable,
shall deliver the opinions, certificates and other documents and
instruments required to be delivered by or on behalf of such Party under
Article III.
ARTICLE III
CONDITIONS TO CLOSING
---------------------
3.1 Conditions to the Purchaser's Obligations. The obligation
-----------------------------------------
of the Purchaser to consummate the transactions contemplated by this Agreement
is subject to the satisfaction of the following conditions as of the Closing
Date:
(a) The representations and warranties set forth in Article V and
Article VI hereof shall be true and correct in all material respects at and as
of the Closing Date as though then made and as though the Closing Date were
substituted for the date of this Agreement throughout such representations and
warranties (without taking into account any disclosures made by the Company or
the Sellers to the Purchaser pursuant to Sections 4.1(g), 5.25 and 6.5 hereof);
-7-
<PAGE>
(b) The Company and each Seller shall have performed and complied with
all of the covenants and agreements required to be performed by each of them
under this Agreement on or prior to the Closing;
(c) All consents by third parties that are required for the transfer
of the Acquired Stock to the Purchaser, and the consummation of the other
transactions contemplated hereby or that are required in order to prevent a
breach of, a default under, a termination or modification of, or any
acceleration of, any obligations under any material contract to which the
Company is a party shall have been obtained, and payoff letters with respect to
all of the Company's Indebtedness outstanding as of the Closing and releases of
any and all Liens held by third parties against property of the Company shall
have been obtained, all on terms reasonably satisfactory to the Purchaser; and
the Purchaser shall have obtained the requisite consent of its senior lender,
First Union Bank of North Carolina;
(d) All governmental filings, authorizations and approvals that are
required for the transfer of the Acquired Stock to the Purchaser and the
consummation of the other transactions contemplated hereby shall have been duly
made and obtained on terms reasonably satisfactory to the Purchaser;
(e) No action, suit, or proceeding shall be pending or threatened
before any court or quasi-judicial or administrative agency of any federal,
state, local, or foreign jurisdiction or before any arbitrator wherein an
unfavorable judgment, decree, injunction, order or ruling would prevent the
performance of this Agreement or any of the transactions contemplated hereby,
declare unlawful the transactions contemplated by this Agreement, cause such
transactions to be rescinded or materially and adversely affect the right of the
Purchaser to own, operate or control the Company, and no judgment, decree,
injunction, order or ruling shall have been entered which has any of the
foregoing effects;
(f) Except as otherwise specified in writing by the Purchaser to a
Representative, all of the Company's directors shall have resigned and such
resignations shall be effective as of the Closing Date;
(g) David S. Ament and Robert B. McCarty shall have each entered into
an agreement with the Company relating to their respective employment with the
Company (each, an "Employment Agreement"), substantially in the form of Exhibits
-------------------- --------
A-1 and A-2 attached hereto, and such Employment Agreements shall be in full
- -----------
force and effect;
(h) Purchaser shall have received an opinion, dated the Closing Date,
of Carson Messinger Elliott Laughlin & Ragan, P.L.L.C., counsel to the Company
and the Sellers, substantially in the form of Exhibit B attached hereto;
---------
(i) On or prior to the Closing Date, Sellers shall have delivered to
Purchaser all of the following:
(i) a certificate from the Company and Sellers in a form reasonably
satisfactory to the Purchaser, dated the Closing Date, stating that the
preconditions specified in Sections 3.1(a) through (h) have been satisfied;
-8-
<PAGE>
(ii) copies of all third party and governmental consents, approvals,
filings, releases and terminations required in connection with the
consummation of the transactions contemplated herein;
(iii) certified copies of the resolutions of the Company's board of
directors approving the transactions contemplated by this Agreement;
(iv) certificates of the secretary of state of the State of Texas and
each state where the Company is qualified to do business providing that the
Company is in good standing;
(v) copies of the resignations described in Section 3.1(f);
(vi) all documents and records relating to the business of the
Company that are in any Seller's possession;
(vii) landlord consents and estoppel certificates from the Company's
landlords in form and substance satisfactory to the Purchaser; and
(viii) such other documents or instruments as the Purchaser may
reasonably request to effect the transactions contemplated hereby; and
(j) All proceedings to be taken by the Company and each Seller in
connection with the consummation of the Closing Transactions and the other
transactions contemplated hereby and all certificates, opinions, instruments and
other documents required to be delivered by the Company and each Seller to
effect the transactions contemplated hereby reasonably requested by the
Purchaser shall be reasonably satisfactory in form and substance to the
Purchaser.
Any condition specified in this Section 3.1 may be waived by the Purchaser;
provided that no such waiver shall be effective unless it is set forth in a
writing executed by the Purchaser.
3.2 Conditions to Each Sellers' Obligations. The obligation of
---------------------------------------
each Seller to consummate the transactions contemplated by this Agreement is
subject to the satisfaction of the following conditions as of the Closing Date:
(a) The representations and warranties set forth in Article VII shall
be true and correct in all material respects at and as of the Closing Date as
though then made and as though the Closing Date were substituted for the date of
this Agreement throughout such representations and warranties (without taking
into account any disclosures made by the Purchaser to Sellers pursuant to
Sections 4.3(a) and 7.7 hereof);
(b) The Purchaser shall have performed and complied with all of the
covenants and agreements required to be performed by it under this Agreement on
or prior to the Closing;
(c) All governmental filings, authorizations and approvals that are
required for the transfer of the Acquired Stock to the Purchaser and the
consummation of the other transactions contemplated hereby shall have been duly
made and obtained on terms reasonably satisfactory to a Representative;
-9-
<PAGE>
(d) No action, suit, or proceeding shall be pending before any court
or quasijudicial or administrative agency of any federal, state, local, or
foreign jurisdiction or before any arbitrator wherein an unfavorable judgment,
decree, injunction, order or ruling would prevent the performance of this
Agreement or any of the transactions contemplated hereby, declare unlawful the
transactions contemplated by this Agreement, cause such transactions to be
rescinded or materially and adversely affect the right of the Purchaser to own,
operate or control the Company, and no judgment, decree, injunction, order or
ruling shall have been entered which has any of the foregoing effects;
(e) Each of David S. Ament and Robert B. McCarty shall have entered
into an Employment Agreement with the Company, and each such Employment
Agreement shall be in full force and effect;
(f) On or prior to the Closing Date, the Purchaser shall have
delivered to a Representative all of the following:
(i) a certificate from the Purchaser in a form reasonably satisfactory
to a Representative, dated the Closing Date, stating that the preconditions
specified in Sections 3.2(a) through (d), inclusive, have been satisfied;
(ii) certified copies of the resolutions of the Purchaser's board of
directors approving the transactions contemplated by this Agreement; and
(iii) such other documents or instruments as the Sellers may
reasonably request to effect the transactions contemplated hereby; and
(g) All proceedings to be taken by the Purchaser in connection with
the consummation of the Closing Transactions and the other transactions
contemplated hereby and all certificates, opinions, instruments and other
documents required to be delivered by the Purchaser to effect the transactions
contemplated hereby reasonably requested by a Representative shall be reasonably
satisfactory in form and substance to such Representative.
Any condition specified in this Section 3.2 may be waived by a Representative;
provided that no such waiver shall be effective unless it is set forth in a
writing executed by a Representative.
ARTICLE IV
COVENANTS PRIOR TO CLOSING
4.1 AFFIRMATIVE COVENANTS OF THE COMPANY AND EACH SELLER. Prior
----------------------------------------------------
to the Closing, unless the Purchaser otherwise agrees in writing, each Seller
shall cause the Company to, and in the case of Sections 4.1(f), (g), (h) and (i)
each Seller also shall:
(a) conduct its business and operations only in the Ordinary Course of
Business;
-10-
<PAGE>
(b) keep in full force and effect its corporate existence and all
rights, franchises and intellectual property relating or pertaining to its
business and use its best efforts to cause its current insurance (or
reinsurance) policies not to be canceled or terminated or any of the coverage
thereunder to lapse;
(c) use its best efforts to carry on the business of the Company in
the same manner as presently conducted, including paying all accounts payable,
purchasing inventory, collecting all accounts receivable and making capital
expenditures in the Ordinary Course of Business, and to keep the Company's
business organization and properties intact, including its present assets,
business operations, physical facilities, working conditions and employees and
its present relationships with lessors, licensors, suppliers and customers and
others having business relations with it;
(d) maintain the material assets of the Company in good repair, order
and condition (normal wear and tear excepted) consistent with current needs,
replace in accordance with prudent practices its inoperable, worn out or
obsolete assets with assets of good quality consistent with prudent practices
and current needs and, in the event of a casualty, loss or damage to any of such
assets or properties prior to the Closing Date, whether or not the Company is
insured, either repair or replace such damaged property or use the proceeds of
such insurance in such other manner as mutually agreed upon by a Representative
and the Purchaser;
(e) maintain the books, accounts and records of the Company in
accordance with past custom and practice as used in the preparation of the
Financial Statements;
(f) encourage employees to continue their employment with the Company
after the Closing;
(g) promptly (once the Company or any Seller obtains knowledge
thereof) inform Purchaser in writing of any variances from the representations
and warranties contained in Article V or Article VI hereof or any breach of any
covenant hereunder by the Company or any Seller;
(h) cooperate with the Purchaser and use best efforts to cause the
conditions to the Purchaser's obligation to close to be satisfied (including,
without limitation, the execution and delivery of all agreements contemplated
hereunder to be so executed and delivered and the making and obtaining of all
third party and governmental notices, filings, authorizations, approvals,
consents, releases and terminations); and
(i) cooperate with the Purchaser in the Purchaser's investigation of
the business and properties of the Company, to permit the Purchaser and its
employees, agents, accounting, legal and other authorized representatives to (i)
have full access to the premises, books and records of the Company at reasonable
hours, (ii) visit and inspect any of the properties of the Company, and (iii)
discuss the affairs, finances and accounts of the Company with the directors,
officers, partners, key employees, key customers, key sales representatives, key
suppliers and independent accountants of the Company.
(j) cause the Company's liabilities and obligations (whether accrued,
absolute or contingent, and whether due or to become due, including without
limitation, all accounts payable,
-11-
<PAGE>
accrued expenses, income taxes and Indebtedness), as of the Closing Date (i.e.,
as opposed to the Effective Date), to not be in excess of $3,000,000.
4.2 Negative Covenants of the Company and Each Seller. Prior to
-------------------------------------------------
the Closing, unless Purchaser otherwise agrees in writing, each Seller shall
cause the Company to not:
(a) take any action that would require disclosure under Section 5.8;
(b) make any loans, enter into any transaction with any Insider or
make or grant any increase in any shareholder's, employee's or officer's
compensation (including bonuses) or make or grant any increase in any employee
benefit plan, incentive arrangement or other benefit covering any of the
employees of the Company;
(c) establish or, except in accordance with past practice, contribute
to any pension, retirement, profit sharing or stock bonus plan or multiemployer
plan covering the employees of the Company;
(d) except as specifically contemplated by this Agreement, enter into
any contract, agreement or transaction, other than in the Ordinary Course of
Business and at arm's length with unaffiliated Persons;
(e) declare, pay, make or otherwise effectuate any dividends,
distributions, redemptions, issuances, equity repurchases or other transactions
involving the Company's capital stock or equity securities;
(f) sell, transfer, contribute, distribute, or otherwise dispose of
any securities or assets of the Company, or agree to do any of the foregoing, to
any Person, or negotiate or have any discussions with any Person with respect to
any of the foregoing, other than in the Ordinary Course of Business; or
(g) incur any Indebtedness other than indebtedness to finance its
working capital needs.
4.3 Covenants of Purchaser. Prior to the Closing, the Purchaser
----------------------
shall:
(a) promptly (once it obtains knowledge thereof) inform a
Representative in writing of any variances from the representations and
warranties contained in Article VII or any breach of any covenant hereunder by
Purchaser; and
(b) cooperate with Sellers and use its best efforts to cause the
conditions to each Seller's obligation to close to be satisfied (including,
without limitation, the execution and delivery of all agreements contemplated
hereunder to be so executed and delivered and the making and obtaining of all
third party and governmental filings, authorizations, approvals, consents,
releases and terminations).
-12-
<PAGE>
ARTICLE V
REPRESENTATIONS AND WARRANTIES
CONCERNING THE COMPANY
----------------------
As a material inducement to Purchaser to enter into this Agreement,
each Seller hereby jointly and severally represents and warrants that:
5.1 ORGANIZATION AND CORPORATE POWER. The Company is a
--------------------------------
corporation duly organized, validly existing and in good standing under the laws
of the State of Texas and is qualified to do business in every jurisdiction in
which it is required to be qualified. All jurisdictions in which the Company is
qualified to do business are set forth on the "Organization Schedule" attached
---------------------
hereto. The Company has full power and authority and all licenses, permits and
authorizations necessary to own and operate its properties and to carry on its
business as now conducted. Correct and complete copies of the Company's and
each of its Subsidiaries' articles of incorporation and by-laws have been
furnished to the Purchaser, which documents reflect all amendments made thereto
at any time prior to the date of this Agreement. Correct and complete copies of
the minute books containing the records of meetings of the stockholders and
board of directors, the stock certificate books and the stock record books of
the Company and each of its Subsidiaries have been furnished to the Purchaser.
Neither the Company nor any of its Subsidiaries is in default under or in
violation of any provision of its articles of incorporation or by-laws.
5.2 AUTHORIZATION OF TRANSACTIONS. The Company has full
-----------------------------
corporate power and authority to execute and deliver the Transaction Documents
to which it is a party and to consummate the transactions contemplated hereby
and thereby. The board of directors of the Company has duly approved the
Transaction Documents to which the Company is a party and has duly authorized
the execution and delivery of such Transaction Documents and the consummation of
the transactions contemplated thereby. No other corporate proceedings on the
part of the Company are necessary to approve and authorize the execution and
delivery of the Transaction Documents to which the Company is a party and the
consummation of the transactions contemplated thereby. All Transaction
Documents to which the Company is a party have been duly executed and delivered
by the Company and constitute the valid and binding agreements of the Company,
enforceable against the Company in accordance with their terms.
5.3 CAPITALIZATION. The authorized, issued and outstanding
--------------
stock of the Company consists of 1,000,000 shares of Common Stock, of which
6,666 2/3 shares are issued and outstanding. All of the issued and outstanding
shares of the Company's capital stock have been duly authorized, are validly
issued, fully paid, and nonassessable, and are held of record and beneficially
by the Sellers in the amounts set forth on the "Schedule of Stockholders" and
------------------------
are not subject to, nor were they issued in violation of, any preemptive rights
or rights of first refusal, and are owned of record and beneficially by the
respective Sellers as set forth on the Schedule of Stockholders free and clear
------------------------
of all Liens. There are no outstanding or authorized options, warrants, rights,
contracts, calls, puts, rights to subscribe, conversion rights or other
agreements or commitments to which the Company is a party or which are binding
upon the Company providing for the issuance, disposition or acquisition of any
of its capital stock (other than this Agreement). There are no outstanding or
authorized stock appreciation, phantom stock or similar rights with respect to
the Company or any of its Subsidiaries. There are no voting trusts, proxies or
any other agreements or understandings
-13-
<PAGE>
with respect to the voting of the capital stock of the Company or any of its
Subsidiaries. Neither the Company nor any of its Subsidiaries is subject to any
obligation (contingent or otherwise) to repurchase or otherwise acquire or
retire any shares of its capital stock.
5.4 SUBSIDIARIES; INVESTMENTS. The Company does not have any
-------------------------
Subsidiaries and does not control, directly or indirectly, any other
corporation, or any limited liability company, partnership, joint venture,
association or any other business entity, and the Company does not own any
shares of capital stock or any other securities of, and has not made any other
Investment in, any other Person. Should the Company at any time have a
Subsidiary or other affiliated Person, such Subsidiary or other affiliated
Person, the representations and warranties of this Section 5 shall be expanded
to encompass and include such Subsidiary or affiliated Person.
5.5 ABSENCE OF CONFLICTS. Except as set forth on the "Conflicts
-------------------- ---------
Schedule" attached hereto, the execution, delivery and performance of the
- --------
Transaction Documents and the consummation of the transactions contemplated
thereby by the Company do not and shall not (a) conflict with or result in any
breach of any of the terms, conditions or provisions of, (b) constitute a
default under, (c) result in a violation of, (d) give any third party the right
to modify, terminate or accelerate any obligation under, (e) result in the
creation of any Lien upon the Acquired Stock or the assets of the Company or any
of its Subsidiaries, or (f) require any authorization, consent, approval,
exemption or other action by or notice or declaration to, or filing with, any
court or administrative or other governmental body or agency, under the
provisions of the articles of incorporation or by-laws of the Company or any of
its Subsidiaries or any indenture, mortgage, lease, loan agreement or other
agreement or instrument to which the Company or any of its Subsidiaries is bound
or affected, or any law, statute, rule or regulation to which the Company or any
of its Subsidiaries is subject or any judgment, order or decree to which the
Company or any of its Subsidiaries is subject.
5.6 FINANCIAL STATEMENTS AND RELATED MATTERS.
----------------------------------------
(a) Financial Statements. Attached hereto as the "Financial
-------------------- ---------
Statements Schedule" are copies of the Company's and its Subsidiaries' (i)
- -------------------
unaudited consolidated and consolidating balance sheet as of August 31, 1997
(the "Latest Balance Sheet") and the related statements of income and cash flows
--------------------
for the eight-month period then ended and (ii) unaudited consolidated and
consolidating balance sheets and statements of income and cash flows for the
fiscal years ended December 31, 1996, 1995 and 1994. Each of the foregoing
financial statements (including in all cases the notes thereto, if any) (the
"Financial Statements") is accurate and complete in all material respects, is
- ---------------------
consistent with the Company's books and records (which, in turn, are accurate
and complete in all material respects), presents fairly the Company's financial
condition and results of operations as of the times and for the periods referred
to therein, and has been prepared in accordance with GAAP, subject in the case
of unaudited financial statements to changes resulting from normal year-end
adjustments for recurring accruals (which shall not be material individually or
in the aggregate) and to the absence of footnote disclosure.
(b) Receivables. The Company's notes and accounts receivable are
-----------
valid receivables, current, and are, to the best of the Sellers' knowledge,
subject to no valid counterclaims or setoffs, at the aggregate amount recorded
on the Company's books and records as of the Closing, net of an amount of
allowances for doubtful accounts which relate to those receivables computed in
-14-
<PAGE>
a manner consistent with GAAP and the accounting practices used in the
preparation of the Latest Balance Sheet.
(c) Inventory. The Company's inventory, net of the reserves
---------
applicable to such inventory, consists of a quantity and quality which, except
as reflected in such reserve, is usable and saleable in the Ordinary Course of
Business, and the items of such inventory are not defective, slow-moving,
obsolete or damaged (except for certain inventory which is under repair in the
Ordinary Course of Business) and are merchantable and fit for their particular
use. The Company has good title to such inventory, free and clear of all Liens
(other than Permitted Encumbrances).
5.7 ABSENCE OF UNDISCLOSED LIABILITIES. The Company has no
----------------------------------
obligations or liabilities (whether accrued, absolute, contingent, unliquidated
or otherwise, whether or not known, whether due or to become due and regardless
of when asserted) arising out of transactions entered into at or prior to the
Closing, or any action or inaction at or prior to the Closing, or any state of
facts existing at or prior to the Closing, except (i) obligations under
executory contracts or commitments described on the Contracts Schedule attached
------------------
hereto or under executory contracts and commitments which are not required to be
disclosed thereon (but not liabilities for breaches thereof), (ii) liabilities
reflected on the liabilities side of the Latest Balance Sheet, and (iii)
liabilities which have arisen after the date of the Latest Balance Sheet in the
Ordinary Course of Business or otherwise in accordance with the terms and
conditions of this Agreement (none of which is a liability for breach of
contract, breach of warranty, tort or infringement or a claim or lawsuit or an
environmental liability).
5.8 ABSENCE OF CERTAIN DEVELOPMENTS. Except as set forth on the
-------------------------------
"Developments Schedule" attached hereto and except as expressly contemplated by
---------------------
this Agreement, since December 31, 1996, the Company has not:
(a) suffered any change that has had or could reasonably be expected
to have a Material Adverse Effect or suffered any theft, damage, destruction or
casualty loss in excess of $10,000, to its assets, whether or not covered by
insurance or suffered any substantial destruction of its books and records;
(b) redeemed or repurchased, directly or indirectly, any shares of
capital stock or other equity security or declared, set aside or paid any
dividends or made any other distributions (whether in cash or in kind) with
respect to any shares of its capital stock or other equity security;
(c) issued, sold or transferred any equity securities, any securities
convertible, exchangeable or exercisable into shares of its capital stock or
other equity securities, or warrants, options or other rights to acquire shares
of its capital stock or other of its equity securities;
(d) incurred or become subject to any liabilities, except liabilities
incurred in the Ordinary Course of Business;
(e) subjected any portion of its properties or assets to any Lien
(other than Permitted Encumbrances)
(f) sold, leased, assigned or transferred (including, without
limitation, transfers to Sellers or any Insider) a portion of its tangible
assets, except for sales of inventory in the Ordinary
-15-
<PAGE>
Course of Business, or canceled without fair consideration any material debts or
claims owing to or held by it;
(g) sold, assigned, licensed or transferred (including, without
limitation, transfers to Sellers or any Insider) any Proprietary Rights owned
by, issued to or licensed to it or disclosed any confidential information (other
than pursuant to agreements requiring the disclosure to maintain the
confidentiality of and preserving all its rights in such confidential
information) or received any confidential information of any third party in
violation of any obligation of confidentiality;
(h) suffered any extraordinary losses or waived any rights of material
value;
(i) entered into, amended or terminated any material lease, contract,
agreement or commitment, or taken any other action or entered into any other
transaction other than in the Ordinary Course of Business;
(j) materially changed any business practice;
(k) made or granted any bonus or any wage, salary or compensation
increase to any director, officer, employee or sales representative, group of
employees or consultant or made or granted any increase in any employee benefit
plan or arrangement, or amended or terminated any existing employee benefit plan
or arrangement or adopted any new employee benefit plan or arrangement;
(l) made any other change in employment terms for any of its
directors, officers, and employees outside the Ordinary Course of Business;
(m) conducted its cash management customs and practices other than in
the Ordinary Course of Business (including, without limitation, with respect to
collection of accounts receivable, purchases of inventory and supplies, repairs
and maintenance, payment of accounts payable and accrued expenses, levels of
capital expenditures and operation of cash management practices generally);
(n) made any capital expenditures or commitments for capital
expenditures that aggregate in excess of $20,000, other than purchases of
equipment in the Ordinary Course of Business;
(o) made any loans or advances to, or guarantees for the benefit of,
any Person;
(p) made charitable contributions, pledges, association fees or dues;
or
(q) changed (or authorized any change) in its articles of
incorporation or by-laws.
5.9 ASSETS. Except as set forth on the attached "Assets
------ ------
Schedule," the Company has good and marketable title to, or a valid leasehold
- --------
interest in, the properties and assets used by it, located on its premises or
shown on the Latest Balance Sheet or acquired thereafter, free and clear of all
Liens, except for Permitted Encumbrances and except for properties and assets
disposed of in the Ordinary Course of Business since the date of the Latest
Balance Sheet. Except as described on
-16-
<PAGE>
the Assets Schedule, the Company's buildings, equipment and other tangible
---------------
assets are in good operating condition and are fit for use in the ordinary
course of business. The Company owns or leases all buildings, machinery,
equipment, and other tangible assets necessary for the conduct of its business
as presently conducted.
5.1 TITLE TO PROPERTIES.
-------------------
(a) Owned Properties. The Company does not and has never owned any
----------------
real property.
(b) Leased Properties. The "Leases Schedule" sets forth a list of all
----------------- ---------------
of the leases and subleases (the "Leases") and each leased and subleased parcel
------
of real property in which the Company has a leasehold and subleasehold interest
(the "Leased Real Property"). Each of the Leases is in full force and effect
--------------------
and the Company holds a valid and existing leasehold or subleasehold interest
under each of the Leases. The Company has delivered to the Purchaser true,
correct, complete and accurate copies of each of the Leases described in the
Leases Schedule. With respect to each Lease listed on the Leases Schedule: (i)
- --------------- ---------------
the Lease is legal, valid, binding, enforceable and in full force and effect;
(ii) the Lease will continue to be legal, valid, binding, enforceable and in
full force and effect on identical terms following the Closing; (iii) neither
the Company nor, to the knowledge of the Company or any Seller, any other party
to the Lease is in breach or default, and no event has occurred which, with
notice or lapse of time, would constitute such a breach or default or permit
termination, modification or acceleration under the Lease; (iv) no party to the
Lease has repudiated any provision thereof; (v) there are no disputes, oral
agreements, or forbearance programs in effect as to the Lease; (vi) the Lease
has not been modified in any respect, except to the extent that such
modifications are disclosed by the documents delivered to the Purchaser; and
(vii) the Company has not assigned, transferred, conveyed, mortgaged, deeded in
trust or encumbered any interest in the Lease.
(c) Real Property Disclosure. Except as disclosed on the Leases
------------------------ ------
Schedule, there is no real property leased or owned by the Company used in its
- --------
business.
(d) Permits. All certificates of occupancy, permits, licenses,
-------
franchises, approvals and authorizations (collectively, the "Real Property
-------------
Permits") of all governmental authorities having jurisdiction over the Leased
- -------
Real Property, required or appropriate to have been issued to the Company to
enable the Company to lawfully occupy and use the Leased Real Property for all
of the purposes for which it is currently occupied and used have been lawfully
issued and are, as of the date hereof, in full force and effect. The Company
has delivered complete and correct copies of the Real Property Permits to the
Purchaser. The Company has not received or been informed by a third party of
the receipt by it of any notice from any governmental authority having
jurisdiction over the Leased Real Property threatening a suspension, revocation,
modification or cancellation of any Real Property Permit and, to the knowledge
of the Company or any Seller, there is no basis for the issuance of any such
notice or the taking of any such action.
5.11 TAXES. Except as set forth on the attached "Taxes
----- -----
Schedule,"
-17-
<PAGE>
(a) the Company has timely filed all Tax Returns which are required
to be filed, and all such Tax Returns are true, complete and accurate in all
respects and have been prepared in compliance with applicable law;
(b) all Taxes due and payable by the Company, whether or not shown on
a Tax Return, have been paid by the Company and no Taxes are delinquent;
(c) the amount accrued as a current liability for taxes on the Latest
Balance Sheet shall be sufficient to pay in full all Taxes for taxable periods
(or portions thereof) ending on or before the date of the Latest Balance Sheet,
whether or not such Taxes are due on or before such date and, since the date of
the Latest Balance Sheet, the Company has not incurred any liability for Taxes
other than in the Ordinary Course of Business;
(d) no deficiency for any amount of Tax which has not been resolved
has been asserted or assessed by a taxing authority against the Company, and
neither the Company nor any Seller has knowledge that any such assessment or
asserted Tax liability shall be made;
(e) there is no action, suit, taxing authority proceeding or audit
now in progress, pending or, to the knowledge of the Company or any Seller,
threatened against or with respect to the Company;
(f) the Sellers do not reasonably expect any taxing authority to
claim or assess any additional Taxes in respect of the Company for any period;
(g) the Company has not (A) waived any statute of limitations, (B)
agreed to any extension of the period for assessment or collection or (C)
executed or filed any power of attorney, in each case with respect to any Taxes
which waiver, agreement or power of attorney is currently in force;
(h) the Company has not been a member of an Affiliated Group (as
defined in Section 1504 of the Code), or any similar group defined under local,
state or foreign Tax law and the Company has no liability for Taxes of any
Person other than the Company under Treasury Regulations Section 1.1502-6 or any
similar provision of local, state or foreign Tax law;
(i) the Company is not a party to or bound by any Tax allocation,
sharing, indemnity or similar agreement or arrangement with any Person and the
Company has no current or potential contractual obligation to indemnify any
other Person with respect to Taxes;
(j) the Company has no obligation to make any payment that could be
non-deductible under Section 280G of the Code (or any corresponding provision of
state, local or foreign Tax law);
(k) no claim has ever been made by a taxing authority in a
jurisdiction where the Company does not pay Taxes or file Tax Returns that the
Company is or may be subject to Taxes assessed by such jurisdiction;
-18-
<PAGE>
(l) the Company has withheld and paid all Taxes required to have been
withheld and paid in connection with amounts paid or owing to any employee,
creditor, independent contractor or other third party;
(m) the Taxes Schedule contains a list of states, territories and
--------------
jurisdictions (whether foreign or domestic) in which the Company is required to
file Tax Returns relating to its business; and
(n) the Company will not be required to include any amount in taxable
income for any taxable period (or portion thereof) ending after the Closing Date
that is attributable to any taxable period (or portion thereof) ending on or
before the Closing Date as a result of (i) any change in method of accounting
for a taxable period ending on or prior to the Closing Date, (ii) any "closing
agreement," as described in Section 7121 of the Code (or any corresponding
provision of state, local or foreign income Tax law), entered into on or before
the Closing Date, (iii) any installment sale made on or before the Closing Date,
or (iv) any deferred intercompany gain described in Treasury Regulation Section
1.15102-13 or any excess loss account described in Treasury Regulation Section
1.1502-19 and 1.1502-32 (or any corresponding or similar provision or
administrative rule of federal, state, local or foreign income tax law) arising
on or before the Closing Date.
5.12 CONTRACTS AND COMMITMENTS.
-------------------------
(a) Except as specifically contemplated by this Agreement and except
as set forth on the "Contracts Schedule" attached hereto, the Company is not a
------------------
party to or bound by, whether written or oral, any:
(i) collective bargaining agreement or contract with any labor union
or any bonus, pension, profit sharing, retirement or any other form of
deferred compensation plan or any stock purchase, stock option,
hospitalization insurance or similar plan or practice, whether formal or
informal;
(ii) any contract for the employment of any officer, individual
employee or other person on a full-time or consulting basis or any
severance agreements;
(iii) agreement or indenture relating to the borrowing of money or to
mortgaging, pledging or otherwise placing a Lien on any of its assets;
(iv) contract under which the Company has advanced or loaned any
other Person amounts in the aggregate exceeding $10,000;
(v) agreement under which the Company has granted any Person any
registration rights (including, without limitation, demand and piggyback
registration rights);
(vi) agreements with respect to the lending or investing of funds;
(vii) license or royalty agreements;
(viii) guaranty of any obligation, other than endorsements made for
collection;
-19-
<PAGE>
(ix) lease or agreement under which it is lessee of, or holds or
operates, any personal property owned by any other party calling for
payments in excess of $10,000 annually;
(x) lease or agreement under which it is lessor of or permits any
third party to hold or operate any property, real or personal, owned or
controlled by it;
(xi) contract or group of related contracts with the same party
continuing over a period of more than six months from the date or dates
thereof, not terminable by it on 30 days or less notice without penalties
or involving more than $10,000;
(xii) contract which prohibits it from freely engaging in business
anywhere in the world; or
(xiii) other agreement material to it whether or not entered into in
the Ordinary Course of Business.
(b) Except as disclosed on the Contracts Schedule, (i) no contract or
------------------
commitment required to be disclosed on the Contracts Schedule has been breached
------------------
or canceled by the other party and neither the Company nor any Seller has
knowledge of any anticipated breach by any other party to any contract set forth
on the Contracts Schedule, (ii) no customer or supplier has indicated in writing
------------------
or orally to the Company, or any Seller that it shall stop or decrease the rate
of business done with the Company or that it desires to renegotiate its contract
or current arrangement with the Company, (iii) the Company has performed all the
obligations required to be performed by it in connection with the contracts or
commitments required to be disclosed on the Contracts Schedule and is not in
------------------
default under or in breach of any contract or commitment required to be
disclosed on the Contracts Schedule, and no event has occurred which with the
------------------
passage of time or the giving of notice or both would result in a default or
breach thereunder, (iv) the Company has no present expectation or intention of
not fully performing any obligation pursuant to any contract set forth on the
Contracts Schedule, and (vi) each agreement is legal, valid, binding,
- ------------------
enforceable and in full force and effect and will continue as such following the
consummation of the transactions contemplated hereby.
(c) The Sellers have provided the Purchaser with a true and correct
copy of all written contracts which are required to be disclosed on the
Contracts Schedule, in each case together with all amendments, waivers or other
- ------------------
changes thereto (all of which are disclosed on the Contracts Schedule). The
------------------
Contracts Schedule contains an accurate and complete description of all material
- ------------------
terms of all oral contracts referred to therein.
5.13 PROPRIETARY RIGHTS.
------------------
(a) The attached "Proprietary Rights Schedule" contains a complete and
---------------------------
accurate list of all (a) patented or registered Proprietary Rights owned or used
by the Company, (b) pending patent applications and applications for
registrations of other Intellectual Property Rights filed by the Company, (c)
unregistered trade names, internet domain names and corporate names owned or
used by the Company, and (d) unregistered trademarks, service marks, and
computer software owned or used by the Company. The Proprietary Rights Schedule
---------------------------
also contains a complete and accurate
-20-
<PAGE>
list of all licenses and other rights granted by the Company to any third party
with respect to any Proprietary Rights and all licenses and other rights granted
by any third party to the Company with respect to any Proprietary Rights, in
each case identifying the subject Proprietary Rights. Except as set forth on the
Proprietary Rights Schedule, the Company owns, free of all Liens (except
- ---------------------------
Permitted Encumbrances), all right, title and interest to, or has the right to
use pursuant to a valid written license, all Proprietary Rights necessary for
the operation of its business as presently conducted and such rights will be
owned or made available for use by the Company after the Closing on terms and
conditions identical to those under which they owned or used such rights prior
to the Closing. Except as set forth on the Proprietary Rights Schedule, the loss
---------------------------
or expiration of any Proprietary Rights or related group of Proprietary Rights
owned or used by the Company has not had a Material Adverse Effect on the
conduct of its business and is not pending or, to the knowledge of the Company
or any Seller, threatened or reasonably foreseeable.
(b) To the best of the Sellers' knowledge, none of the computer
software, computer firmware, computer hardware (whether general or special
purpose) or other similar or related items of automated, computerized or
software systems that are used or relied on by Company in the conduct of its
business will malfunction, will cease to function, will generate incorrect data
or will produce incorrect results when processing, providing or receiving (i)
date-related data from, into and between the twentieth and twenty-first
centuries or (ii) date-related data in connection with any valid date in the
twentieth and twenty-first centuries.
(c) Except as set forth on the Proprietary Rights Schedule, (i) the
---------------------------
Company owns and possesses without restriction as to use, all right, title and
interest in and to the Proprietary Rights necessary for the operation of the
Company's business as currently conducted; (ii) the Company has not received any
notices of invalidity, infringement or misappropriation from any third party
with respect to any such Proprietary Rights; (iii) the Company has not
interfered with, infringed upon, misappropriated or otherwise come into conflict
with any Proprietary Rights of any third parties; and (iv) to the knowledge of
the Company or any Seller, no third party has interfered with, infringed upon,
misappropriated, or otherwise come into conflict with any Proprietary Rights of
the Company.
(d) The transactions contemplated by this Agreement shall have no
adverse effect on the Company's right, title and interest in and to any of its
Proprietary Rights.
5.14 LITIGATION; PROCEEDINGS. Except as set forth on the attached
-----------------------
"Litigation Schedule," there are no actions, suits, proceedings, orders,
-------------------
investigations or claims pending or, to the knowledge of the Company or any
Seller, threatened against or affecting the Company (or to the knowledge of the
Company or any Seller, pending or threatened against or affecting any of the
offi cers, directors or key employees of the Company with respect to its
businesses or proposed business activities) at law or in equity, or before or by
any governmental department, commission, board, bureau, agency or
instrumentality (including, without limitation, any actions, suits, proceedings
or investigations with respect to the transactions contemplated by this
Agreement); nor has there been any such actions, suits, proceedings, orders,
investigations or claims pending against or affecting the Company during the
past three years; and the Company is not subject to any arbitration proceedings
under collective bargaining agreements or otherwise or, to the knowledge of the
Company or any Seller, any governmental investigations or inquiries. The
Company is not subject to any judgment, order or decree of any court or other
governmental agency, and the Company has not received any
-21-
<PAGE>
opinion or memorandum or legal advice from legal counsel to the effect that it
is exposed, from a legal standpoint, to any liability or disadvantage which may
be material to its business.
5.15 BROKERAGE. Except as set forth on the "Brokerage Schedule"
--------- ------------------
attached hereto, there are no claims for brokerage commissions, finders' fees or
similar compensation in connection with the transactions contemplated by this
Agreement based on any arrangement or agreement made by or on behalf of the
Company.
5.16 GOVERNMENTAL LICENSES AND PERMITS. The "Permits Schedule"
--------------------------------- ----------------
attached hereto contains a complete listing and summary description of all
permits, licenses, certificates, approvals and other authorizations of any
governmental entity or any department, agency or political subdivision thereof,
or other similar rights (collectively, the "Licenses") owned or possessed by the
--------
Company or used by it in the conduct of its business. Except as indicated on
the Permits Schedule, the Company owns or possesses all right, title and
----------------
interest in and to all of the Licenses that are necessary to conduct its
business as presently conducted, including, without limitation, all Licenses
required under any federal, state or local law relating to public health and
safety, employee health and safety, pollution or protection of the environment.
The Company is in compliance with the terms and conditions of such Licenses and
has received no notices that it is in violation of any of the terms or
conditions of such Licenses. The Company has taken all necessary action to
maintain such Licenses. No loss or expiration of any such License is
threatened, pending or reasonably foreseeable other than expiration in
accordance with the terms thereof. Except as indicated on the Permits Schedule,
----------------
all of the Licenses shall survive the transactions contemplated hereby.
5.17 EMPLOYEES. Except as set forth on the "Employees Schedule"
--------- ------------------
attached hereto, to the knowledge of the Company or any Seller, no key executive
employee and no group of employees or independent contractors of the Company has
any plans to terminate his, her or its employment or relationship as an
independent contractor with the Company. The Company has complied with all
applicable laws relating to the employment of personnel and labor. The Company
is not a party to or bound by any collective bargaining agreement, nor has the
Company experienced any strikes, grievances, unfair labor practices claims or
other material employee or labor disputes. The Company has not engaged in any
unfair labor practice. Neither the Company nor any Seller has knowledge of any
organizational effort presently being made or threatened by or on behalf of any
labor union with respect to employees of the Company.
5.18 EMPLOYEE BENEFIT MATTERS.
------------------------
(a) Except as set forth on the "Benefit Plans Schedule" attached
----------------------
hereto, with respect to current or former employees of the Company, the Company
does not maintain or contribute to or have any actual or potential liability
with respect to any (i) deferred compensation or bonus or retirement plans or
arrangements, (ii) qualified or nonqualified defined contribution or defined
benefit plans or arrangements which are employee pension benefit plans (as
defined in Section 3(2) of the Employee Retirement Income Security Act of 1974
("ERISA")), or (iii) employee welfare benefit plans, (as defined in Section 3(1)
-----
of ERISA), stock option or stock purchase plans, or material fringe benefit
plans or programs whether in writing or oral and whether or not terminated. The
Company has never contributed to any multiemployer pension plan (as defined in
Section 3(37) of ERISA), and the Company has never maintained or contributed to
any defined benefit plan (as defined in Section 3(35) of ERISA). The plans,
arrangements, programs and agreements referred
-22-
<PAGE>
to the preceding two sentences are referred to collectively as the "Plans." The
-----
Company does not maintain or contribute to any employee welfare benefit plan
which provides health, accident or life insurance benefits to former employees,
their spouses or dependents, other than in accordance with Section 4980B of the
Code ("COBRA").
-----
(b) The Plans (and related trusts and insurance contracts) set forth
on the Benefit Plans Schedule comply in form and in operation with the
----------------------
requirements of applicable laws and regulations, including ERISA and the Code
and the nondiscrimination rules thereof.
(c) All required reports and descriptions (including Form 5500 Annual
Reports, Summary Annual Reports and Summary Plan Descriptions) with respect to
the Plans set forth on the Benefit Plans Schedule have been properly and timely
----------------------
filed with the appropriate government agency and distributed to participants as
required. The Company has complied with the requirements of COBRA.
(d) With respect to each Plan set forth on the Benefit Plans Schedule,
----------------------
(i) there have been no prohibited transactions as defined in Section 406 of
ERISA or Section 4975 of the Code, (ii) no fiduciary (as defined in Section
3(21) of ERISA) has any liability for breach of fiduciary duty or any other
failure to act or comply in connection with the administration or investment of
the assets of such Plans, and (iii) no actions, investigations, suits or claims
with respect to the assets thereof (other than routine claims for benefits) are
pending or threatened, and neither the Company nor any Seller has knowledge of
any facts which would give rise to or could reasonably be expected to give rise
to any such actions, suits or claims.
(e) With respect to each of the Plans listed on the Benefit Plans
-------------
Schedule, the Sellers have furnished to the Purchaser true and complete copies
- --------
of (i) the plan documents, summary plan descriptions and summaries of material
modifications and other material employee communications, (ii) the Form 5500
Annual Report (including all schedules and other attachments for the most recent
three years), (iii) all related trust agreements, insurance contracts or other
funding agreements which implement such plans and (iv) all contracts relating to
each such plan, including, without limitation, service provider agreements,
insurance contracts, investment management agreements and recordkeeping
agreements.
5.19 INSURANCE. The "Insurance Schedule" attached hereto lists
--------- ------------------
and briefly describes each insurance policy maintained by the Company with
respect to its properties, assets and business, together with a claims history
for the past five years. All of such insurance policies are in full force and
effect, and the Company is not in default with respect to its obligations under
any such insurance policies and the Company has not been denied insurance
coverage. Except as set forth on the Insurance Schedule, the Company does not
------------------
have any self-insurance or co-insurance programs, and the reserves set forth on
the Latest Balance Sheet are adequate to cover all anticipated liabilities with
respect to self-insurance or coinsurance programs.
5.20 OFFICERS AND DIRECTORS; BANK ACCOUNTS. The "Officers,
------------------------------------- ---------
Directors and Bank Accounts Schedule" attached hereto lists all officers and
- ------------------------------------
directors of the Company, and all bank accounts, safety deposit boxes and lock
boxes (designating each authorized signatory with respect thereto) for the
Company.
-23-
<PAGE>
5.21 AFFILIATE TRANSACTIONS. Except as disclosed on the
----------------------
"Affiliated Transactions Schedule" attached hereto, no Insider is a party to any
- ---------------------------------
agreement, contract, commitment or transaction with the Company or which is
pertaining to the business of the Company or has any interest in any property,
real or personal or mixed, tangible or intangible, used in or pertaining to the
business of the Company.
5.22 COMPLIANCE WITH LAWS. The Company and its officers,
--------------------
directors, partners, agents and employees have complied with and are in
compliance with all applicable laws, regulations and ordinances of foreign,
federal, state and local governments and all agencies thereof which are
applicable to the business, business practices (including, but not limited to,
the Company's marketing and sales of its products and services) or any owned or
leased properties of the Company and to which the Company may be subject, and no
claims have been filed against the Company alleging a violation of any such laws
or regulations, and neither the Company has not received notice of any such
violations.
5.23 ENVIRONMENTAL MATTERS. Except as set forth on the
---------------------
"Environmental Schedule" attached hereto:
- -----------------------
(a) The Company has complied with and is currently in compliance with
all Environmental and Safety Requirements, and the Company has not received any
oral or written notice, report or information regarding any liabilities (whether
accrued, absolute, contingent, unliquidated or otherwise) or any corrective,
investigatory or remedial obligations arising under Environmental and Safety
Requirements which relate to the Company or any of its properties or facilities.
(b) Without limiting the generality of the foregoing, the Company has
obtained and complied with, and is currently in compliance with, all permits,
licenses and other authorizations that may be required pursuant to any
Environmental and Safety Requirements for the occupancy of their properties or
facilities or the operation of its business. A list of all such permits,
licenses and other authorizations which are material to the Company is set forth
on the Environmental Schedule.
----------------------
(c) Neither this Agreement or the other Transaction Documents nor the
consummation of the transactions contemplated hereby and thereby shall impose
any obligations on the Company or otherwise for site investigation or cleanup,
or notification to or consent of any government agencies or third parties under
any Environmental and Safety Requirements (including, without limitation, any so
called "transaction-triggered" or "responsible property transfer" laws and
regulations).
(d) To the best of the Sellers' knowledge, none of the following
exists at any property or facility owned, occupied or operated by the Company:
(i) underground storage tanks or surface impoundments; (ii) asbestos-containing
material in any form or condition; (iii) materials or equipment containing
polychlorinated biphenyls; or (iv) landfills.
(e) The Company has not treated, stored, disposed of, arranged for or
permitted the disposal of, transported, handled or Released any substance
(including, without limitation, any hazardous substance) or owned, occupied or
operated any facility or property, so as to give rise to
-24-
<PAGE>
liabilities of the Company for response costs, natural resource damages or
attorneys' fees pursuant to CERCLA or any other Environmental and Safety
Requirements.
(f) Without limiting the generality of the foregoing, no facts, events
or conditions relating to the past or present properties, facilities or
operations of the Company shall prevent, hinder or limit continued compliance
with Environmental and Safety Requirements, give rise to any corrective,
investigatory or remedial obligations pursuant to Environmental and Safety
Requirements or give rise to any other liabilities (whether accrued, absolute,
contingent, unliquidated or otherwise) pursuant to Environmental and Safety
Requirements, including, without limitation, those liabilities relating to
onsite or offsite Releases or threatened Releases of hazardous materials,
substances or wastes, personal injury, property damage or natural resources
damage.
(g) The Company has not, either expressly or by operation of law,
assumed or undertaken any liability or corrective investigatory or remedial
obligation of any other Person relating to any Environmental and Safety
Requirements.
(h) No Environmental Lien has attached to any property owned, leased
or operated by the Company.
5.24 DISCLOSURE. Neither this Agreement, the other Transaction
----------
Documents, nor any of the schedules, attachments or Exhibits hereto, contain any
untrue statement of a material fact or omit a material fact necessary to make
each statement contained herein or therein, not misleading; There is no fact
which has not been disclosed to the Purchaser of which the Company or any Seller
has knowledge which has a Material Adverse Effect or could reasonably be
anticipated to have a Material Adverse Effect.
5.25 CLOSING DATE. All of the representations and warranties
------------
contained in this Article V and elsewhere in this Agreement and all information
delivered in any schedule, attachment or Exhibit hereto or in any writing
delivered to the Purchaser are true and correct on the date of this Agreement
and shall be true and correct on the Closing Date, except to the extent that any
Seller has advised the Purchaser otherwise in writing prior to the Closing.
ARTICLE VI
REPRESENTATIONS AND WARRANTIES CONCERNING THE SELLERS
-----------------------------------------------------
As a material inducement to the Purchaser to enter into this
Agreement, each Seller severally represents and warrants to the Purchaser that:
6.1 Authorization of Transactions. Such Seller has full power,
-----------------------------
authority and legal capacity to enter into this Agreement and the other
documents contemplated hereby to which such Seller is a party and to perform his
obligations hereunder and thereunder. This Agreement and the other documents
contemplated hereby to which such Seller is a party have been duly executed and
delivered by such Seller and constitute the valid and binding agreements of such
Seller, enforceable in accordance with their respective terms.
-25-
<PAGE>
6.2 Absence of Conflicts. Neither the execution and the
--------------------
delivery of this Agreement and the other documents contemplated hereby to which
such Seller is a party, nor the consummation of the transactions contemplated
hereby and thereby, shall (a) conflict with, result in a breach of any of the
provisions of, (b) constitute a default under, (c) result in the violation of,
(d) give any third party the right to terminate or to accelerate any obligation
under, (e) result in the creation of any Lien upon the Acquired Stock owned by
such Seller, or (f) require any authorization, consent, approval, execution or
other action by or notice to any court or other governmental body, under the
provisions of any indenture, mortgage, lease, loan agreement or other agreement
or instrument to which such Seller is bound or affected, or any statute,
regulation, rule, judgment, order, decree or other restriction of any
government, governmental agency or court to which such Seller is subject. No
notice to, filing with or authorization, consent or approval of any government
or governmental agency by such Seller is necessary for the consummation of the
transactions contemplated by this Agreement and the other documents contemplated
hereby to which such Seller is a party.
6.3 Brokerage. Except as set forth on the Brokerage Schedule,
--------- ------------------
there are no claims for brokerage commissions, finders' fees or similar
compensation in connection with the transactions contemplated by this Agreement
based on any arrangement or agreement made by or on behalf of such Seller.
6.4 Shares. Such Seller holds of record and owns beneficially
------
the shares of Acquired Stock as indicated on the Schedule of Stockholders, free
------------------------
and clear of any Liens. Such Seller is not a party to any option, warrant,
right, contract, call, put or other agreement or commitment providing for the
disposition or acquisition of any capital stock of the Company (other than this
Agreement). Such Seller is not a party to any voting trust, proxy or other
agreement or understanding with respect to the voting of any capital stock of
the Company.
6.5 Closing Date. All of the representations and warranties
------------
concerning such Seller contained in this Article VI and elsewhere in this
Agreement and all information delivered in any schedule, attachment or Exhibit
hereto or in any writing delivered to the Purchaser are true and correct on the
date of this Agreement and shall be true and correct on the Closing Date except
to the extent that such Seller has advised the Purchaser otherwise in writing
prior to the Closing.
ARTICLE VII
REPRESENTATIONS AND WARRANTIES CONCERNING THE PURCHASER
-------------------------------------------------------
As a material inducement to Sellers to enter into this Agreement, the
Purchaser hereby represents and warrants to Sellers that:
7.1 Organization and Corporate Power. The Purchaser is a
--------------------------------
corporation duly organized, validly existing and in good standing under the laws
of the State of Delaware, with full corporate power and authority to enter into
this Agreement and the other agreements contemplated hereby to which the
Purchaser is a party and perform its obligations hereunder and thereunder.
-26-
<PAGE>
7.2 Authorization of Transaction. The execution, delivery and
----------------------------
performance of this Agreement and the other agreements contemplated hereby to
which the Purchaser is a party have been duly and validly authorized by all
requisite corporate action on the part of the Purchaser, and no other corporate
proceedings on its part are necessary to authorize the execution, delivery or
performance of this Agreement. This Agreement constitutes, and each of the
other agreements contemplated hereby to which the Purchaser is a party shall
when executed constitute, a valid and binding obligation of the Purchaser,
enforceable in accordance with their terms.
7.3 No Violation. The Purchaser is not subject to or obligated
------------
under its certificate of incorporation, its by-laws, any applicable law, or rule
or regulation of any governmental authority, or any agreement or instrument, or
any license, franchise or permit, or subject to any order, writ, injunction or
decree, which would be breached or violated by its execution, delivery or
performance of this Agreement and the other agreements contemplated hereby to
which the Purchaser is a party.
7.4 Governmental Authorities and Consents. The Purchaser is not
-------------------------------------
required to submit any notice, report or other filing with any governmental
authority in connection with the execution or delivery by it of this Agreement
and the other agreements contemplated hereby to which the Purchaser is a party
or the consummation of the transactions contemplated hereby or thereby. No
consent, approval or authorization of any governmental or regulatory authority
or any other party or person is required to be obtained by the Purchaser in
connection with its execution, delivery and performance of this Agreement and
the other agreements contemplated hereby to which the Purchaser is a party or
the transactions contemplated hereby or thereby.
7.5 Litigation. There are no actions, suits, proceedings or
----------
orders pending or, to the Purchaser's knowledge, threatened against or affecting
the Purchaser at law or in equity, or before or by any federal, state, municipal
or other governmental department, commission, board, bureau, agency or
instrumentality, domestic or foreign, which would adversely affect the
Purchaser's performance under this Agreement and the other agreements
contemplated hereby to which the Purchaser is a party or the consummation of the
transactions contemplated hereby or thereby.
7.6 Brokerage. There are no claims for brokerage commissions,
---------
finders' fees or similar compensation in connection with the transactions
contemplated by this Agreement based on any arrangement or agreement made by or
on behalf of the Purchaser.
7.7 Closing Date. All of the representations and warranties
------------
contained in this Article VII and elsewhere in this Agreement and all
information delivered in any schedule, attachment or Exhibit hereto or in any
writing delivered to Sellers are true and correct on the date of this Agreement
and shall be true and correct on the Closing Date, except to the extent that the
Purchaser has advised Sellers otherwise in writing prior to the Closing.
ARTICLE VII
TERMINATION
-----------
8.1 Termination. This Agreement may be terminated at any time
-----------
prior to the Closing:
-27-
<PAGE>
(a) by mutual written consent of a Representative and the Purchaser;
(b) by a Representative or the Purchaser if there has been a material
misrepresentation or breach on the part of the other Party of the
representations, warranties or covenants set forth in this Agreement or if
events have occurred which have made it impossible to satisfy a condition
precedent to the terminating Party's obligations to consummate the transactions
contemplated hereby unless such terminating Party's willful or knowing breach of
this Agreement has caused the condition to be unsatisfied; or
(c) by a Representative or the Purchaser if the Closing has not
occurred on or prior to January 16, 1998; provided, however, that neither the
Purchaser nor a Representative shall be entitled to terminate this Agreement
pursuant to this Section 8.1(c) if such Party's willful or knowing breach of
this Agreement has prevented the consummation of the transactions contemplated
hereby at or prior to such time.
8.2 Effect of Termination. In the event of termination of this
---------------------
Agreement by either a Representative or the Purchaser as provided in Section
8.1, this Agreement shall forthwith become void and there shall be no liability
on the part of any Party to any other Party under this Agreement, except that
the provisions of Sections 10.3 and 10.7 and Article XI shall continue in full
force and effect and except that nothing herein shall relieve any Party from
liability for any breach of this Agreement prior to such termination.
ARTICLE IX
INDEMNIFICATION AND RELATED MATTERS
-----------------------------------
9.1 Survival. All representations, warranties, covenants and
--------
agreements set forth in this Agreement or in any writing or certificate
delivered in connection with this Agreement shall survive the Closing Date and
the consummation of the transactions contemplated hereby and shall not be
affected by any examination made for or on behalf of any Party, the knowledge of
any of such Party's officers, directors, stockholders, employees or agents, or
the acceptance of any certificate or opinion. Notwithstanding the foregoing, no
Party shall be entitled to recover for any Loss pursuant to Section 9.2(a)(i) or
Section 9.2(c)(i) unless written notice of a claim thereof is delivered to the
other Party prior to the Applicable Limitation Date. For purposes of this
Agreement, the term "Applicable Limitation Date" shall mean the second
--------------------------
anniversary of the Closing Date; provided that the Applicable Limitation Date
with respect to the following Losses shall be as follows: (i) with respect to
any Loss arising from or related to a breach of the representations and
warranties of the Company and Sellers set forth in Section 5.11 (Taxes), the
Applicable Limitation Date shall be the 30th day after expiration of the statute
of limitations (including any extensions thereto to the extent that such statute
of limitations may be tolled) applicable to the Tax which gave rise to such
Loss, (ii) with respect to any Loss arising from or related to a breach of the
representations and warranties of the Company and Sellers set forth in Section
5.23 (Environmental), the Applicable Limitation Date shall be the fifth
anniversary of the Closing Date, and (iii) with respect to any Loss arising from
or related to a breach of the representations and warranties of the Company and
Sellers set forth in Section 5.1 (Organization and Corporate Power), Section 5.2
(Authorization of Transactions), Section 5.3 (Capitalization), Section 5.5
(Absence of Conflicts), Section 5.15 (Brokerage) or Article
-28-
<PAGE>
VI (Representations and Warranties with Respect to Sellers) and with respect to
any Loss arising from or related to a breach of the representations and
warranties of Purchaser set forth in Section 7.1 (Organization an Corporate
Power), 7.2 (Authorization of Transactions), 7.3 (No Violation) or 7.6
(Brokerage), there shall be no Applicable Limitation Date (i.e., such
representations and warranties shall survive forever).
9.2 Indemnification.
---------------
(a) Each Seller shall jointly and severally indemnify the Purchaser,
and the Company and each of their respective officers, directors, stockholders,
employees, agents, representatives, affiliates, successors and assigns
(collectively, the "Purchaser Parties") and hold each of them harmless from and
-----------------
against and pay on behalf of or reimburse such Purchaser Parties in respect of
any Loss which any such Purchaser Party may suffer, sustain or become subject
to, as a result of or relating to:
(i) the breach of any representation or warranty made by the Company
or any Seller contained in Article V of this Agreement or any certificate
delivered by the Company or any Seller to the Purchaser with respect
thereto in connection with the Closing;
(ii) the breach of any representation or warranty made by such Seller
contained in Article VI of this Agreement or any certificate delivered by
such Seller to Purchaser with respect thereto in connection with the
Closing;
(iii) the breach of any representation, warranty (other than
representations or warranties set forth in Articles V and VI), covenant or
agreement made by the Company or any Seller contained in this Agreement,
the other Transaction Documents, any Exhibit hereto or any certificate
delivered by the Company or any Seller to the Purchaser with respect
thereto in connection with the Closing; or
(iv) any product leased or sold by, or any services provided by, the
Company or any of its Subsidiaries prior to the Closing Date, or the
ownership, operation, or condition at any time on or prior to the Closing
Date of the Company's and its Subsidiaries' facilities or any other
properties and assets (whether real, personal, or mixed and whether
tangible or intangible) in which Sellers or the Company or any Subsidiary
has or had an interest.
The Purchaser's remedy for any indemnification of Losses hereunder may be
satisfied by proceeding against one or more Sellers individually for all or any
portion of any such Loss. Notwithstanding the foregoing, if any such Loss
arises from a breach of such Seller's representation or warranty contained in
Article VI, Purchaser shall proceed solely against such breaching Seller for the
entire amount of such Loss.
(b) The indemnification provided for in Section 9.2(a)(i) above is
subject to the following limitations:
(i) Sellers will be liable to the Purchaser Parties with respect to
claims referred to in Section 9.2(a)(i) only if Purchaser gives a
Representative written notice thereof within the Applicable Limitation
Date; and
-29-
<PAGE>
(ii) With respect to claims pursuant to Section 9.2(a)(i), the
Sellers will be liable to the Purchaser Parties for Losses arising
therefrom only if the aggregate Losses resulting to the Purchaser Parties
from all such claims exceeds $62,500 (the "Threshold"), in which case the
---------
Sellers will be liable for the entire amount of such Losses; and
(iii) The aggregate amount of all payments made by the Sellers in
satisfaction of claims for indemnification pursuant to Section 9.2(a)(i)
shall not exceed the Purchase Price (the "Cap").
---
Notwithstanding any implication to the contrary contained in this Agreement, so
long as the Purchaser delivers written notice of a claim to Sellers under
Section 9.2(a)(i) no later than the Applicable Limitation Date, the Sellers
shall be required to indemnify the Purchaser Parties for all Losses (up to the
Cap) which the Purchaser Parties may incur in respect of the matters which are
the subject of such claim, regardless of when incurred.
(c) The Purchaser shall indemnify the Sellers and hold each Seller and
its officers, directors, stockholders, employees, agents, representatives,
affiliates, successors and assigns (collectively, the "Seller Parties") harmless
--------------
from and against and pay on behalf of or reimburse such Sellers in respect of
any Loss which any Seller Parties may suffer, sustain or become subject to, as a
result of or relating to:
(i) the breach of any representation or warranty made by the Purchaser
contained in Article VII of this Agreement or any certificate delivered by
the Purchaser to the Sellers with respect thereto in connection with the
Closing; or
(ii) the breach of any representation, warranty (other than
representations or warranties set forth in Article VII), covenant or
agreement made by the Purchaser contained in this Agreement, the other
Transaction Documents, any Exhibit hereto or any certificate delivered by
the Purchaser to the Sellers with respect thereto in connection with the
Closing.
(d) The indemnification provided for in Section 9.2(c)(i) above is
subject to the following limitations:
(i) The Purchaser will be liable to the Seller Parties with respect to
claims referred to in Section 9.2(c)(i) only if a Seller gives the
Purchaser written notice thereof within the Applicable Limitation Date; and
(ii) With respect to claims pursuant to Section 9.2(c)(i), the
Purchaser will be liable to the Seller Parties for Losses arising therefrom
only if the aggregate Losses resulting to the Seller Parties from all such
claims exceeds the Threshold, in which case the Purchaser will be liable
for the entire amount of such Losses; and
(iii) The aggregate amount of all payments made by the Purchaser in
satisfaction of claims for indemnification pursuant to Section 9.2(c)(i)
shall not exceed the Cap.
Notwithstanding any implication to the contrary contained in this Agreement, so
long as a Representative delivers written notice of a claim to the Purchaser
under Section 9.2(a)(i) no later
-30-
<PAGE>
than the Applicable Limitation Date, the Purchaser shall be required to
indemnify the Seller Parties for all Losses (up to the Cap) which the Seller
Parties may incur in respect of the matters which are the subject of such claim,
regardless of when incurred.
(e) If a party hereto seeks indemnification under this Article IX,
such party (the "Indemnified Party") shall give written notice to the other
-----------------
party (the "Indemnifying Party") after receiving written notice of any action,
------------------
lawsuit, proceeding, investigation or other claim against it (if by a third
party) or discovering the liability, obligation or facts giving rise to such
claim for indemnification, describing the claim, the amount thereof (if known
and quantifiable), and the basis thereof; provided that the failure to so notify
the Indemnifying Party shall not relieve the Indemnifying Party of its or his
obligations hereunder except to the extent such failure shall have harmed the
Indemnifying Party. In that regard, if any action, lawsuit, proceeding,
investigation or other claims shall be brought or asserted by any third party
which, if adversely determined, would entitle the Indemnified Party to indemnity
pursuant to this Article IX, the Indemnified Party shall promptly notify the
Indemnifying Party of the same in writing, specifying in detail the basis of
such claim and the facts pertaining thereto and the Indemnifying Party shall be
entitled to participate in the defense of such action, lawsuit, proceeding,
investigation or other claim giving rise to the Indemnified Party's claim for
indemnification at its expense, and at its option (subject to the limitations
set forth below) shall be entitled to appoint lead counsel of such defense with
reputable counsel reasonably acceptable to the Indemnified Party; provided that,
as a condition precedent to the Indemnifying Party's right to assume control of
such defense, it must first:
(i) enter into an agreement with the Indemnified Party (in form and
substance reasonably satisfactory to the Indemnified Party) pursuant to
which the Indemnifying Party agrees to be fully responsible for all Losses
relating to such claims and that it will provide full indemnification to
the Indemnified Party for all Losses relating to such claim, and
(ii) unconditionally guarantees the payment and performance of any
liability or obligation which may arise with respect to such claim or the
facts giving rise to such claim for indemnification, and
(iii) furnish the Indemnified Party with reasonable evidence that the
Indemnifying Party is and will be able to satisfy any such liability;
and provided further that the Indemnifying Party shall not have the right to
assume control of such defense and shall pay the fees and expenses of counsel
retained by the Indemnified Party, if the claim which the Indemnifying Party
seeks to assume control (i) seeks non-monetary relief, (ii) involves criminal or
quasi-criminal allegations, (iii) involves a claim to which the Indemnified
Party reasonably believes an adverse determination would be detrimental to or
injure the Indemnified Party's reputation or future business prospects, or (iv)
involves a claim which, upon petition by the Indemnified Party, the appropriate
court rules that the Indemnifying Party failed or is failing to vigorously
prosecute or defend.
If the Indemnifying Party is permitted to assume and control the defense
and elects to do so, the Indemnified Party shall have the right to employ
counsel separate from counsel employed by the Indemnifying Party in any such
action and to participate in the defense thereof, but the fees and expenses of
such counsel employed by the Indemnified Party shall be at the expense of the
-31-
<PAGE>
Indemnified Party unless (i) the employment thereof has been specifically
authorized by the Indemnifying Party in writing, or (ii) the Indemnifying Party
has been advised by counsel that a reasonable likelihood exists of a conflict of
interest between the Indemnifying Party and the Indemnified Party.
If the Indemnifying Party shall control the defense of any such claim, the
Indemnifying Party shall obtain the prior written consent of the Indemnified
Party (which shall not be unreasonably withheld) before entering into any
settlement of a claim or ceasing to defend such claim, if pursuant to or as a
result of such settlement or cessation, injunction or other equitable relief
will be imposed against the Indemnified Party or if such settlement does not
expressly unconditionally release the Indemnified Party from all liabilities and
obligations with respect to such claim, without prejudice.
(f) The Indemnifying Party shall pay the Indemnified Party in
immediately available funds promptly after the Indemnified Party provides the
Indemnifying Party with written notice of a claim hereunder and the Parties
reasonably agree that there is a reasonable basis for such claim.
(g) Amounts paid to or on behalf of Sellers or Purchaser as
indemnification shall be treated as adjustments to the Purchase Price.
(h) Effective upon the Closing, each Seller hereby irrevocably waives,
releases and discharges the Company from any and all liabilities and obligations
to such Seller of any kind or nature whatsoever, whether in his capacity as
Seller hereunder, as a stockholder, officer or director of the Company or
otherwise (including, without limitation, in respect of rights of contribution
or indemnification other than compensation as an employee of the Company), in
each case whether absolute or contingent, liquidated or unliquidated, and
whether arising hereunder or under any other agreement or understanding or
otherwise at law or equity, and each Seller shall not seek to recover any
amounts in connection therewith or thereunder from the Company.
ARTICLE X
ADDITIONAL AGREEMENTS
---------------------
10. Continuing Assistance. Subsequent to the Closing, each
---------------------
Seller and the Purchaser (at their own cost) shall assist each other (including
making records available) in the preparation of their respective Tax Returns and
the filing and execution of Tax elections, if required, as well as any audits or
litigation that ensue as a result of the filing thereof, to the extent that such
assistance is reasonably requested.
10. Tax Matters.
-----------
(a) All transfer, documentary, sales, use, stamp, registration and
other such Taxes and fees (including any penalties and interest thereon)
incurred in connection with this Agreement shall be paid by the Sellers when
due, and each Seller shall, at his or its own expense, file all necessary Tax
Returns and other documentation with respect to all such transfer, documentary,
sales, use, stamp, registration and other Taxes and fees, and if required by
applicable law, the Purchaser
-32-
<PAGE>
shall, and shall cause its affiliates to, join in the execution of any such Tax
Returns and other documentation.
(b) The Sellers shall reimburse the Purchaser for all Taxes of the
Company with respect to any period (or portion thereof) ending on or before the
Closing Date within ten days of payment by the Purchaser or the Company of such
Taxes; provided that the Sellers shall not be required to reimburse the
--------
Purchaser for the portion of such Taxes which Sellers allocate toward the
$3,000,000 limitation of Company liabilities and obligations set forth in
Section 4(j) above. For purposes of this Section 10.2(b), in the case of any
Taxes that are imposed on a periodic basis and are payable for a Taxable period
that includes (but does not end on) the Closing Date, the portion of such Tax
which is respect to the portion of such Taxable period ending on the Closing
Date shall (x) in the case of any Taxes other than Taxes based upon or related
to income or receipts, be deemed to be the amount of such Tax for the entire
Taxable period multiplied by a fraction the numerator of which is the number of
days in the Taxable period ending on the Closing Date and the denominator of
which is the number of days in the entire Taxable period, and (y) in the case of
any Tax based upon or related to income or receipts be deemed equal to the
amount which would be payable if the relevant Taxable period ended on the
Closing Date.
10.3 Press Releases and Announcements. Prior to the Closing
--------------------------------
Date, no press releases related to this Agreement and the transactions
contemplated herein, or other announcements to the employees, customers or
suppliers of the Company shall be issued without the mutual approval of all
Parties, except for any public disclosure which any Party in good faith believes
is required by law or regulation (in which case the disclosure shall be prepared
jointly by the Sellers and the Purchaser). After the Closing Date, no press
releases related to this Agreement and the transactions contemplated herein, or
other announcements to the employees, customers or suppliers of the Company
shall be issued without the Purchaser's consent (which shall not be unreasonably
withheld). Purchaser shall not disclose the Purchase Price in any such press
release without the prior consent of the Sellers, except for any public
disclosure which any Party in good faith believes is required by law or
regulation (in which case the disclosure shall be prepared jointly by the
Sellers and the Purchaser).
10.4 Further Transfers. Each Seller shall execute and deliver
-----------------
such further instruments of conveyance and transfer and take such additional
action as the Purchaser may reasonably request to effect, consummate, confirm or
evidence the transfer to the Purchaser of the Acquired Stock and any other
transactions contemplated hereby.
10.5 Specific Performance. Each Seller acknowledges that the
--------------------
Company's business is unique and recognizes and affirms that in the event of a
breach of this Agreement by such Seller, money damages may be inadequate and
Purchaser may have no adequate remedy at law. Accordingly, each Seller agrees
that Purchaser shall have the right, in addition to any other rights and
remedies existing in its favor, to enforce its rights and such Seller's
obligations hereunder not only by an action or actions for damages but also by
an action or actions for specific performance, injunctive and/or other equitable
relief.
10.6 Transition Assistance. Each Seller shall not in any manner
---------------------
take any action which is designed, intended, or might be reasonably anticipated
to have the effect of discouraging customers, suppliers, lessors, licensors and
other business associates from maintaining the same
-33-
<PAGE>
business relationships with the Company after the date of this Agreement as were
maintained with the Company prior to the date of this Agreement.
10.7 Expenses. Except as otherwise provided herein, each Seller
--------
and the Purchaser shall pay all of their own fees, costs and expenses
(including, without limitation, fees, costs and expenses of legal counsel,
investment bankers, brokers or other representatives and consultants and
appraisal fees, costs and expenses) incurred in connection with the negotiation
of the this Agreement and the other agreements contemplated hereby, the
performance of its obligations hereunder and thereunder, and the consummation of
the transactions contemplated hereby and thereby (collectively, the "Transaction
-----------
Expenses"); it being understood that Sellers shall pay the fees, costs and
- --------
expenses of the Company and that the Company shall pay any of Sellers' fees,
costs and expenses (including, without limitation, legal and accounting fees,
costs and expenses) arising in connection with the transactions contemplated
hereby if the transactions are not consummated. At the request of the Sellers,
the fees, costs and expenses for which they are liable pursuant to this Section
10.7 may be deducted from the Cash Purchase Price and paid directly to the
Sellers' legal counsel, investment bankers and other agents and representatives.
To the extent that the Company pays or becomes liable with respect to any
Transaction Expenses of the Company or the Sellers, the Cash Purchase Price
shall be reduced dollar-for-dollar.
10.8 Exclusivity. Until this Agreement is terminated by its
-----------
terms, neither the Company nor Sellers (and neither the Company nor Sellers
shall cause or permit any Insider or agent or any other Person acting on behalf
of any Seller, the Company, or its Affiliates to), (a) solicit, initiate or
encourage the submission of any proposal or offer from any Person (including any
of them) relating to any (i) liquidation, dissolution or recapitalization of,
(ii) merger or consolidation with or into, (iii) acquisition or purchase of
assets of or any equity interest in or (iv) similar transaction or business
combination involving the Company or (b) participate in any discussions or
negotiations regarding, furnish any information with respect to, assist or
participate in, or facilitate in any other manner any effort or attempt by any
other Person to do or seek any of the foregoing. The Company and each Seller
agrees that it will discontinue immediately any negotiations or discussion with
respect to any of the foregoing. Until this Agreement is terminated by its
terms, the Sellers and the Company shall notify the Purchaser immediately if any
Person makes any proposal, offer, inquiry or contact with respect to any of the
foregoing.
10.9 Books and Records. Unless otherwise consented to in writing
-----------------
by the Sellers or the Purchaser (as the case may be), the Purchaser and the
Sellers will not, for a period of seven years following the date hereof,
destroy, alter or otherwise dispose of any of the books and records of the
Company acquired by the Purchaser hereunder or retained by any Seller without
first offering to surrender to the Sellers or the Purchaser such books and
records or any portion thereof of which the Sellers or the Purchaser may intend
to destroy, alter or dispose. The Purchaser and the Sellers will allow the
other party's representatives, attorneys and accountants access to such books
and records, upon reasonable request for during such party's normal business
hours, for the purpose of examining and copying the same in connection with any
matter whether or not related to or arising out of this Agreement or the
transactions contemplated hereby.
10.10 Appointment of Representative.
-----------------------------
-34-
<PAGE>
(a) Powers of Attorney. Each Seller irrevocably constitutes and
------------------
appoints David S. Ament and Robert B. McCarty (each, a "Representative", and
--------------
together, the "Representatives") as such Seller's true and lawful agent, proxy
---------------
and attorney-in-fact and agent and authorizes each Representative acting for
such Seller and in such Seller's name, place and stead, in any and all
capacities to do and perform every act and thing required or permitted to be
done in connection with the transactions contemplated by this Agreement, as
fully to all intents and purposes as such Person might or could do in person,
including, without limitation:
(i) determine the presence (or absence) of claims for indemnification
against the Purchaser pursuant to Section 9.2 above;
(ii) deliver all notices required to be delivered by such Seller
under this Agreement, including, without limitation, any notice of a claim
for which indemnification is sought under Section 9.2 above;
(iii) receive all notices required to be delivered to such Seller
under this Agreement, including, without limitation, any notice of a claim
for which indemnification is sought under Section 9.2 above;
(iv) take any and all action on behalf of such Seller from time to
time as a Representative may deem necessary or desirable to defend, pursue,
resolve and/or settle claims under this Agreement, including, without
limitation, indemnification under Section 9.2; and
(v) to engage and employ agents and representatives (including
accountants, legal counsel and other professionals) and to incur such other
expenses as he deems necessary or prudent in connection with the
administration of the foregoing.
Each Seller grants unto said attorney-in-fact and agent full power and authority
to do and perform each and every act and thing necessary or desirable to be done
in connection with the transactions contemplated by this Agreement, as fully to
all intents and purposes as the undersigned might or could do in person, hereby
ratifying and confirming all that each Representative may lawfully do or cause
to be done by virtue hereof. Each Seller will, by executing this Agreement
agree that such agency, proxy and power of attorney are coupled with an
interest, and are therefore irrevocable without the consent of a Representative
and shall survive the death, incapacity, or bankruptcy of such Seller. Each
Seller acknowledges and agrees that upon execution of this Agreement, any
delivery by a Representative of any waiver, amendment, agreement, opinion,
certificate or other documents executed by a Representative or any decisions
made by a Representative pursuant to this Section 10.10, such Seller shall be
bound by such documents or decision as fully as if such Seller had executed and
delivered such documents or made such decisions.
(b) A Representative shall not have by reason of this Agreement a
fiduciary relationship in respect of any Seller, except in respect of amounts
received on behalf of such Seller. A Representative shall not be liable to any
Seller for any action taken or omitted by him or any agent employed by him
hereunder or under any other Transaction Document, or in connection therewith,
except that a Representative shall not be relieved of any liability imposed by
law for gross negligence or willful misconduct. A Representative shall not be
liable to Sellers for any apportionment or
-35-
<PAGE>
distribution of payments made by him in good faith, and if any such
apportionment or distribution is subsequently determined to have been made in
error the sole recourse of any Seller to whom payment was due, but not made,
shall be to recover from other Sellers any payment in excess of the amount to
which they are determined to have been entitled. A Representative shall not be
required to make any inquiry concerning either the performance or observance of
any of the terms, provisions or conditions of this Agreement.
(c) Replacement of a Representative. Upon the death, disability or
-------------------------------
incapacity of either initial Representative appointed pursuant to Section
10.10(a) above, each Seller acknowledges and agrees that such Representative's
executor, guardian or legal representative, as the case may be, shall (in
consultation with Sellers) appoint a replacement reasonably believed by such
person as capable of carrying out the duties and performing the obligations of
such Representative hereunder within thirty (30) days. In the event that either
Representative resigns for any reason, such Representative shall (in
consultation with Sellers) select another representative to fill such vacancy.
Any substituted representative shall be deemed a Representative for all purposes
of this Agreement and the other Transaction Documents.
(d) Actions of a Representative; Liability of a Representative. Each
----------------------------------------------------------
Seller agrees that Purchaser shall be entitled to rely on any action taken by a
Representative, on behalf of Sellers, pursuant to Section 10.10(a) above (each,
an "Authorized Action"), and that each Authorized Action shall be binding on
-----------------
each Seller as fully as if such Seller had taken such Authorized Action. The
Purchaser agrees that a Representative shall have no liability to the Purchaser
for any Authorized Action, except to the extent that such Authorized Action is
found by a final order of a court of competent jurisdiction to have constituted
fraud or willful misconduct. Sellers jointly and severally agree to pay, and
to indemnify and hold harmless the Purchaser from and against any losses which
they may suffer, sustain, or become subject to, as the result of any claim by
any Person that an Authorized Action is not binding on, or enforceable against,
Sellers. In addition, Sellers hereby release and discharge Purchaser from and
against any liability arising out of or in connection with a Representative's
failure to distribute any amounts received by a Representative on Sellers'
behalf to Sellers.
(e) Allocation of Payments. Subject to Section 9.2(a), whenever
----------------------
Sellers are entitled to receive any payments hereunder or are obligated to make
any payments hereunder (including those specified in Section 9.2), each Seller
shall be entitled to receive from Purchaser or shall be obligated to pay to
Purchaser such portion of any such payment as set forth on the Schedule of
-----------
Stockholders.
- ------------
10.11 NONCOMPETITION, NONSOLICITATION AND CONFIDENTIALITY.
---------------------------------------------------
(a) Noncompetition. In consideration of payment by the Purchaser to
--------------
Sellers of $150,000 (allocated among Sellers in the manner documented in the
Schedule of Stockholders) (the "Noncompete Payment") and the mutual covenants
- ------------------------ ------------------
provided for herein to Sellers at the Closing, during the period beginning on
the Closing Date and ending on the fifth anniversary of the Closing Date (the
"Noncompete Period"), none of the Sellers shall engage (whether as an owner,
- ------------------
operator, manager, employee, officer, director, consultant, advisor,
representative or otherwise) directly or indirectly in any business that the
Company conducts as of the Closing Date in any geographic area in which the
Company conducts its business as of the Closing Date, except as expressly
permitted
-36-
<PAGE>
under any employment agreement with the Company executed at the Closing as
contemplated hereunder; provided that ownership of less than 2% of the
outstanding stock of any publicly-traded corporation shall not be deemed to be
engaging solely by reason thereof in any of its businesses. The parties hereto
agree that the covenant set forth in this Section 10.11 is reasonable with
respect to its duration, geographical area and scope. If the final judgment of a
court of competent jurisdiction declares that any term or provision of this
Section 10.11(a) is invalid or unenforceable, the Parties agree that the court
making the determination of invalidity or unenforceability shall have the power
to reduce the scope, duration, or area of the term or provision, to delete
specific words or phrases, or to replace any invalid or unenforceable term or
provision with a term or provision that is valid and enforceable and that comes
closest to expressing the intention of the invalid or unenforceable term or
provision, and this Agreement shall be enforceable as so modified after the
expiration of the time within which the judgment may be appealed.
(b) Nonsolicitation. Each Seller agrees that, during the Noncompete
---------------
Period, such Seller (i) shall not, and shall use his best efforts not to permit
such Seller's affiliates to, directly or indirectly contact, approach or solicit
for the purpose of offering employment to or hiring (whether as an employee,
consultant, agent, independent contractor or otherwise) or actually hire any
person employed by the Company at any time prior to the Closing Date or during
the Noncompete Period, without the prior written consent of the Company and (ii)
shall not induce or attempt to induce any customer or other business relation of
the Company into any business relationship which might materially harm the
Company. The term "indirectly" as used in this Section 10.11 is intended to
----------
mean any acts authorized or directed by or on behalf of any Seller or any person
controlled by such Seller.
(c) Confidentiality. Each Seller shall treat and hold as confidential
---------------
any information concerning the business and affairs of the Company that is not
already generally available to the public (the "Confidential Information"),
------------------------
refrain from using any of the Confidential Information except in connection with
this Agreement, and deliver promptly to the Purchaser or destroy, at the request
and option of the Purchaser, all tangible embodiments (and all copies) of the
Confidential Information which are in his possession or under his control. In
the event that any Seller is requested or required (by oral question or request
for information or documents in any legal proceeding, interrogatory, subpoena,
civil investigative demand, or similar process) to disclose any Confidential
Information, such Seller shall notify the Purchaser promptly of the request or
re quirement so that the Purchaser may seek an appropriate protective order or
waive compliance with the provisions of this Section 10.11(c). If, in the
absence of a protective order or the receipt of a waiver hereunder, any Seller
is, on the advice of counsel, compelled to disclose any Confidential Information
to any tribunal or else stand liable for contempt, such Seller may disclose the
Confiden tial Information to the tribunal; provided that such disclosing Seller
shall use his best efforts to obtain, at the request of the Purchaser, an order
or other assurance that confidential treatment shall be accorded to such portion
of the Confidential Information required to be disclosed as the Purchaser shall
designate.
(d) Trade Names. No Seller shall use or permit any of his affiliates
-----------
to use the "Genpower Pump & Equipment" name or any name confusingly similar
thereto in any manner anywhere in the world after Closing.
-37-
<PAGE>
(e) Remedy for Breach. Each Seller acknowledges and agrees that in
-----------------
the event of a breach by any Seller of any of the provisions of this Section
10.11, monetary damages shall not constitute a sufficient remedy. Consequently,
in the event of any such breach, the Company, Purchaser and/or their respective
successors or assigns may, in addition to other rights and remedies existing in
their favor, apply to any court of law or equity of competent jurisdiction for
specific performance and/or injunctive or other relief in order to enforce or
prevent any violations of the provisions hereof, in each case without the
requirement of posting a bond or proving actual damages.
10.12 EMPLOYEES. Craig Anderson and Esau Quiroga shall
---------
continue to be employed by the Company and shall be eligible to participate
under the Company's Plans until March 8, 1998. Pyramid, Inc. shall reimburse
the Company for any Loss incurred by the Company with respect to such employees'
employment or participation under the Company's Plans.
ARTICLE XI
MISCELLANEOUS
-------------
11.1 Amendment and Waiver. This Agreement may be amended and any
--------------------
provision of this Agreement may be waived, provided that any such amendment or
waiver shall be binding upon a Party only if such amendment or waiver is set
forth in a writing executed by Purchaser and a Representative. No course of
dealing between or among any persons having any interest in this Agreement shall
be deemed effective to modify, amend or discharge any part of this Agreement or
any rights or obligations of any Party under or by reason of this Agreement.
11.2 Notices. All notices, demands and other communications
-------
given or delivered under this Agreement shall be in writing and shall be deemed
to have been given when personally delivered, mailed by first class mail, return
receipt requested, or delivered by express courier service or telecopied (with
hard copy to follow). Notices, demands and communications to each Seller shall,
unless another address is specified in writing, or unless receipt of notice has
been specifically delegated to a Representative under this Agreement, be sent to
the address or telecopy number indicated below, and notices, demands and
communications to the Representative, the Company and Purchaser shall, unless
another address is specified in writing, be sent to the address or telecopy
number indicated below:
<TABLE>
<CAPTION>
Notices to any Seller: with a copy to:
- --------------------- --------------
<S> <C>
David S. Ament Carson Messinger Elliott
11410 Sagecountry Laughlin & Ragan, P.L.L.C.
Houston, TX 77089 3300 North Central Avenue
Suite 1900
Phoenix, AZ 85012
Attention: James A. Burns, Esq.
Telecopy: (602) 277-4507
</TABLE>
-38-
<PAGE>
<TABLE>
<CAPTION>
Notices to the Company: with a copy to:
- ---------------------- --------------
<S> <C>
Genpower Pump & Equipment Co., Inc. Carson Messinger Elliott
1314 Underwood Street Laughlin & Ragan, P.L.L.C.
Deer Park, TX 77536 3300 North Central Avenue
Attention: David S. Ament Suite 1900
Telecopy: (281) 476-9473 Phoenix, AZ 85012
Attention: James A. Burns, Esq.
Telecopy: (602) 277-4507
Notices to Purchaser: with a copy to:
- -------------------- --------------
National Equipment Services, Inc. Kirkland & Ellis
1800 Sherman Avenue 200 East Randolph Drive
Suite 100 Chicago, IL 60601
Evanston, IL 60201 Attention: Sanford E. Perl
Attention: Kevin Rodgers Telecopy: (312) 861-2200
Telecopy: (847) 733-1078
</TABLE>
11.3 Binding Agreement; Assignment. This Agreement and all of
-----------------------------
the provisions hereof shall be binding upon and inure to the benefit of the
Parties and their respective successors and permitted assigns; provided that
neither this Agreement nor any of the rights, interests or obligations hereunder
may be assigned by any Seller without the prior written consent of Purchaser or
by Purchaser (except as otherwise provided in this Agreement) without the prior
written consent of each Seller. Without limiting the generality of the
foregoing:
(a) Purchaser may at any time prior to the Closing, at its sole
discretion, assign, in whole or in part, its rights and obligations pursuant to
this Agreement to one or more of its wholly-owned Subsidiaries. The Purchaser's
"wholly-owned Subsidiaries" include Subsidiaries which may be organized
subsequent to the date hereof;
(b) Purchaser may assign its rights under this Agreement for
collateral security purposes to any lender providing financing to Purchaser, the
Company, or any of their Affiliates and any such lender may exercise all of the
rights and remedies of the Purchaser hereunder; and
(c) Purchaser may assign its rights under this Agreement, in whole or
in part, to any subsequent purchaser of the Company or any material portion of
its assets (whether such sale is structured as a sale of stock, a sale of
assets, a merger or otherwise). No such assignment shall release Purchaser from
its obligations hereunder.
11.4 Severability. Whenever possible, each provision of this
------------
Agreement shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement is held to be prohibited
by or invalid under applicable law, such provision shall be ineffective only to
the extent of such prohibition or invalidity, without invalidating the remainder
of such provisions or the remaining provisions of this Agreement.
-39-
<PAGE>
11.5 No Strict Construction. The language used in this Agreement
----------------------
shall be deemed to be the language chosen by the Parties to express their mutual
intent, and no rule of strict construction shall be applied against any person.
11.6 Captions. The captions used in this Agreement are for
--------
convenience of reference only and do not constitute a part of this Agreement and
shall not be deemed to limit, characterize or in any way affect any provision of
this Agreement, and all provisions of this Agreement shall be enforced and
construed as if no caption had been used in this Agreement.
11.7 Entire Agreement. This Agreement and the documents referred
----------------
to herein contain the entire agreement between the Parties and supersede any
prior understandings, agreements or representations by or between the Parties,
written or oral, which may have related to the subject matter hereof in any way.
11.8 Counterparts. This Agreement may be executed in multiple
------------
counterparts, each of which shall be deemed an original but all of which taken
together shall constitute one and the same instrument.
11.9 Governing Law. All questions concerning the construction,
-------------
validity and interpretation of this Agreement shall be governed by and construed
in accordance with the domestic laws of the State of Illinois, without giving
effect to any choice of law or conflict of law provision (whether of the State
of Illinois or any other jurisdiction) that would cause the application of the
laws of any jurisdiction other than the State of Illinois.
11.10 Parties in Interest. Nothing in this Agreement, express or
-------------------
implied, is intended to confer on any person other than the Parties and their
respective successors and assigns any rights or remedies under or by virtue of
this Agreement.
* * * * *
-40-
<PAGE>
IN WITNESS WHEREOF, the Parties have executed this Stock Purchase Agreement as
of the date first written above.
NATIONAL EQUIPMENT SERVICES, INC.
By:
-------------------------------
Name:
-------------------------------
Its:
-------------------------------
GENPOWER PUMP & EQUIPMENT CO., INC.
By: /s/ Kevin P. Rodgers
-------------------------------
Name: Kevin Rodgers
-------------------------------
Its: President
-------------------------------
/s/ David S. Ament
-------------------------------------
David S. Ament
/s/ Robert B. McCarty
-------------------------------------
Robert B. McCarty
<PAGE>
Exhibit 10.24
-------------
ASSET PURCHASE AGREEMENT
------------------------
THIS AGREEMENT IS MADE this 4th day of February, 1998, by and among NES
Michigan Acquisition Corp., a Michigan corporation ("Purchaser"), Work Safe
Supply Co., Inc., a Michigan corporation ("Seller"), Dan J. Babcock
("Principal") and Kathy Babcock ("Shareholder").
In consideration of the mutual covenants, agreements and warranties herein
contained and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
DEFINITIONS
-----------
The following terms shall have the meanings set forth herein for the
purposes of the transactions described in this Agreement:
"Acquired Assets" shall have the meaning given to it in Section 1.1.
-----------
"Agreement" shall mean this Asset Purchase Agreement, including all
Exhibits and Schedules hereto.
"Applicable Law" shall mean any federal, state, local or other law,
statute, regulation, rule, policy, guideline, ordinance (zoning or otherwise),
by-law, order, judgment, decree or restriction of any kind (including, without
limitation, any environmental law) applicable to or binding on Purchaser,
Seller, Principal, the Business, the Real Properties or any of the Acquired
Assets.
"Assumed Obligations" shall have the meaning given to it in Section 1.4.
-----------
"Book Value" shall mean net book value (i.e. book value of Acquired Assets
less Assumed Obligations) of all Acquired Assets determined in accordance with
GAAP, consistently applied.
"Bulk Sales Laws" shall mean the laws of any jurisdiction relating to bulk
sales or transfers that are applicable to the sale of the Acquired Assets
hereunder.
"Business" shall mean the business and operations of Seller, wherever
conducted.
"Closing" shall mean the consummation of the transactions contemplated
herein in accordance with Section 10 hereof.
----------
"Closing Date" shall mean the date on which the Closing occurs or is to
occur.
"Contract" shall mean any contract, lease, commitment, sales order,
purchase order, indenture, mortgage, note, bond, instrument, license or other
agreement relating to the Business including, without limitation, any Purchase
Order or Customer Contract.
"Contract Receivables" shall mean the receivables of Seller set forth on
Schedule 1.3(b).
- ---------------
1
<PAGE>
"Customer Contract" shall have the meaning set forth in Section 1.2(b).
--------------
"Encumbrance" shall mean any encumbrance or restriction of any kind,
including, without limitation, any pledge, security interest, lien, charge,
encumbrance, mortgage, hypothecation, trust deed, easement, lease, sublease,
claim, right of way, covenant, option, condition, right of first refusal or
restriction (whether on sale, transfer, disposition or otherwise, whether
imposed by agreement, law or otherwise and whether of record or otherwise).
"Environmental Law" shall mean any law, statute, regulation, rule, order,
consent decree, settlement agreement or governmental requirement which relates
to or otherwise imposes liability or standards of conduct concerning discharges,
releases or threatened releases of noises, odors or any pollutants, contaminants
or hazardous or toxic wastes, substances or materials into ambient air, water or
land, or otherwise relating to the manufacture, processing, generation,
distribution, use, treatment, storage, disposal, cleanup, transport or handling
of pollutants, contaminants or hazardous or toxic wastes, substances or
materials, including (but not limited to) the Comprehensive Environmental
Response, Compensation and Liability Act of 1980, as amended, the Resource
Conservation and Recovery Act of 1976, as amended, any other so-called
"Superfund" or "Superlien" law, the Toxic Substances Control Act, or any other
similar Federal, state or local statutes.
"Environmental Permit" shall mean any Permit required by or pursuant to any
applicable Environmental Law.
"Excluded Assets" shall have the meaning given to it in Section 1.3.
-----------
"GAAP" shall mean the U.S. generally accepted accounting principles at the
time in effect, consistently applied for the period in question.
"Inventory" shall have the meaning given to it in Section 1.1(b).
--------------
"Losses" shall mean all liabilities, losses, costs, fines, damages,
penalties or expenses (including, without limitation, reasonable attorneys' fees
and costs of investigation and litigation).
"Management Non-Competition Agreements" shall mean the non-competition
agreements in the form of Exhibit C hereto.
---------
"Other Contracts" shall have the meaning given to it in Section 1.2(c).
--------------
"Permits" shall have the meaning given to it in Section 1.2(d).
--------------
"Purchase Orders" shall have the meaning given to it in Section 1.2(a).
--------------
"Purchase Price" shall mean $7,595,000.
2
<PAGE>
"Real Properties" shall mean the improved real property located at: G-4309
South Dort Highway, Burton, Michigan, 48529; 3898 South Blue Star Drive,
Traverse City, Michigan 49684; 2610 East M-28, Harvey, Michigan, 49855; and 2610
Sanford S.W., Granville, Michigan 49418.
"Rental Inventory" shall have the meaning given it in Section 1.1(a).
--------------
"Seller's Plans" shall have the meaning given to it in Section 3.13.
------------
"Seller's Staff" shall have the meaning given to it in Section 2.3.
-----------
"Tax Authority" shall mean any Governmental Authority having jurisdiction
over the payment of Taxes by Seller and shall include, without limitation, the
Michigan Department of Revenue.
"Taxes" shall mean all taxes, including, without limitation, income, gross
receipts, net proceeds, ad valorem, turnover, real and personal property
(tangible and intangible), sales, use, franchise, excise, value added, stamp,
leasing, lease, user, transfer, fuel, excess profits, occupational and interest
equalization, windfall profits, payroll, severance and employees' income
withholding and Social Security taxes imposed by the United States or by any
state, municipality, subdivision or instrumentality of the United States or by
any other tax authority, including all applicable penalties and interest.
"To the knowledge of" shall mean to the knowledge of the party in question
after reasonable due investigation.
3
<PAGE>
SECTION 1. Purchase and Sale; Liabilities
------------------------------
1.1 Acquired Assets. At the Closing, Seller shall sell, assign, transfer
---------------
and deliver to Purchaser, and Purchaser shall purchase, acquire and take
assignment and delivery of, all of the assets owned by Seller, wherever located
(collectively, the "Acquired Assets"), except for the Excluded Assets. The
Acquired Assets include, without limitation, the following:
(a) All new or used machinery, equipment and vehicles (including, without
limitation, signage, barricades and trailers) that are leased by Seller to
its customers in the ordinary course of business including, without
limitation, those items set forth on Schedule 1.1 (the "Rental Inventory");
------------
(b) All new or used machinery, equipment and vehicles (including, without
limitation, signage, barricades and trailers), supplies, materials or spare
parts held for sale or resale by Seller (the "Inventory");
(c) All accounts receivables, trade receivables, notes receivables and
other receivables (other than Contract Receivables) arising out of the
operation of the Business on or before the Closing Date;
(d) All cash, certificates of deposit, bank deposits and other cash
equivalents, together with all accrued but unpaid interest thereon, and
including any security deposit under any Customer Contract;
(e) All patents, patent registrations or applications, copyrights,
copyright registrations or applications, trademarks, trademark
registrations or applications, tradenames, trade secrets, inventions,
processes, designs, know-how, formulae and all phone numbers and facsimile
numbers for the Real Properties, including, without limitation, the names
"Work Safe," "TrafFix" and "San-Fil;"
(f) All confidential information, price lists, marketing information,
advertising materials, historical and financial records and files, and
other proprietary information and all environmental control, monitoring and
test records;
(g) All sales, rental, and maintenance records for each item of the
Inventory, Rental Inventory and otherwise, customer lists and files
(including customer credit and collection information and customer
addresses), historical records and files and other proprietary information;
(h) All warranties, indemnities or other rights relating to the Acquired
Assets;
(i) All goodwill, if any, related to or used in connection with the
Business; and
(j) All other assets, tangible or intangible, of Seller relating to or used
in connection with the Business (except for the Excluded Assets),
including, without limitation, furniture, tools and shop equipment.
4
<PAGE>
1.2 Assignment of Contracts, Leases and Other Assets. At the Closing,
------------------------------------------------
Seller shall assign and transfer to Purchaser, effective as of the Closing Date,
all of Seller's right, title and interest in and to, and Purchaser will take
assignment of the following (and all of the following shall be deemed included
in the term "Acquired Assets" as used herein):
(a) All purchase orders, contracts and agreements for the purchase or lease
by Seller of goods or materials, or the subcontracting by Seller for
services, each as set forth on Schedule 1.2 (a) attached hereto (the
----------------
"Purchase Orders");
(b) All leases, contracts and agreements for the lease, service or sale of
goods or services with customers entered into in the ordinary course of
business and any deposits under such leases, contracts and agreements (the
"Customer Contracts");
(c) All Contracts with suppliers and other Contracts listed on Schedule
--------
1.2(c) (the "Other Contracts") and all such other Contracts as shall be
------
entered into between the date hereof and the Closing Date which fall into
the categories set forth in clauses (a) or (b) above or in this clause (c)
----------- --- ----------
and have been entered into in the ordinary course of business or such other
Contracts which shall be expressly designated in writing by Purchaser prior
to the Closing; and
(d) All permits, licenses, consents, approvals, certificates, variances or
other authorizations required in connection with the operation of the
Business under any Applicable Law (the "Permits").
1.3 Excluded Assets. The following assets of Seller (collectively, the
---------------
"Excluded Assets") shall be retained by Seller and are not being sold or
assigned to Purchaser hereunder:
(a) The real property at G-4309 South Dort Highway, Burton, Michigan 49684
and 1500 East M-28, Harvey, Michigan 49855;
(b) All Contract Receivables;
(c) All corporate seals, articles of incorporation, minute books, stock
books, tax returns or similar records pertaining to the corporate
organization of Seller;
(d) any interest in "Pro-Line Painters" including the investment in, and
notes and accounts receivable of such entity; and
(e) employee advances and loans.
1.4 Assumed Obligations. At the Closing, Purchaser shall assume, and
-------------------
agree to pay, perform, fulfill and discharge, from and after the Closing Date,
the obligations of Seller that are required to be performed, and which accrue,
after the Closing Date under the Purchase Orders, Customer Contracts or Other
Contracts (excluding indemnities, warranties, services or other obligations
relating to matters occurring or which should have occurred on or before the
Closing
5
<PAGE>
Date) (the "Assumed Obligations"), except where the consent of a third party is
required for the assignment of such order or contract and such consent has not
been obtained.
1.5 No Other Liabilities Assumed. Anything in this Agreement to the
----------------------------
contrary notwithstanding, neither Purchaser nor any of its affiliates shall
assume, and shall not be deemed to have assumed, any debt, claim, obligation or
other liability of Seller, Principal, any Shareholder or any of their respective
affiliates whatsoever other than as specifically set forth in Section 1.4.
-----------
Without limiting the generality of the foregoing exclusion, Purchaser is
assuming no obligation for, and shall have no responsibility with respect to,
any such party's accounts payable, warranty obligations, taxes, liabilities
under Environmental Laws or liabilities to or with respect to employees or under
or with respect to any employee benefit plan, policy, program or arrangement.
Purchaser shall be under no obligation to hire any of Seller's employees and
shall not assume any obligations with respect to such employees including,
without limitation, any obligation for employment compensation, benefits or
severance.
SECTION 2. Purchase Price.
--------------
2.1 Payment. On the Closing Date, Purchaser shall pay Seller the Purchase
-------
Price.
2.2 Allocation of Purchase Price. Purchaser and Seller shall allocate
----------------------------
the Purchase Price as set forth on Schedule 2.2 hereto. Such allocation is
------------
intended to comply with the requirements of Section 1060 of the Code. Seller
and Purchaser shall file Form 8594 with their respective Tax Returns
consistently with such allocation. Purchaser and Seller shall treat and report
the transaction contemplated by this Agreement in all respects consistently for
purposes of any federal, state or local tax, including, without limitation, the
calculation of gain, loss and basis with reference to the Purchase Price
allocation made pursuant to this Section 2.2. The parties hereto shall not take
-----------
any actions or positions inconsistent with the obligations set forth herein.
2.3 Manner of Payments. All payments required by this Section 2 shall be
------------------ ---------
by wire transfer of same day funds to an account designated by the party
entitled to payment.
2.4 Procedures for Assets not Transferable. If any of the contracts or
--------------------------------------
agreements or any other property or rights included in the Acquired Assets are
not assignable or transferable without the consent of a third party, Seller
shall diligently use its best efforts to obtain such consents prior to the
Closing Date and Purchaser shall use commercially reasonable efforts to assist
in that endeavor. If any such consent cannot be obtained prior to the Closing
Date and the Closing occurs, this Agreement and the related instruments of
transfer shall not constitute an assignment or transfer thereof, and Purchaser
shall not assume Seller's obligations with respect thereto, but Seller shall
diligently use its best efforts to obtain such consent as soon as possible after
the Closing Date or otherwise obtain for Purchaser the practical benefit of such
property or rights and Purchaser shall use commercially reasonable efforts to
assist in that endeavor.
2.5 Cash Reconciliation. Purchaser is acquiring the Acquired Assets in
-------------------
consideration of there being included therein $375,251 in cash. After the
Closing, the parties will cooperate in good faith to diligently determine the
actual amount of cash included in the Acquired Assets (the "Cash Amount").
Seller, Principal and Shareholder will provide Purchaser with access to all
records
6
<PAGE>
requested by Purchaser to determine or verify the Cash Amount. On February 15,
1998 (a) Seller shall pay Purchaser the amount, if any, by which $375,251
exceeds the Cash Amount and (b) Purchaser shall pay Seller the amount, if any,
by which the Cash Amount exceeds $375,251. Any payment made under this Section
-------
2.5 will include interest at the rate of 5% per annum on the payment due,
- ---
accrued from the date hereof until the date paid. In determining the Cash
Amount, the following rules shall apply: (i) all cash received by Seller since
December 31, 1997 with respect to the Contract Receivables shall be excluded
from the Cash Amount, (ii) the amount of all accounts payable and other
obligations of Seller existing on December 31, 1997 and paid since December 31,
1997 shall be excluded from the Cash Amount and (iii) the amount of all ordinary
course accounts payable and payroll of the Business paid since December 31, 1997
shall be included in the Cash Amount.
SECTION 3. Representations and Warranties of Seller, Principal and Shareholder.
-------------------------------------------------------------------
Each of Seller, Principal and the Shareholder, all such parties being obligated
jointly and severally, represent and warrant to Purchaser as follows:
3.1 Due Incorporation. Seller is a corporation duly organized, validly
-----------------
existing and in good standing under the laws of Michigan with all requisite
corporate power and authority to own, lease and operate the Acquired Assets.
Seller is duly organized and in good standing as a foreign corporation
authorized to do business in each jurisdiction where the failure to be qualified
would have a material adverse effect on the Business or the Acquired Assets.
Principal and the Shareholder are the only shareholders of Seller.
3.2 Due Authorization. Seller, Principal and the Shareholder have full
-----------------
power and authority to enter into this Agreement and to carry out the
transactions contemplated herein. The execution, delivery and performance of
this Agreement has been duly authorized by all necessary corporate and
shareholder action on the part of Seller. This Agreement has been duly and
validly executed and delivered by Seller, Principal and the Shareholder, and
constitutes the legal, valid and binding obligation of each of them, enforceable
against each of them in accordance with its terms. The execution, delivery and
performance by Seller, Principal and the Shareholder of this Agreement and all
other instruments, agreements, certificates and documents contemplated hereby
(a) do not violate or constitute a default under any Applicable Law or any
Contract to which Seller or Principal is a party, or by which any of them or any
of the Acquired Assets are bound; and (b) will not result in the creation of any
Encumbrance upon the Acquired Assets, or permit the acceleration of the maturity
of the indebtedness of either Seller relating to, or indebtedness secured by,
the Acquired Assets. No notice to, filing with, authorization of, exemption by,
or consent of any person or entity is required in order for Seller, Principal or
the Shareholder to consummate the transactions contemplated hereby.
3.3 No Adverse Change. Since July 31, 1997, there has not been (a) any
-----------------
material adverse change in the financial condition, results of operations,
properties or prospects of the Business, (b) any material loss or damage or
other adverse change to any of the Acquired Assets; (c) any sale, transfer or
disposition of the Acquired Assets, other than sales of Inventory in the
ordinary course of business; (d) any Encumbrance placed on any of the Acquired
Assets; or (e) any changes in the accounting systems, policies or practices of
the Business.
7
<PAGE>
3.4 Title to and Condition of Assets. Seller has good and valid title to
--------------------------------
the Acquired Assets. At and as of the Closing, Seller shall convey the Acquired
Assets to Purchaser by bills of sale, documents of title and instruments of
assignment and transfer effective to vest in Purchaser good and valid record,
beneficial and marketable title to all of the Acquired Assets, free and clear of
any Encumbrance. The Acquired Assets and the Excluded Assets constitute all
assets necessary for the conduct of the Business. Schedule 3.4 sets forth the
------------
location of each unit of the Rental Inventory.
3.5 Taxes. All Taxes of Seller have been properly determined in
-----
accordance with applicable rules and regulations and have been timely paid in
full. Seller has duly and timely filed all Tax Returns of every nature required
to be filed by it, in every jurisdiction in which the same may have been so
required, and has paid all Taxes disclosed on such returns. All Taxes that
Seller is required by law to withhold or collect, including, without limitation,
sales and use taxes, and amounts required to be withheld for Taxes of employees,
have been duly withheld or collected and, to the extent required, have been paid
over to the proper governmental authorities.
3.6 Contracts. Schedule 3.6 is an accurate and complete list of all
--------- ------------
Customer Contracts. Seller has delivered to Purchaser true and complete copies
of each listed document.
3.7 No Defaults or Violations. Seller has not breached any provision of,
-------------------------
nor is in default under the terms of, any Contract to which it is a party or by
which it or the Acquired Assets is bound (including, without limitation, the
Purchase Orders, Customer Contracts and Other Contracts), and, to the knowledge
of Seller, no other party to any such Contract is in breach or default either in
the payment of money or any other material respect. Neither Seller, the
Acquired Assets nor the Business is in any violation or default of, or with
respect to, any Applicable Law, and no notice from any Governmental Authority
has been served upon Seller claiming any violation of any Applicable Law or
asserting any assessment or penalty which would have a material adverse effect
on the Acquired Assets. No condition or set of facts exists which, with notice,
lapse of time or both, would constitute a breach of the representations and
warranties in this Section 3.
---------
3.8 Certain Environmental Matters. Except as disclosed on Schedule 3.8
----------------------------- ------------
attached hereto: (a) Seller has obtained all Environmental Permits required or
desirable for the operation of the Business or the Acquired Assets and such
Environmental Permits are valid and in full force and effect; (b) neither the
Business, any of the Acquired Assets nor the Real Properties violate any
applicable Environmental Law or Environmental Permit in effect as of the date
hereof and no condition or event has occurred which, with notice, lapse of time
or both, would constitute any such violation; (c) neither the Seller nor any
other Person has stored or used any pollutants, contaminants or hazardous or
toxic wastes, substances or materials on or at the Real Properties; (d) Seller
has not received notice from any Person advising that any of the Real Properties
or Acquired Assets or the operation of the Business violates any Environmental
Law or any Environmental Permit or that Seller is responsible (or potentially
responsible) for the cleanup of any pollutants, contaminants or hazardous or
toxic wastes, substances or materials at, on or beneath the Real Properties or
at, on or beneath any land adjacent thereto or any other property and, to the
knowledge of Seller and Principal, no such notice is threatened; (e) Seller,
Principal and the Shareholder are not aware of any fact or circumstance that
would give rise to any claim, suit, proceeding or investigation related to the
manufacture, distribution, use, treatment, storage, disposal, discharge or
release of any industrial,
8
<PAGE>
toxic or hazardous substance or waste in connection with the Business, the
Acquired Assets or the Real Properties; (f) neither Seller nor any other Person
has buried, dumped, disposed, spilled or released any pollutants, contaminants
or hazardous or toxic wastes, substances or materials on, beneath or about the
Real Properties or any property adjacent thereto or any other property; (g) no
parcel of the Real Properties nor any land adjacent to any such parcel has been
used for the disposal, processing or treatment of waste or as a dump site; and
(h) no storage tanks are or have been on, at or under the Real Properties.
Seller has timely filed all reports required to be filed with respect to the
Real Properties, the Acquired Assets and the operation of the Business and has
generated and maintained all required data, documentation and records under any
applicable Environmental Laws and Environmental Permits with respect thereto.
3.9 Permits. Seller holds all of the Permits described on Schedule 3.9
------- ------------
attached hereto (each of which is in full force and effect), and no other
Permits are currently necessary for the lawful operation of the Business or the
Acquired Assets. Seller has not received notice of revocation or modification
of any Permit.
3.10 Litigation. There are no actions, suits, proceedings or
----------
governmental investigations pending or, to the knowledge of Seller, Principal
and the Shareholder, threatened against or affecting Seller, Principal, the
Business, any of the Acquired Assets, the Real Properties or relating to the
transactions contemplated by this Agreement. Seller is not subject to any
order, judgment, decree, stipulation or consent of or with any Governmental
Agency that has or may have a material adverse effect on the Acquired Assets or
the transactions contemplated by this Agreement.
3.11 Insurance Policies. Schedule 3.11 attached hereto contains an
------------------ -------------
accurate and complete list of all insurance carried by Seller with respect to
the Business and the Acquired Assets. No claims have been made against such
insurance in the three (3) year period prior to the date hereof. All such
insurance is in full force and effect and all premiums due to date have been
paid.
3.12 Customers. Schedule 3.12 contains a list of all Customers to which
--------- -------------
Seller has sold or leased units of the Rental Inventory or rendered services
during the past twelve (12) months. No customer listed thereon has, during the
past twelve (12) months, discontinued or materially limited its leases or
purchases from the Business. Seller has not received any notice or has any
knowledge that any customer intends to terminate or materially reduce its leases
or purchases from the Business in the future. There is no Customer or group of
related Customers who accounted for more than 5% of the revenues of the Business
during the past twelve (12) months. The Business is conducted from no location
other than the Real Properties.
3.13 Employee Benefit Plans and Employment Agreements.
------------------------------------------------
(a) Schedule 3.13 is a list of all employee contracts, and employee benefit
-------------
plans, programs, policies and arrangements (including all collective
bargaining, stock purchase, stock option, employment, compensation,
deferred compensation, pension, retirement, severance, termination,
separation, vacation, sickness, health, welfare and bonus plans,
arrangements, and agreements) whether or not such contracts, plans,
policies or arrangements constitute "employee benefit plans" within the
meaning of Section 3(3) of ERISA under or
9
<PAGE>
with respect to which Seller has any obligation or liability
that relates to the U.S. Business (collectively, the "SELLER'S PLANS").
(b) Seller has provided access to Purchaser of true and correct copies of
each of Seller's Plans and all contracts relating thereto, or to the
funding thereof, including, without limitation, all trust agreements,
insurance contracts, administration contracts, investment management
agreements, subscription and participation agreements, and recordkeeping
agreements, each as in effect on the date hereof, and an accurate
description of any Seller's Plans that are not in written form. To the
extent applicable, a true and correct copy of the most recent annual
report, actuarial report, summary plan description, and Internal Revenue
Service determination letter with respect to each of Seller's Plans has
been supplied to Purchaser by Seller and there have been no material
changes in the financial condition of any Seller's Plan from that stated in
the applicable annual reports and actuarial reports supplied.
(c) With respect to each of Seller's Plans and except as set forth on
Schedule 3.13
-------------
(i) no such Seller's Plan is a multiemployer plan (as defined in
Section 3(37) of ERISA) or is subject to title IV of ERISA;
(ii) to Seller's knowledge, each such Seller's Plan complies and has been
administered in form and in operation in all material respects with
all applicable requirements of law, including, to the extent
applicable, sections 401(a) and 501(a) of the Code; to Seller's
knowledge, no event has occurred which will or could cause any such
Seller's Plan to fail to comply with such requirements and there
have been no amendments to such plans which are employee benefit
pension plans (as defined in Section 3(2) of ERISA) which are not
the subject of a favorable determination letter issued with respect
thereto by the Internal Revenue Service;
(iii) to Seller's knowledge, there are no actions, suits or claims (other
than routine claims for benefits) pending or threatened involving
any such Seller's Plan or the assets thereof and no facts exist
which could give rise to any such actions, suits or claims (other
than routine claims for benefits);
(iv) to Seller's knowledge, there have been no "prohibited transactions"
(as described in section 406 of ERISA or section 4975 of the Code)
with respect to any of Seller's Plans and Seller has not engaged in
any prohibited transaction, which could reasonably be expected to
have a material adverse effect on Seller;
(v) Seller does not have any liability or contingent liability for
providing, under any of Seller's Plans or otherwise, any post-
retirement medical or life insurance benefits, other than statutory
liability for providing group health plan continuation coverage
under Part 6 of Title I of ERISA and
10
<PAGE>
Section 4980B of the Code, which could reasonably be expected to have
a material adverse effect on Seller; and
(vi) there have been no acts or omissions by Seller which have given rise
to or may give rise to fines, penalties, taxes or related charges
under section 502 of ERISA or Chapters 43, 47, 68 or 100 of the Code
for which Purchaser may be liable on account of the execution of this
Agreement or the consummation of the transaction contemplated hereby,
which could reasonably be expected to have a material adverse effect
on Seller.
3.14 Employees. Schedule 3.14 contains a true, complete and
--------- -------------
accurate list of the names, titles, annual compensation and all current bonuses
for each employee of the Seller who has an annual base salary of $25,000 or
more. Except as disclosed on Schedule 3.14, there is no, and during the past
-------------
two years there has been no, labor strike, picketing, dispute, slow-down, work
stoppage, union organization effort, grievance filing or proceeding, or other
labor difficulty actually pending or threatened against or involving Seller.
Except as set forth in Schedule 3.14 Seller is not a party to any collective
-------------
bargaining agreement pertaining to the conduct of the Business and no such
agreement determines the terms and conditions of the employment of employees of
the Business. Except as set forth in Schedule 3.14 no collective bargaining
-------------
agent has been certified as a representative of any of employees of the Business
and no representation campaign or election is now in progress with respect to
any employees of the Business. Seller is in compliance with its obligations, if
any, pursuant to the Worker Adjustment and Retraining Notification Act of 1988
("WARN ACT") and all other obligations, if any, arising under any other
applicable Law relating to the termination of employees of the Business. Except
as set forth on Schedule 3.14, Seller has not received notice that any key
-------------
employee of the Business intends to terminate his employment with Seller or
would not be willing to work for Purchaser.
3.15 Seller's Warranties. Schedule 3.15 contains a list of each
------------------- -------------
express warranty, if any, given by Seller on goods sold or leased or services
performed by Seller, that is outstanding on the Closing Date. Seller has
furnished Purchaser with a true and complete copy of each such warranty.
3.16 Manufacturers' Warranties. Schedule 3.16 contains a list of
------------------------- -------------
each express warranty, if any, given by any manufacturer with respect to any of
the Acquired Assets, that is outstanding on the Closing Date. Seller has
furnished Purchaser with a true and complete copy of each such warranty and each
such warranty shall be assigned to Purchaser at Closing, at no additional cost
to Purchaser.
3.17 Brokers. The Charter Group has acted for Seller in
-------
connection with this Agreement and the transactions contemplated hereby and
Seller is solely responsible for payment of any and all brokerage and/or
finder's fees.
3.18 No Other Agreement. Neither Seller nor Principal has any
------------------
contract, agreement, arrangement or understanding with respect to the sale or
other disposition of any of the Acquired Assets or capital stock of either
Seller, except as set forth in this Agreement.
11
<PAGE>
3.19 Contract Receivables. Except as disclosed on Schedule 3.19,
-------------------- -------------
(a) each Contract Receivable represents a sale or lease transaction made in the
ordinary course of business and which arose pursuant to an enforceable written
contract for a bona fide sale or purchase of goods or for services performed,
and Seller has performed all of its obligations to which such Contract
Receivable relates, and (b) no Contract Receivable is subject to any claim for
reduction, counterclaim, set-off, recoupment or other claim for credit,
allowances or adjustments by the obligor thereof and no obligor thereof is
subject to bankruptcy or similar proceedings. Seller is the sole owner of the
Contract Receivables, and no other person or entity has any right or claim
thereto.
3.20 Value of Inventory. The cost value (i.e. original acquisition
------------------
cost) to the Purchaser of the Rental Inventory and the Inventory is at least
$4,100,000.
3.21 DBE Contracts. Certain of Seller's contracts have been awarded to
-------------
it because Seller qualifies as a disadvantaged business enterprise ("DBE") under
Michigan law. These contracts may not be assignable to Purchaser. No
receivables due under such contracts are included in the Acquired Assets (rather
all such receivables are included in the Contract Receivables). The total
billings remaining for work to be performed under the contracts awarded to
Seller because of its status as a DBE under Michigan law or regulation, or any
similar status awarded to Seller pursuant to any municipal or Federal law or
regulation, does not exceed $750,000.
3.22 Accuracy of Statements. Neither this Agreement nor any
----------------------
statement, list, certificate or other information furnished or to be furnished
by or on behalf of Seller or Principal to Purchaser in connection with this
Agreement or any of the transactions contemplated hereby contains any untrue
statement of a material fact regarding Seller, Principal, the Acquired Assets or
the Business or omits to state a material fact necessary to make the statements
regarding Seller, Principal, the Acquired Assets or the Business contained
herein or therein, in light of the circumstances in which they are made, not
misleading.
Each of the foregoing representations and warranties shall be deemed remade by
Seller and Principal, jointly and severally, on the Closing Date. No
investigation or due diligence by Purchaser shall limit, modify or negate any of
the foregoing representations and warranties.
SECTION 4. Representations and Warranties of Purchaser.
-------------------------------------------
Purchaser represents and warrants to Seller and Principal as follows:
4.1 Due Incorporation. Purchaser is a corporation duly organized,
-----------------
validly existing and in good standing under the laws of the State of Delaware
with all requisite corporate power and authority to own, lease and operate its
properties and to carry on its business as now being conducted.
4.2 Due Authorization. Purchaser has full power and authority to
-----------------
enter into this Agreement and to carry out its obligations under this Agreement.
The execution, delivery and performance of this Agreement by Purchaser has been
duly authorized by all necessary corporate action on the part of Purchaser.
This Agreement has been duly executed and delivered by Purchaser and constitutes
the legal, valid and binding obligation of Purchaser, enforceable against
Purchaser
12
<PAGE>
in accordance with its terms. The execution and delivery of this Agreement does
not, and the consummation of the transactions contemplated hereby will not,
violate or constitute a default under any Applicable Law or any Contract to
which Purchaser is a party. Except as set forth on Schedule 4.2, no notice to,
------------
filing with, authorization of, exemption by or consent of any person or entity
is required in order for Purchaser to consummate the transactions contemplated
hereby, except as shall have been obtained on or prior to the Closing Date.
Each of the foregoing representations and warranties shall be deemed remade by
Purchaser on the Closing Date.
SECTION 5. Covenants of Seller and Principal.
---------------------------------
Seller and Principal each agree that from the date hereof to the Closing
Date:
5.1 Implementing Agreement. Seller and Principal shall each take
----------------------
all necessary action to fulfill their respective obligations under this
Agreement and to consummate the transactions contemplated herein.
5.2 Access to Information. Seller and Principal shall each ensure
---------------------
Purchaser and Purchaser's representatives access during normal business hours to
all the Acquired Assets (wherever located) and the facilities, properties,
books, contracts, commitments and records of Seller. Seller's officers and
employees shall be available as Purchaser shall reasonably request. Purchaser
and its representatives shall be furnished with information concerning the
Business as Purchaser shall reasonably request.
5.3 Ordinary Course. Seller shall (a) operate the Business only
---------------
in the usual, regular and ordinary course and manner consistent with past custom
and practice, (b) not incur any indebtedness other than to finance its working
capital needs in the ordinary course of business, (c) pay all accounts payable,
purchase inventory, collect all accounts receivable, and make capital
expenditures in the ordinary course of business consistent with past custom and
practice, (d) use its best efforts to maintain its business and employees,
customers, assets and operations as an ongoing business in accordance with past
custom and practice,(e) not pay dividends or bonuses or grant any increases in
compensation to any employees or to Principal or Shareholder or make any
distributions with respect to its capital stock, and (f) not enter into any
agreements with respect to the foregoing.
5.4 Consents and Approvals. At its own cost, Seller shall make
----------------------
all filings, applications, statements and reports to all Governmental
Authorities that are required to be made prior to the Closing Date pursuant to
any Applicable Law in connection with this Agreement and the transactions
contemplated hereby. Seller shall use its best efforts to obtain all necessary
consents and approvals to consummate the transactions contemplated hereby.
5.5 Compliance with Laws. Seller shall duly comply with all
--------------------
Applicable Laws.
5.6 No Modifications. Seller shall not modify, amend or otherwise
----------------
alter or change any of the material terms or provisions of any Purchase Orders,
Customer Contracts or Other Contracts.
5.7 Approval of Certain Contracts. Without the prior consent of
-----------------------------
Purchaser, neither Seller shall enter into any new contract relating to or
binding the Acquired Assets.
13
<PAGE>
5.8 Bulk Sale Notices. Seller shall assist Purchaser in the
-----------------
preparation and delivery of any notices required by any Bulk Sales Law in
connection with the transactions contemplated by this Agreement.
SECTION 6. Covenants of Purchaser.
----------------------
Purchaser agrees that, from the date hereof to the Closing Date Purchaser
shall make all filings, applications, statements and reports to all Governmental
Authorities that are required to be made prior to the Closing Date by or on
behalf of Purchaser pursuant to any applicable statute, rule or regulation in
connection with this Agreement and the transactions contemplated hereby.
Purchaser shall use its reasonable commercial efforts to obtain all necessary
consents and approvals to consummate and the transactions contemplated hereby.
SECTION 7. Purchaser's Conditions Precedent.
--------------------------------
The obligations of Purchaser under Section 2 of this Agreement are, at
---------
the option of Purchaser, subject to satisfaction of the following conditions
precedent on or before the Closing Date (any of which may be waived by
Purchaser):
7.1 Warranties True as of Both Present Date and Closing Date. The
--------------------------------------------------------
representations and warranties of Seller, Principal and Shareholder contained
herein shall be true on and as of the date of this Agreement, and shall also be
true on and as of the Closing Date with the same force and effect as though made
on and as of the Closing Date.
7.2 Compliance with Agreements and Covenants; Certificate.
-----------------------------------------------------
Seller, Principal and Shareholder shall have performed all of their respective
obligations and agreements and complied with all of their respective covenants
contained in this Agreement required to be performed and complied with on or
prior to the Closing Date; and shall have delivered to Purchaser a certificate,
dated as of the Closing Date, signed by Principal and an executive officer of
Seller, certifying compliance with Section 7.1 and this Section 7.2.
----------- -----------
7.3 Consents and Approvals. Consents and approvals in writing
----------------------
reasonably satisfactory to Purchaser shall have been received by Seller from (a)
each party to any of the Assumed Obligations whose consent and approval is
required for the transfer and assignment to Purchaser of such Assumed
Obligations, (b) any governmental authority whose consent and approval is
required for the consummation of the transactions contemplated hereby,
including, without limitation the transfer and assignment of the Permits to
Purchaser, and (c) any lenders, lessors or other persons whose consent or
approval is required for the consummation of the transactions contemplated
hereby.
7.4 No Material Change. Neither the Business, the results of
------------------
operations thereof or the properties or prospects thereof, nor any of the
Acquired Assets shall have been materially and adversely affected as of the
Closing Date in any way and no event shall have occurred which, in the judgment
of Purchaser, may have a material adverse effect on the Business or the
prospects thereof.
14
<PAGE>
7.5 Actions or Proceedings. No action, proceeding or claim shall
----------------------
have been instituted or threatened which would enjoin, restrain or prohibit, or
might result in damages in respect of, and no court order shall have been
entered which enjoins, restrains or prohibits, the consummation of the
transactions contemplated by this Agreement.
7.6 Due Diligence Review. Purchaser and its employees, agents,
--------------------
investment advisors and accounting and legal representatives shall have
completed their business and legal due diligence review of Seller and all
aspects of the Business and the Acquired Assets, and the results of such review
shall be satisfactory to Purchaser in its sole discretion.
7.7 Release of Encumbrances on Acquired Assets. All Encumbrances
------------------------------------------
on the Acquired Assets shall have been released and Seller shall have delivered
evidence thereof acceptable to Purchaser in its sole discretion.
7.8 Opinion of Counsel. Purchaser shall have received an opinion,
------------------
dated the Closing Date, of Rhoades, McKee, Boar, Goodrich and Titta, counsel for
Seller, addressing the matters at the second and third sentences of Section 3.2.
-----------
7.9 Seller's Authority Documents. Seller shall have delivered to
----------------------------
Purchaser: (a) a copy of the certificate of incorporation of Seller certified
as of a recent date by the Michigan Department of Consumer and Industry Services
Corporation, Securities and Land Development Bureau, (b) a copy of the by-laws
of Seller, certified as of the Closing Date by the Secretary of Seller as true
and complete; and (c) a certificate of the Secretary of Seller, dated the
Closing Date, certifying a copy of the resolutions duly adopted by the Board of
Directors and the Shareholder approving this Agreement and the transactions
contemplated hereby as true and complete, as not having been amended or
supplemented and as being in full force and effect on the Closing Date.
7.10 Approvals. The Board of Directors of Purchaser shall have
---------
approved the transactions contemplated by this Agreement.
7.11 Lease of Real Properties. Principal and Shareholder shall
------------------------
have executed and delivered to Purchaser the lease, in the form of Exhibit A-1
-----------
attached hereto, of the Real Properties owned by Seller or its affiliates and
Seller and the appropriate lessor shall have executed and delivered assignment
and consent documents in the form of Exhibit A-2 for the assignment of the
-----------
leases for those Real Properties not owned by Seller or its affiliates.
7.12 Employment Agreement. Purchaser and Principal shall have entered
--------------------
into an Employment Agreement in the form of Exhibit B attached hereto.
----------
7.13 Covenants Not to Compete. Purchaser and Dan Babcock and Purchaser
------------------------
and Kathy Babcock shall have entered into the Management Non-Competition
Agreements.
7.14 Satisfaction of Liabilities. All liabilities and obligations of
---------------------------
the Seller, Principal or Shareholder (other than Assumed Obligations) shall have
been paid in full and Seller shall provide evidence reasonably satisfactory to
Purchaser of such satisfaction.
15
<PAGE>
7.15 Other Documents and Agreements. Purchaser shall have
------------------------------
received from Seller appropriate bills of sale and instruments of assignment and
such other documents and agreements necessary to convey the Acquired Assets to
Purchaser in accordance with the terms of this Agreement in such forms as are
reasonably satisfactory to Purchaser and its counsel. Purchaser shall have
received from Seller title certificates for each vehicle or other certificated
asset included within the Acquired Assets and executed originals or duplicate
originals of each Purchase Order and Customer Contract.
SECTION 8. Seller's Conditions Precedent.
-----------------------------
The obligations of Seller and Principal under Section 2 of this Agreement
---------
are, at the option of Seller, subject to the satisfaction of the following
conditions precedent on or before the Closing Date:
8.1 Warranties True as of Both Present Date and Closing Date. The
--------------------------------------------------------
representations and warranties of Purchaser contained herein shall be true on
and as of the date of this Agreement, and shall also be true on and as of the
Closing Date with the same force and effect as though made by Purchaser on and
as of the Closing Date.
8.2 Compliance with Agreements and Covenants; Certificate. Purchaser
-----------------------------------------------------
shall have performed all obligations and agreements and complied with all
covenants contained in this Agreement to be performed and complied with on or
prior to the Closing Date; and Purchaser shall have delivered to Seller and
Principal a certificate, dated as of the Closing Date, of an executive officer
of Purchaser, certifying compliance with Section 8.1 and this Section 8.2.
----------- -----------
8.3 Actions or Proceedings. No action, proceeding or claim shall
----------------------
have been instituted or threatened which would enjoin, restrain or prohibit, or
might result in substantial damages in respect of, and no court order shall have
been entered which enjoins, restrains or prohibits, the consummation of the
transactions contemplated by this Agreement.
8.4 Opinion of Counsel. Seller shall have received an opinion,
------------------
dated the Closing Date, of Mayer, Brown & Platt, counsel for Purchaser,
addressing the matters at the second and third sentences of Section 4.2.
-----------
8.5 Closing Deliveries. Purchaser shall deliver to Seller
------------------
appropriate instruments of assumption and other documents necessary to assume
the Assumed Obligations in accordance with the terms of this Agreement in such
forms as are reasonably satisfactory to Seller and their counsel.
SECTION 9. Employees and Benefits.
----------------------
Purchaser shall be under no obligation to hire any of the employees of
Seller and shall not assume any obligations with respect to such employees,
including, without limitation, any obligations for employment compensation,
benefits or severance.
SECTION 10. Closing.
-------
16
<PAGE>
The Closing shall take place at the offices of Mayer, Brown & Platt, 190
South LaSalle Street, Chicago, Illinois at 10:00 A.M. on February 4, 1998, or at
such other place or on such later date to which the parties hereto shall agree.
SECTION 11. Termination.
-----------
This Agreement may be terminated as follows: (a) with the mutual consent
of Seller and Purchaser; (b) by Purchaser, if any of the conditions provided in
Section 7 shall not have been satisfied on or prior to the date specified for
- ---------
fulfillment thereof and the Closing shall not have occurred, and Purchaser shall
not have waived, in writing, such failure of satisfaction; (c) by Seller, if any
of the conditions provided in Section 8 shall not have been satisfied on or
---------
prior to the date specified for fulfillment thereof and the Closing shall not
have occurred, and Seller shall not have waived, in writing, such failure of
satisfaction; or (d) on February 6, 1998, if the Closing shall not have taken
place before such date. In the event of any termination pursuant to this
Section 11 (other than pursuant to clause (a) or (d) above), written notice
- ----------
setting forth the reasons thereof shall forthwith be given by Purchaser, if it
is the terminating party, to Seller, or by Seller, if they are the terminating
party, to Purchaser. No termination of this Agreement shall relive a party from
any breach of this Agreement by it prior to the termination.
17
<PAGE>
SECTION 12. Survival and Indemnification.
----------------------------
12.1 Survival. The representations and warranties of the parties
--------
hereto contained herein or in any other certificate or other writing delivered
pursuant hereto shall survive the Closing for a period of two years, except for
the representations and warranties contained in Sections 3.1, 3.2, 3.4 and 3.8
------------------------------
which shall not expire and the representations and warranties contained in
Section 3.5 which shall survive the Closing for the applicable statute of
- -----------
limitations period plus 90 days.
12.2 Indemnification by Seller, Principal and Shareholder.
----------------------------------------------------
Seller, Principal and the Shareholder, all such parties being obligated jointly
and severally, agree to indemnify Purchaser and each of its affiliates against,
and agree to hold it and them harmless from, any Losses incurred or suffered by
Purchaser or any of its affiliates arising out of any of the following: (a) any
breach of or inaccuracy in any representation or warranty made by either Seller,
Principal or the Shareholder pursuant to this Agreement, and any breach of or
failure by Seller or Principal to perform any covenant or obligation of either
Seller or Principal set out in this Agreement; (b) any debt, claim, obligation
or other liability of Seller or any of its affiliates other than the Assumed
Obligations; (c) any claim relating to the Business or any of the Acquired
Assets (including, without limitation, any claim based in warranty, contract,
tort or strict liability) arising from events occurring on or before the Closing
Date; (d) any claim (i) by any Tax Authority regarding any Taxes incurred on or
prior to the Closing Date in connection with the Business or the Acquired Assets
or (ii) pursuant to the Bulk Sales Laws of any jurisdiction regarding
transactions contemplated by this Agreement; (e) any obligation or other
liability with respect to any violation by Principal or Seller of any Applicable
Law in effect on the date hereof or any condition existing on the Real
Properties on the date hereof; (f) any claims by or liabilities with respect to
any employee of any Seller regarding his or her employment or termination of
employment with Seller; or (g) for the period until the third anniversary of the
Closing, any claim asserted by a third party against Purchaser arising out of,
or liability incurred by Purchaser to a third party due to, Purchaser's status
as Seller's agent pursuant to Section 12.7 below (other than due to Purchaser's
------------
gross negligence or wilful misconduct).
12.3 Indemnification by Purchaser. Purchaser agrees to indemnify
----------------------------
Seller, Principal and each of their respective Affiliates against, and agrees to
hold it and them harmless from, any Losses incurred or suffered by Seller,
Principal or any of their respective Affiliates arising out of any of the
following: (a) any breach of or any inaccuracy in any representation or
warranty made by Purchaser pursuant to this Agreement, and any breach of or
failure by Purchaser to perform any covenant or obligation of Purchaser set out
in this Agreement; (b) the Assumed Obligations; or (c) the use or ownership of
any of the Acquired Assets after the Closing Date to the extent such Losses
arise in connection with and relate to periods commencing after the Closing
Date.
12.4 Notice of Claims; Assumption of Defense. The indemnified
---------------------------------------
party shall give prompt notice to the indemnifying party, in accordance with the
terms of Section 14.2, of the assertion of any claim, or the commencement of any
------------
suit, action or proceeding in respect of which indemnity may be sought
hereunder, specifying with reasonable particularity the basis therefor and
giving the indemnifying party such information with respect thereto as the
indemnifying party may reasonably request (but the giving of such notice shall
not be a condition precedent to indemnification hereunder). The indemnifying
party may, at its own expense, (a) participate in and (b) upon notice to the
indemnified party and the indemnifying party's written agreement that the
indemnified party
18
<PAGE>
is entitled to indemnification pursuant to Section 12.2 or Section 12.3 for
------------ ------------
Losses arising out of such claim, suit, action or proceeding, at any time during
the course of any such claim, suit, action or proceeding, assume the defense
thereof; provided that (y) the indemnifying party's counsel is reasonably
--------
satisfactory to the indemnified party and (z) the indemnifying party shall
thereafter consult with the indemnified party upon the indemnified party's
reasonable request for such consultation from time to time with respect to such
claim, suit, action or proceeding. If the indemnifying party assumes such
defense, the indemnified party shall have the right (but not the duty) to
participate in the defense thereof and to employ counsel, at its own expense,
separate from the counsel employed by the indemnifying party. Whether or not
the indemnifying party chooses to defend or prosecute any such claim, suit,
action or proceeding, all of the parties hereto shall cooperate in the defense
or prosecution thereof.
12.5 Settlement or Compromise. Any settlement or compromise made
------------------------
or caused to be made by the indemnified party or the indemnifying party, as the
case may be, of any such claim, suit, action or proceeding of the kind referred
to in Section 12.4 shall also be binding upon the indemnifying party or the
------------
indemnified party, as the case may be, in the same manner as if a final judgment
or decree had been entered by a court of competent jurisdiction in the amount of
such settlement or compromise. No party shall settle or compromise any claim,
suit, action or proceeding without the prior written consent of the other party,
which shall not be unreasonably withheld.
12.6 Failure of Indemnifying Party to Act. In the event that the
------------------------------------
indemnifying party elects not to assume the defense of any claim, suit, action
or proceeding, such election shall not relieve the indemnifying party of its
obligations hereunder.
12.7 Contract Receivables. To secure the indemnity obligations of
--------------------
Seller, Principal and Shareholder, Seller wishes to grant Purchaser a right of
offset against the Contract Receivables. Seller hereby irrevocably appoints
Purchaser as Seller's exclusive agent with respect to the Contract Receivables
with full power and authority to receive, endorse, accept, negotiate, deposit,
realize upon and take all other actions with respect to the Contract Receivables
or payments made on the Contract Receivables as could be taken by Seller
(including, without limitation, endorsement of checks or money orders on behalf
of Seller). Purchaser will bear all costs incurred in collecting the Contract
Receivables, except any costs involved in hiring a collection agency or
attorneys to collect the Contract Receivables (including any costs of litigation
related thereto) all of which cost will be borne by Seller. Seller shall
promptly notify the account debtors on the Contract Receivables of Purchaser's
role as Seller's agent and that all payments are to be made to Purchaser as
agent for Seller. Seller shall take all actions to encourage the account
debtors to make payment on the Contract Receivables as soon as possible.
Purchaser shall keep a record of, and remit to Seller, at least once every seven
(7) days, all payments received on the Contract Receivables, less amounts
withheld by Purchaser for claims asserted or reasonably anticipated to be
asserted under Section 12.2 above; provided that the Purchaser will withhold any
------------
amounts collected if the amount of Contract Receivables which arose during the
prior 24 months which remains to be collected is less than $1 million. The
agency and authority of Purchaser to act on Seller's behalf will terminate on
the 130th day following the Closing Date.
The parties shall cooperate and take all actions requested by either
party to further effect or evidence this Section 12.7, including, without
------------
limitation, the execution and delivery of additional
19
<PAGE>
documents, instruments, notices or appointments. Seller acknowledges that
Purchaser is agreeing to this Section 12.7 in lieu of requiring a holdback from
------------
the Purchase Price and that PURCHASER HAS MADE, AND MAKES, NO REPRESENTATIONS OR
WARRANTIES, EXPRESS OR IMPLIED, AS TO ITS ABILITY TO ACT AS SELLER'S AGENT.
SELLER HEREBY EXPRESSLY WAIVES THE RIGHT TO MAKE ANY CLAIM (OF ANY NATURE)
AGAINST PURCHASER WITH RESPECT TO ANY OF THE CONTRACT RECEIVABLES, OTHER THAN
ANY CLAIM THAT PURCHASER HAS WITHHELD REMITTANCE OF THE PROCEEDS OF A CONTRACT
RECEIVABLE IN VIOLATION OF THIS SECTION 12.7.
------------
SECTION 13. Non-Competition and Confidentiality Agreement.
----------------------------------------------
13.1 Non-Competition Agreement. For a period of five (5) years
-------------------------
after the Closing Date (the "Non-Competition Period"), Seller, Principal and the
Shareholder shall not, within a 250 mile radius of any of the Real Properties or
any location from which Purchaser or its affiliates conducts business on the
date hereof (the "Restricted Area"), directly or indirectly, own, control,
manage, participate in, assist, invest in or permit their names to be used by
any person or entity that engages in or owns, controls, manages, participates
in, assists or invests in any business substantially similar to the Business as
conducted at any time during the three (3) year period prior to the Closing Date
(the "Services"). Notwithstanding the foregoing, being a passive owner of not
more than 5% of the outstanding securities of any class of a publicly traded
entity engaged in the provision of the Services in the Restricted Area shall not
constitute a breach of this Section 13.1.
------------
13.2 Non-Solicitation. During the Non-Competition Period neither
---------------
Seller, Principal, any Shareholder nor any of their affiliates will, directly or
indirectly, offer employment to or hire any employee of Purchaser.
13.3 Confidentiality. Except as may be required by a governmental
---------------
authority, Seller and Principal shall keep confidential all non-public
information concerning the Acquired Assets and not disclose the same to any
other person or entity, or use the same in any way.
13.4 Maximum Duration, Scope. If, at the time of enforcement of
-----------------------
this Section 13, a court shall hold that the duration, scope, area or other
----------
restrictions stated herein are unreasonable under circumstances then existing,
the parties agree that the maximum duration, scope, area or other restrictions
reasonable under such circumstances shall be substituted for the stated
duration, scope, area or other restrictions and that the provision at issue be
revised, as of the date of this Agreement, to the minimum extent necessary to
effect such substitution.
13.5 Specific Performance. Each of Seller, Principal and the
--------------------
Shareholder agree that if any of them breach any of the provisions of this
Section 13, money damages would be inadequate and Purchaser would have no
- ----------
adequate remedy at law. Accordingly, each of Seller, Principal and the
Shareholder agree that Purchaser shall have the right, in addition to any other
rights and remedies existing in its favor, to an action for specific
performance, injunctive or other equitable relief in order to enforce or prevent
any violations (whether anticipatory, continuing or future) of the provisions of
this Section 13 without the necessity of proving actual damages or posting bond.
----------
In the event of a breach or violation of any of the provisions of this Section
-------
13, the running of the Non-Competition Period (but not of Seller's and
- --
Principal's obligations under this Section 13) shall be suspended with
----------
20
<PAGE>
respect to Seller and Principal during the continuance of any actual breach or
violation. In connection with Purchaser's application for such specific
performance, injunctive or other equitable relief, each of Seller, Principal and
the Shareholder hereby waive the claim or defense that Purchaser possesses an
adequate remedy at law or that bond must be posted.
SECTION 14. Miscellaneous.
-------------
14.1 Expenses. Each party hereto shall bear its own expenses with
--------
respect to this transaction. Seller shall pay all taxes required to be paid in
connection with the transfer and assignment of the Acquired Assets.
14.2 Notices. Any notice, request, instruction or other document
-------
to be given hereunder by a party hereto shall be in writing and shall be deemed
to have been given or delivered, (a) when received if given in person, (b) on
the date of transmission if sent by telex, telecopy or other wire transmission
(receipt confirmed), (c) one (1) day after being sent by reputable overnight
courier, or (d) three (3) days after being deposited in the U.S. mail, certified
or registered mail, postage prepaid. All notices shall be addressed as set forth
below.
If to Seller, Principal or Shareholder, addressed as follows:
Dan J. Babcock
311 Barber
Springlake, Michigan 49456
Facsimile: (616) _________
with a copy to:
Rhoades, McKee, Boer, Goodrich & Titta
161 Ottawa, Suite 600
Grand Rapids, Michigan 49503
Attn: Thomas Hogan
Facsimile: (616) 235-1639
If to Purchaser, addressed as follows:
NES Michigan Acquisition Corp.
1800 Sherman Avenue, Suite 100
Evanston, Illinois 60201
Attention: Kevin Rodgers
Facsimile: (847) 733-1078
with a copy to:
Mayer, Brown & Platt
190 South LaSalle Street
21
<PAGE>
Chicago, Illinois 60603
Attention: James J. Junewicz, Esq.
Facsimile: (312) 701-7711
or to such other individual or address as a party hereto may designate for
itself by notice given as herein provided.
14.3 Waivers. No waiver by a party of any condition or breach of any
-------
provision of this Agreement shall be effective unless in writing, and no waiver
in any one or more instances shall be deemed to be a further or continuing
waiver of any such condition or breach in other instances or a waiver of any
other condition or breach of any other provision.
14.4 Counterparts. This Agreement may be executed simultaneously in
------------
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
14.5 Construction. The Article and Section headings are for
------------
convenience only and shall not be deemed part of this Agreement. Each party and
its counsel have reviewed this Agreement. The language of this Agreement shall
be construed according to its fair meaning. Any rule of construction resolving
ambiguities against the drafting party shall not apply in the interpretation of
this Agreement.
14.6 Applicable Law. This Agreement shall be governed by and construed
--------------
and enforced in accordance with the internal laws, and not the laws of
conflicts, of the State of Illinois.
14.7 Assignment. This Agreement shall be binding upon and inure to the
----------
benefit of the parties hereto and their respective heirs, personal
representatives, successors and assigns; provided, however, that no assignment
-------- -------
shall be made hereof without the prior written consent of the non-assigning
party, except that Purchaser may assign its rights hereunder to any of its
affiliates or to any lender.
14.8 Other Instruments. After the Closing Date, each Seller shall
-----------------
execute and deliver to Purchaser such other documents, releases, assignments and
other instruments as may be reasonably required by Purchaser to further effect
the transfer and assignment to Purchaser of, and to vest fully in Purchaser
title to, each of the Acquired Assets.
14.9 Third Party Beneficiaries. This Agreement is not intended to
-------------------------
confer upon any person or entity, other than the parties hereto, any rights or
remedies hereunder.
14.10 Forum. Each party hereto agrees that any suit, action or
-----
proceeding brought by any party against any other party to this Agreement in
connection with or arising out of this Agreement shall be brought solely in the
Federal Courts of the Northern District of Illinois or, if such court lacks
jurisdiction, in the Circuit Court of Cook County, Illinois. Each party hereby
waives any defense or claim of lack of venue, lack of jurisdiction or forum non-
conveniens in connection with the foregoing.
22
<PAGE>
14.11 Records. After the Closing, Seller shall make available to
-------
Purchaser, as requested by Purchaser, its agents and representatives or any Tax
Authority or Governmental Authority, all information, records or documents
relating to the Business or the Acquired Assets and retained by Seller and shall
preserve all such information, records and documents until six years after the
Closing.
14.12 Entire Understanding. This Agreement sets forth the entire
--------------------
agreement and understanding of the parties hereto in respect to the transactions
contemplated hereby and supersedes all prior agreements, arrangements and
understandings relating to the subject matter hereof. This Agreement may be
amended, modified or supplemented only in writing signed by the parties hereto.
23
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed and delivered on the date first above written.
NES MICHIGAN ACQUISITION CORP.
By: /s/ Paul R. Ingersoll
----------------------------------------
Print Name: Paul R. Ingersoll
Print Title: Vice President
WORK SAFE SUPPLY CO., INC.
By: /s/ Kathy Babcock
----------------------------------------
Print Name: Kathy Babcock
Print Title: President
/s/ Dan J. Babcock
----------------------------------------------
DAN J. BABCOCK, individually
/s/ Kathy Babcock
-----------------------------------------------
KATHY BABCOCK, individually
24
<PAGE>
Exhibit 10.25
-------------
ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT is made as of March 2, 1998, by and
among The Modern Group, Inc., a Texas corporation (the "Seller"), the
------
stockholders of the Seller listed on the Schedule of Stockholders attached
------------------------
hereto (each a "Stockholder" and collectively, the "Stockholders"), Southeast
----------- ------------
Texas Intermediary, Inc., a Texas general business corporation (the
"Intermediary"), and NES Acquisition Corp., a Delaware corporation (the
------------
"Purchaser"). The Seller, the Stockholders, the Intermediary and the Purchaser
---------
are referred to herein collectively as the "Parties" and individually as a
-------
"Party."
-----
WHEREAS, the Stockholders own beneficially and of record 100% of the
issued and outstanding shares of capital stock of the Seller;
WHEREAS, the Seller, through its Dragon Rental Division (the
"Division"), is engaged directly and indirectly through a network of alliance
--------
partners in the business of renting tanks, containers, boxes, trailers and other
equipment of all kinds (the "Business"); and
--------
WHEREAS, upon the terms and subject to the conditions set forth in
this Agreement, the Purchaser desires to acquire from the Seller, and the Seller
desires to sell to the Purchaser, substantially all of the Seller's business,
assets and properties (operating as a going concern) constituting the Business.
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Parties, intending to be
legally bound, agree as follows:
ARTICLE I
DEFINITIONS
1.1 Definitions. For purposes hereof, the following terms, when used
-----------
herein with initial capital letters, shall have the respective meanings set
forth herein:
"Affiliate" of any Person means any other Person controlling,
---------
controlled by or under common control with such first Person, where "control"
-------
means the possession, directly or indirectly, of the power to direct the
management and policies of a Person whether through the ownership of voting
securities or otherwise.
"Affiliated Group" means an affiliated group as defined in Section
----------------
1504 of the Code (or any similar combined, consolidated or unitary group defined
under state, local or foreign income Tax law).
"Agreement" means this Asset Purchase Agreement, including all
---------
Exhibits and Schedules hereto, as it may be amended from time to time in
accordance with its terms.
<PAGE>
"Assignment" mean the Partial Assignment of Purchase Agreement for
----------
Exchange Property dated as of the date hereof by and between the Seller and the
Intermediary in the form of Exhibit A attached hereto.
---------
"Baseline Net Assets" means $14,600,000.
-------------------
"Business Day" means a day other than a Saturday, Sunday or other day
------------
on which commercial banks are authorized or required to close under the laws of
the United States.
"Cash" means cash, cash equivalents and marketable securities
----
(including, without limitation, all money market accounts, mutual fund accounts
and repurchase agreements).
"CERCLA" means the Comprehensive Environmental Response,
------
Compensation and Liability Act of 1980, as amended.
"Code" means the United States Internal Revenue Code of 1986,
----
as amended.
"Direct Conveyance Property" means all of the Acquired Assets other
--------------------------
than the Exchange Property.
"Environmental Affiliates" of any Person means, with respect to any
------------------------
particular matter, all other Persons whose liabilities or obligations with
respect to that particular matter have been assumed by, or are otherwise deemed
by law to be those of, such first Person.
"Environmental and Safety Requirements" means all federal, state,
-------------------------------------
local and foreign statutes, regulations, ordinances and similar provisions
having the force or effect of law, all judicial and administrative orders and
determinations, all contractual obligations and all common law concerning public
health and safety, worker health and safety and pollution or protection of the
environment, including all such standards of conduct and bases of obligations
relating to the presence, use, production, generation, handling, transport,
treatment, storage, disposal, distribution, labeling, testing, processing,
discharge, release, threatened release, control, or cleanup of any hazardous
materials, substances or wastes, chemical substances or mixtures, pesticides,
pollutants, contaminants, toxic chemicals, petroleum products or by-products,
asbestos, polychlorinated biphenyls (or PCBs), noise or radiation.
"Environmental Lien" means any Lien, whether recorded or unrecorded,
------------------
in favor of any governmental entity or any department, agency or political
subdivision thereof relating to any liability of the Seller, any Subsidiary or
any Stockholder or any Environmental Affiliate of the Seller, any Subsidiary or
any Stockholder arising under any Environmental and Safety Requirement.
"ERISA" means the Employee Retirement Income Security Act of 1974,
-----
as amended.
"Exchange Agreement" means the Exchange Agreement dated as of the date
------------------
hereof by and between the Seller and the Intermediary in the form of Exhibit B
---------
attached hereto.
-2-
<PAGE>
"Exchange Property" means those assets constituting part of the
-----------------
Acquired Assets and listed on Exhibit C attached hereto.
---------
"GAAP" means, at a given time, United States generally accepted
----
accounting principles, consistently applied.
"Indebtedness" of any Person means, without duplication: (a)
------------
indebtedness for borrowed money or for the deferred purchase price of property
or services in respect of which such Person is liable, contingently or
otherwise, as obligor or otherwise (other than trade payables and other current
liabilities incurred in the ordinary course of business) and any commitment by
which such Person assures a creditor against loss, including contingent
reimbursement obligations with respect to letters of credit; (b) indebtedness
guaranteed in any manner by such Person, including a guarantee in the form of an
agreement to repurchase or reimburse; and (c) obligations under capitalized
leases in respect of which such Person is liable, contingently or otherwise, as
obligor, guarantor or otherwise, or in respect of which obligations such Person
assures a creditor against loss.
"Insider" means, any officer, director, stockholder, partner or
-------
Affiliate, as applicable, of the Seller or any individual related by marriage or
adoption to any such individual or any entity in which any such Person owns any
beneficial interest.
"Knowledge," as used in this Agreement (i) with respect to a
---------
particular Stockholder which is a trust, shall include, without limitation, the
actual knowledge of the beneficiaries of such Stockholder and (ii) with respect
to the Seller, shall include, without limitation, the actual knowledge of Will
Crenshaw.
"Licenses" means all permits, licenses, franchises, certificates,
--------
approvals and other authorizations of foreign, federal, state and local
governments or other similar rights.
"Liens" means any mortgage, pledge, security interest, encumbrance,
-----
lien or charge of any kind (including, without limitation, any conditional sale
or other title retention agreement or lease in the nature thereof), any sale of
receivables with recourse against the Seller or any Affiliate, any filing or
agreement to file a financing statement as debtor under the Uniform Commercial
Code or any similar statute other than to reflect ownership by a third party of
property leased to the Seller or any of its Subsidiaries under a lease which is
not in the nature of a conditional sale or title retention agreement, or any
subordination arrangement in favor of another Person (other than any
subordination arising in the ordinary course of business).
"Loss" means, with respect to any Person, any diminution in value,
----
consequential or other damage, liability, demand, claim, action, cause of
action, cost, damage, deficiency, Tax, penalty, fine or other loss or expense,
whether or not arising out of a third party claim, including all interest,
penalties, reasonable attorneys' fees and expenses and all amounts paid or
incurred in connection with any action, demand, proceeding, investigation or
claim by any third party (including any governmental entity or any department,
agency or political subdivision thereof) against or affecting such Person or
which, if determined adversely to such Person, would give rise to, evidence the
existence of, or relate to, any other Loss and the investigation, defense or
settlement of any of the foregoing.
-3-
<PAGE>
"Material Adverse Effect" means any material adverse effect on the
-----------------------
business, financial condition, operations, results of operations, employee
relations, customer or supplier relations, assets or future prospects of the
Division.
"Net Assets" means (i) the book value of the Division's assets which
----------
are Acquired Assets, determined in accordance with GAAP, applied on a consistent
basis, minus (ii) the book value of the Specified Liabilities, determined in
-----
accordance with GAAP, applied on a consistent basis.
"Ordinary Course of Business" means the ordinary course of the
---------------------------
Business consistent with past practice (including, without limitation, with
respect to collection of accounts receivable, purchases of inventory and
supplies, repairs and maintenance, payment of accounts payable and accrued
expenses, levels of capital expenditures and operation of cash management
practices generally).
"Permitted Encumbrances" shall mean: (A) statutory liens for current
----------------------
taxes or other governmental charges with respect to the Real Property not yet
due and payable or the amount or validity of which is being contested; (B)
mechanics, carriers, workers, repairers and similar statutory liens arising or
incurred in the ordinary course of business for amounts which are not delinquent
and which could not, individually or in the aggregate, have a Material Adverse
Effect; (C) zoning, entitlement, building and other land use regulations imposed
by governmental agencies having jurisdiction over the Real Property which are
not violated by the current use and operation of the Real Property; and (D)
covenants, conditions, restrictions, easements and other matters of record
affecting title to the Real Property which do not unreasonably interfere with
the current use, occupancy, or value, or the marketability of title, of the Real
Property.
"Person" means an individual, a partnership, a corporation, an
------
association, a limited liability company, a joint stock company, a trust, a
joint venture, an unincorporated organization, a governmental entity or any
department, agency or political subdivision thereof and any other entity.
"Proprietary Rights" means all (i) patents, patent applications,
------------------
patent disclosures and inventions, (ii) trademarks, service marks, trade dress,
trade names, logos, internet domain names and corporate names and registrations
and applications for registration thereof together with all of the goodwill
associated therewith, (iii) copyrights (registered or unregistered) and
copyrightable works and registrations and applications for registration thereof,
(iv) mask works and registrations and applications for registration thereof, (v)
computer software, data, data bases and documentation thereof, (vi) trade
secrets and other confidential information (including, without limitation,
ideas, formulas, compositions, inventions (whether patentable or unpatentable
and whether or not reduced to practice), know-how, manufacturing and production
processes and techniques, research and development information, drawings,
specifications, designs, plans, proposals, technical data, copyrightable works,
financial and marketing plans and customer and supplier lists and information),
(vii) other intellectual property rights and (viii) copies and tangible
embodiments thereof (in whatever form or medium).
"Release" has the meaning set forth in CERCLA.
-------
-4-
<PAGE>
"Subsidiary" means, with respect to any Person, any corporation a
----------
majority of the total voting power of shares of stock of which is entitled
(without regard to the occurrence of any contingency) to vote in the election of
directors, managers or trustees thereof is at the time owned or controlled,
directly or indirectly, by that Person or one or more of the other Subsidiaries
of that Person or a combination thereof, or any partnership, limited liability
company, association or other business entity a majority of the partnership or
other similar ownership interest of which is at the time owned or controlled,
directly or indirectly, by that Person or one or more Subsidiaries of that
Person or a combination thereof. For purposes of this definition, a Person is
deemed to have a majority ownership interest in a partnership, limited liability
company, association or other business entity if such Person is allocated a
majority of the gains or losses of such partnership, limited liability company,
association or other business entity or is or controls the managing director or
general partner of such partnership, limited liability company, association or
other business entity.
"Tax Returns" means returns, declarations, reports, claims for refund,
-----------
information returns or other documents (including any related or supporting
schedules, statements or information) filed or required to be filed in
connection with the determination, assessment or collection of Taxes of any
party or the administration of any laws, regulations or administrative
requirements relating to any Taxes.
"Taxes" means any federal, state, local, or foreign income, gross
-----
receipts, license, payroll, employment, excise, severance, stamp, occupation,
premium, windfall profits, environmental, customs duties, capital stock,
franchise, profits, withholding, social security, unemployment, disability, real
property, personal property, sales, use, transfer, registration, value added,
alternative or add-on minimum, or other tax, fee, assessment or charge of any
kind whatsoever, including any interest, penalty, or addition thereto, whether
disputed or not.
"Transaction Documents" means this Agreement, and all other
---------------------
agreements, instruments, certificates and other documents to be entered into or
delivered by any Party in connection with the transactions contemplated to be
consummated pursuant to this Agreement.
"Treasury Regulations" means the United States Treasury Regulations
--------------------
promulgated pursuant to the Code.
1.2 OTHER DEFINITIONAL PROVISIONS.
-----------------------------
(a) Accounting Terms. Accounting terms which are not otherwise
----------------
defined in this Agreement have the meanings given to them under GAAP. To the
extent that the definition of accounting term that is defined in this Agreement
is inconsistent with the meaning of such term under GAAP, the definition set
forth in this Agreement will control.
(b) "Hereof," etc. The terms "hereof," "herein" and "hereunder" and
------------
terms of similar import are references to this Agreement as a whole and not to
any particular provision of this Agreement. Section, clause, Schedule and
Exhibit references contained in this Agreement are references to Sections,
clauses, Schedules and Exhibits in or to this Agreement, unless otherwise
specified.
-5-
<PAGE>
(c) Successor Laws. Any reference to any particular Code section or
--------------
any other law or regulation will be interpreted to include any revision of or
successor to that section regardless of how it is numbered or classified.
1.3 Cross Reference of Other Definitions. Each capitalized term
------------------------------------
listed below is defined in the corresponding Section of this Agreement:
Term Section
- ---- -------
Acquired Assets.................................................2.1(a)
Actual Net Assets...............................................2.2(b)
Agreement.......................................................Preface
Applicable Limitation Date......................................8.1
Assumed Liabilities.............................................2.1(c)
Beaumont Lease..................................................3.1(k)
Business........................................................Recitals
Cap.............................................................8.2(b)(ii)
Cash Purchase Price.............................................2.1(f)
Closing.........................................................2.3(a)
Closing Accounts Receivable.....................................2.4(a)
Closing Accounts Receivable Amount..............................2.4(a)
Closing Date....................................................2.3(a)
Closing Review..................................................2.2(b)
Closing Transactions............................................2.3(b)
COBRA...........................................................5.18(a)
Confidential Information........................................9.9(c)
Direct Conveyance Property Purchase Price.......................2.1(f)
Division........................................................Recitals
Division Employees..............................................9.10(a)
Draft Balance Sheet.............................................2.2(b)
Estimated Net Assets............................................2.2(a)
Excess Collections..............................................2.4(b)
Excluded Assets.................................................2.1(b)
Excluded Employees..............................................9.10(b)
Excluded Liabilities............................................2.1(d)
Financial Statements............................................5.6(a)
Firm............................................................2.2(b)
Holdback........................................................2.1(f)
HSR Act.........................................................3.1(f)
Improvements....................................................5.10(f)
Indemnified Party...............................................8.2(e)
Indemnifying Party..............................................8.2(e)
Intermediary....................................................Preface
Latest Balance Sheet............................................5.6(a)
Leased Real Property............................................5.10(b)
Leases..........................................................5.10(b)
Licenses........................................................5.16
-6-
<PAGE>
Term Section
- ---- -------
Noncompete Period...............................................9.9(a)(i)
Noncompeting Parties............................................9.9(a)(i)
Objection Notice................................................2.2(a)
Offshore Market.................................................9.9(a)(iii)
Owned Real Property.............................................5.10(a)
Party...........................................................Preface
Pending Claim...................................................2.5
Prime Rate......................................................2.2(c)
Purchase Price..................................................2.1(f)
Purchaser.......................................................Preface
Purchaser Parties...............................................8.2(a)
Real Property...................................................2.1(a)(v)
Real Property Permits...........................................5.10(g)
Real Property Law...............................................5.10(h)
Remaining Holdback..............................................2.5
Section 1031 Exchange...........................................2.1(e)
Seller..........................................................Preface
Seller Parties..................................................8.2(c)
Specified Liabilities...........................................2.1(c)(i)
Stipulated Exchange Price.......................................2.1(f)
Stockholder.....................................................Preface
Transfer Obligations............................................2.1(e)
Unassigned Contracts............................................9.13
Uncollected Receivables Amount..................................2.4(b)
ARTICLE II
PURCHASE AND SALE; ASSUMPTION OF CERTAIN LIABILITIES; CLOSING
2.1 Purchase and Sale.
-----------------
(a) Acquired Assets. Upon the terms and subject to the conditions
---------------
set forth in this Agreement, at the Closing the Seller shall sell, assign,
transfer and deliver to the Purchaser, and the Purchaser shall purchase, all
properties, assets, rights and interests of every kind and nature, whether
tangible or intangible, and wherever located and by whomever possessed, owned by
the Seller and related to the Business as of the Closing Date, except as set
forth in Section 2.1(b) below (collectively, the "Acquired Assets"), including,
---------------
without limitation (in each case, only to the extent related to the Business):
(i) all accounts and notes receivables (whether current or
noncurrent);
(ii) all Cash, securities and other investments;
(iii) all Proprietary Rights, along with all income,
royalties, damages and payments due or payable as of the Closing or
thereafter, including, without limitation, damages and payments for past,
present or future infringements or misappropriations thereof,
-7-
<PAGE>
the right to sue and recover for past infringements or misappropriations
thereof and any and all corresponding rights that, now or hereafter, may be
secured throughout the world (including, without limitation, the right to
continue using all logos and design marks registered by the Seller, to the
extent such logos and design marks are being used by the Division as of the
date hereof);
(iv) all of the Seller's rights existing under leases,
contracts, licenses, permits, distribution arrangements, sales and purchase
agreements, accounts receivable, other agreements and business
arrangements, including, without limitation, all contracts and agreements
described on the Contracts Schedule attached hereto;
------------------
(v) all real property owned or leased by the Seller
(provided that with respect to the real property located on Cardinal Drive
in Beaumont, Texas the Acquired Assets shall include only the leasehold
interest in such property as evidenced by the Beaumont Lease), and all
plants, buildings and other improvements located on such owned or leased
property, and all easements, licenses, rights of way, permits and all
appurtenances to such owned or leased property, including, without
limitation, all appurtenant rights in and to public streets, whether or not
vacated (collectively, the "Real Property");
-------------
(vi) all leasehold improvements and all machinery, equipment
(including all transportation and office equipment), fixtures, trade
fixtures, tools, dyes and furniture owned by the Seller wherever located,
including, without limitation, all such items which are located in any
building, warehouse, office or other space leased, owned or occupied by the
Seller or used in connection with the Real Property;
(vii) all rental equipment of any kind, wherever located,
rented by the Seller to any Person;
(viii) all inventories of work in process, semi-finished and
finished goods, stores, replacement and spare parts, packaging materials,
operating supplies, and fuels, owned by the Seller wherever located;
(ix) all office supplies, production supplies, spare parts,
other miscellaneous supplies, and other tangible property of any kind
wherever located, including, without limitation, all property of any kind
located in any building, office or other space leased, owned or occupied by
the Seller or in any warehouse where any of the Seller's properties and
assets may be situated (other than administrative software, equipment and
supplies located at 1655 Louisiana, Beaumont, Texas);
(x) all prepayments and prepaid expenses;
(xi) all of the Seller's claims, causes of action, choses in
action, rights of recovery and rights of set-off of any kind;
(xii) the right to receive and retain mail, accounts
receivable payments and other communications;
-8-
<PAGE>
(xiii) the right to bill and receive payment for products
shipped or delivered and services performed but unbilled or unpaid as of
the Closing;
(xiv) all lists, records and other information pertaining to
accounts, personnel and referral sources, all lists and records pertaining
to suppliers and customers; and all books, ledgers, files and business
records of every kind; whether evidenced in writing, electronically
(including, without limitation, by computer) or otherwise;
(xv) all advertising, marketing and promotional materials and
all other printed or written materials;
(xvi) all permits, licenses, certifications and approvals from
all permitting, licensing, accrediting and certifying agencies, and the
rights to all data and records held by such permitting, licensing and
certifying agencies;
(xvii) all telephone numbers (e.g. "800" numbers, other than
800-231-8198) used by the Seller;
(xviii) all goodwill as a going concern and all other
intangible properties;
(xix) the name "Dragon Rental" (and all derivatives thereof,
other than the name "Tiger Tanks by Dragon Products");
(xx) the assets listed on the "Additional Acquired Assets
--------------------------
Schedule," attached hereto; and
--------
(xxi) except as specified in Section 2.1(b) below, all other
property owned by the Seller, or in which it has an interest on the Closing
Date, including, without limitation, all fixed assets included on the
Latest Balance Sheet and any and all subsequent improvements or additions
thereon through the Closing Date.
(b) Excluded Assets. Notwithstanding Section 2.1(a) above, the
---------------
following assets are expressly excluded from the purchase and sale contemplated
hereby and, as such, are not Acquired Assets (collectively, the "Excluded
--------
Assets"):
- ------
(i) all monies to be received by the Seller from the
Purchaser in connection with the consummation of the transactions
contemplated by the Transaction Documents;
(ii) all rights of the Seller under this Agreement;
(iii) the assets listed on the "Excluded Assets Schedule,"
------------------------
attached hereto;
(iv) the telephone number 800-231-8198;
-9-
<PAGE>
(v) all logos and design marks registered by the Seller
except to the extent they use the words "Dragon Rental" (or any derivative
thereof) (provided that the Purchaser has the right to continue using such
logos and design marks to the extent they are being used by the Division as
of the date hereof);
(vi) the name "Tiger Tanks by Dragon Products";
(vii) the Seller's post office box in Beaumont, Texas;
(viii) all qualifications to do business as a foreign
corporation;
(ix) all arrangements with registered agents relating to
foreign qualifications;
(x) all taxpayer and other identification numbers; and
(xi) all seals, minute books, stock transfer books, blank
stock certificates, and other documents relating to the organization,
maintenance, and existence of the Seller as a corporation.
(c) Assumed Liabilities. Subject to Section 2.1(d) below, as
-------------------
additional consideration for the Acquired Assets, at the Closing the Purchaser
will assume the following liabilities and obligations of the Seller (the
"Assumed Liabilities"):
- --------------------
(i) all liabilities of the Division for accrued expenses
(other than accrued expenses relating to Indebtedness and income Taxes) and
non-interest bearing accounts payable relating to the ongoing operation of
the Division which are set forth on the face of the Latest Balance Sheet
(rather than in any notes thereto) or which are of the type set forth on
the face of the Latest Balance Sheet and incurred by the Division in the
Ordinary Course of Business since the date of the Latest Balance Sheet (the
"Specified Liabilities"); and
---------------------
(ii) all liabilities and obligations of the Division pursuant
to executory contracts, orders and commitments covering the purchase of
inventory and/or supplies or the sale or rental of merchandise or services
which are described on the attached Contracts Schedule.
------------------
(d) Excluded Liabilities. Except as set forth in Section 2.1(c)
--------------------
above, the Purchaser shall not assume or become liable for, and shall not be
deemed to have assumed or have become liable for, any of the Seller's
liabilities and obligations not expressly assumed by the Purchaser pursuant to
Section 2.1(c) above, whether accrued, absolute or contingent, whether known or
unknown, whether disclosed or undisclosed, whether due or to become due and
whether related to the Acquired Assets or otherwise, and regardless of when
asserted, including, without limitation, any liabilities or obligations arising
from or relating to the Acquired Assets or Seller's operation of the Business
prior to the Closing Date (the "Excluded Liabilities").
--------------------
-10-
<PAGE>
(e) Contemporaneously with the execution of this Agreement and
pursuant to the Assignment, the Seller has assigned to the Intermediary all of
the Seller's obligations to convey the Exchange Property to the Purchaser in
accordance with the provisions of this Agreement (the "Transfer Obligations").
--------------------
Pursuant to the Assignment, the Intermediary has agreed to receive title to the
Exchange Property and to assume and perform all Transfer Obligations with
respect thereto. In connection with the execution of the Exchange Agreement, the
Seller intends to cause the Exchange Property to be exchanged in a manner that
will qualify as a non-taxable deferred exchange under Section 1031 of the Code.
The transactions contemplated by the Assignment and by the Exchange Agreement
are collectively referred to herein as the "Section 1031 Exchange." The
---------------------
Purchaser hereby agrees to accept conveyance of the Exchange Property from the
Intermediary in satisfaction of the Seller's Transfer Obligations. The Seller
and the Stockholders hereby agree, stipulate, covenant and confirm that (i) the
Seller and the Stockholders shall remain fully liable and responsible for all
representations, warranties, covenants, agreements, indemnities and adjustments
contained in this Agreement with respect to the Exchange Property with like
effect and to the same extent as if the Section 1031 Exchange had not occurred,
(ii) the Purchaser's acceptance of the Exchange Property from the Intermediary
shall in no way affect, abrogate, limit, release or discharge the Seller and the
Stockholders from all or any of such representations, warranties, covenants,
agreements, indemnities and adjustments, and (iii) the Purchaser has not made,
and by acceptance of conveyance of the Exchange Property from the Intermediary
shall not be deemed to make, any representation or warranty regarding whether
the Section 1031 Exchange will constitute a non-taxable deferred exchange under
Section 1031 of the Code or with respect to the title, status, existence or
condition of any of the property acquired by the Seller or the Intermediary with
the Exchange Property.
(f) Purchase Price for Acquired Assets. The purchase price for the
----------------------------------
Acquired Assets (the "Purchase Price") will consist of the assumption by
--------------
Purchaser of the Assumed Liabilities and the payment of an aggregate of
$22,950,000 (as adjusted pursuant to Section 2.2 below), which shall be paid at
Closing as follows: (i) the Purchaser shall deliver $22,264,500 in cash (as
adjusted pursuant to Section 2.2 below) (the "Cash Purchase Price"), of which
-------------------
amount $18,747,570 shall be delivered to the Seller (the "Direct Conveyance
-----------------
Property Purchase Price") and $3,516,930 shall be delivered to the Intermediary
- -----------------------
(the "Stipulated Exchange Price") and (ii) the Purchaser shall maintain $685,500
-------------------------
in a book entry account of the Purchaser (the "Holdback"). The Holdback shall
--------
bear interest at the rate of 6% per annum, compounded monthly, which interest
amount shall be added to the Holdback, and become a part thereof. The Holdback
shall be available to satisfy any amounts owing to the Purchaser pursuant to
Section 2.2 (Purchase Price Adjustment), Section 2.4 (Accounts Receivable)
and/or Section 8.2 (Indemnification). The Purchase Price is subject to
adjustment pursuant to Section 2.2 hereof.
2.2 Purchase Price Adjustments.
--------------------------
(a) Closing Date Adjustments. At the Closing, the Purchase Price will
------------------------
be adjusted dollar-for-dollar as set forth in this Section 2.2(a).
(i) Net Assets. Not more than ten (10) Business Days, but
----------
in no event less than five (5) Business Days, before the Closing Date, the
Seller and the Purchaser will, in good faith and in accordance with the
GAAP, jointly estimate the Net Assets as of the close of business on the
day before the Closing Date on a reasonable basis using the Seller's
-11-
<PAGE>
then available financial information; provided, however, that if the
-------- -------
Seller and the Purchaser cannot agree on an estimate of the Net Assets,
such estimate will be deemed to be equal to the average of the Seller's and
the Purchaser's good faith determinations thereof. The amount of the Net
Assets as finally estimated pursuant to this Section 2.2(a), is referred
to herein as the "Estimated Net Assets." At the Closing, if the Estimated
--------------------
Net Assets is less than the Baseline Net Assets, then each of the Purchase
Price, the Cash Purchase Price and the Direct Conveyance Property Purchase
Price will be decreased by the amount of such deficiency, and if the
Estimated Net Assets is greater than the Baseline Net Assets, then each of
the Purchase Price, the Cash Purchase Price and the Direct Conveyance
Property Purchase Price will be increased by the amount of such excess.
(ii) Indebtedness. At the Closing, each of the Purchase
------------
Price, the Cash Purchase Price and the Direct Conveyance Property Purchase
Price will be decreased dollar-for-dollar by an amount equal to the amount
necessary to discharge fully the then outstanding balance of the Seller's
and its Subsidiaries' Indebtedness secured by any of the Acquired Assets
(including, without limitation, prepayment penalties and premiums).
(b) Post-Closing Determination. Within 90 days after the Closing
--------------------------
Date, the Purchaser and its auditors will conduct a review (the "Closing
-------
Review") of the Net Assets as of the close of business on the day before the
- ------
Closing Date and will prepare and deliver to the Seller a computation of the
amount of the Net Assets as of the close of business on the day before the
Closing Date (the "Draft Balance Sheet"). The Purchaser and its auditors will
-------------------
make available to the Seller and its auditors all records and work papers used
in preparing the Draft Balance Sheet. If the Seller disagrees with the
computation of the Net Assets reflected on the Draft Balance Sheet, the Seller
may, within thirty (30) days after receipt of the Draft Balance Sheet, deliver a
notice (an "Objection Notice") to the Purchaser setting forth the Seller's
----------------
calculation of the amount of the Net Assets as of the close of business on the
day before the Closing Date. The Purchaser and the Seller will use reasonable
best efforts to resolve any disagreements as to the computation of the Net
Assets, but if they do not obtain a final resolution within thirty (30) days
after the Purchaser has received the Objection Notice, the Purchaser and the
Seller will jointly retain an independent accounting firm of recognized national
or regional standing (the "Firm") to resolve any remaining disagreements. If the
----
Purchaser and the Seller are unable to agree on the choice of the Firm, then the
Firm will be a "big-six" accounting firm selected by lot (after excluding one
firm designated by the Purchaser and one firm designated by the Seller). The
Purchaser and the Seller will direct the Firm to render a determination within
30 days of its retention and the Purchaser, the Seller, the Stockholders and
their respective agents will cooperate with the Firm during its engagement. The
Firm will consider only those items and amounts in the Draft Balance Sheet set
forth in the Objection Notice which the Purchaser and the Seller are unable to
resolve. In resolving any disputed item, the Firm may not assign a value to any
item greater than the greatest value for such item claimed by either party or
less than the smallest value for such item claimed by either party. The Firm's
determination will be based solely on presentations by the Purchaser and the
Seller (i.e., not on independent review), and on the definition of Net Assets
included herein. The determination of the Firm will be conclusive and binding
upon the Purchaser, the Seller and the Stockholders. The Purchaser and the
Seller shall bear the costs and expenses of the Firm based on the percentage
which the portion of the contested amount not awarded to each party bears to the
amount actually contested by such party. The amount
-12-
<PAGE>
of the Net Assets, as finally determined pursuant to this Section 2.2(b), is
referred to herein as the "Actual Net Assets."
-----------------
(c) Post-Closing Adjustment.
-----------------------
(i) Payment by the Purchaser. If the Actual Net Assets is greater
------------------------
than the Estimated Net Assets, the Purchaser will, within five (5) Business
Days after the determination thereof, pay to the Seller an amount equal to
the sum of (A) the Actual Net Assets minus the Estimated Net Assets plus
----
(B) interest on such difference from the Closing Date to the date of
payment at an interest rate equal to the "Prime Rate" as listed in the Wall
Street Journal on the Closing Date (the "Prime Rate"). Such payment will
----------
be made by wire transfer or delivery of other immediately available funds.
(ii) Payment by the Stockholders. If the Actual Net Assets is less
---------------------------
than the Estimated Net Assets, the Purchaser shall be entitled to receive
from the Holdback, within five (5) business days after the determination
thereof, the amount equal to the sum of (A) the Estimated Net Assets minus
the Actual Net Assets plus (B) interest on such difference from the Closing
----
Date to the date of payment at an interest rate equal to the Prime Rate
(provided, however, that if the Holdback is less than the amount of such
sum of (A) and (B) above, the Seller shall pay to the Purchaser, within
five (5) business days after the determination of the Actual Net Assets,
the amount by which the Holdback is less than the amount of such sum of (A)
and (B) above, by wire transfer or delivery of other immediately available
funds).
(iii) Dispute. If, pursuant to Section 2.2(b) above, there is a
-------
dispute as to the final determination of the Actual Net Assets, the
Purchaser and the Seller shall promptly pay to the other, as appropriate,
such amounts as are not in dispute, pending final determination of such
dispute pursuant to Section 2.2(b).
2.3 Closing Transactions.
--------------------
(a) Closing. The closing of the transactions contemplated by
-------
this Agreement (the "Closing") shall take place at the offices of Kirkland &
-------
Ellis, 200 East Randolph Drive, Chicago, Illinois 60601, commencing at 10:00
a.m. on the Business Day following the satisfaction or waiver of all conditions
to the obligations of the Parties to consummate the transactions contemplated
hereby (other than conditions with respect to actions the respective Parties
will take at the Closing itself), or at such other place or on such other date
as may be mutually agreeable to the Purchaser and the Seller; provided that in
any event, if the Purchaser's senior lenders require that the Closing take place
at the offices of their attorneys, the Parties agree that the Closing shall take
place at such offices. The date and time of the Closing are herein referred to
as the "Closing Date."
------------
(b) Closing Transactions. Subject to the conditions set forth in
--------------------
this Agreement, the Parties shall consummate the following transactions (the
"Closing Transactions") on the Closing Date:
--------------------
(i) the Stockholders shall cause the Seller and the Intermediary,
respectively, to convey, and the Seller and the Intermediary, respectively,
shall convey to the Purchaser good
-13-
<PAGE>
and indefeasible title to the Direct Conveyance Property and the Exchange
Property, respectively, thereby transferring good and indefeasible title to
all of the Acquired Assets, free and clear of all Liens (other than
Permitted Encumbrances), and the Seller and the Intermediary shall deliver
to the Purchaser bills of sale, assignment of leases and contracts and all
other instruments of conveyance which are necessary or desirable to effect
transfer of the Direct Conveyance Property and the Exchange Property which
together constitute all of the Acquired Assets, all of which instruments
shall be in form and substance reasonably satisfactory to the Purchaser;
(ii) the Purchaser shall deliver to the Seller such instruments of
assumption as are required in order for the Purchaser to assume the Assumed
Liabilities;
(iii) the Purchaser shall repay, or cause to be repaid, on behalf of
the Seller and its Subsidiaries, all amounts necessary to discharge fully
the then outstanding balance of the Seller's and its Subsidiary's
Indebtedness secured by any of the Acquired Assets (including, without
limitation, prepayment penalties and premiums) by wire transfer of
immediately available funds as directed by the holders of such Indebtedness
at or prior to the Closing, and the Seller shall deliver to Purchaser all
appropriate payoff letters and shall make arrangements reasonably
satisfactory to Purchaser for such holders to deliver lien releases and
canceled notes at the Closing;
(iv) the Purchaser shall deliver to the Seller the Direct Conveyance
Property Purchase Price by wire transfer of immediately available funds;
(v) the Purchaser shall deliver to the Intermediary the Stipulated
Exchange Price by wire transfer of immediately available funds;
(vi) the Purchaser shall deliver to the Stockholders (in the manner
set forth on the Schedule of Stockholders) the amount set forth in Section
------------------------
9.9(a) by wire transfer of immediately available funds; and
(vii) the Seller, the Intermediary and the Purchaser, as applicable,
shall deliver the opinions, certificates and other documents and
instruments required to be delivered by or on behalf of such party under
Article III.
2.4 Accounts Receivable.
-------------------
(a) Within ten (10) days after the Closing, the Seller and the
Purchaser shall jointly prepare a list of the accounts receivable of the Seller
relating to the Business in existence as of the close of business on the day
before the Closing Date (collectively, the "Closing Accounts Receivable"). The
---------------------------
amount of such listed Closing Accounts Receivable is referred to herein as the
"Closing Accounts Receivable Amount."
- -----------------------------------
(b) If collections by the Purchaser with respect to the Closing
Accounts Receivable during the 120-day period between the Closing Date and the
120th day following the Closing Date are less than the Closing Accounts
Receivable Amount (such deficit is the
-14-
<PAGE>
"Uncollected Receivables Amount"), the Purchaser shall be entitled to receive
------------------------------
from the Holdback, within two (2) Business Days after the determination of the
Uncollected Receivables Amount, the Uncollected Receivables Amount (provided,
however, that if the Holdback is less than the Uncollected Receivables Amount,
the Seller shall pay to the Purchaser, within two (2) business days after the
determination of the Uncollected Receivables Amount, the amount by which the
Holdback is less than the Uncollected Receivables Amount, by wire transfer or
delivery of other immediately available funds); provided that if collections by
-------------
the Purchaser with respect to the Closing Accounts Receivable during the 120-day
period between the Closing Date and the 120th day following the Closing Date are
greater than the Closing Accounts Receivable Amount (such excess is the "Excess
------
Collections"), the Purchaser shall pay to the Seller, within two (2) Business
- -----------
Days after the determination of the Excess Collections, an amount equal to the
Excess Collections by wire transfer or delivery of other immediately available
funds. Such payment shall be deemed to be an adjustment to the Purchase Price.
(c) The Purchaser agrees to use commercially reasonable efforts,
consistent with the efforts and resources it uses to collect its other accounts
receivable, to collect all of the Closing Accounts Receivable. The Purchaser
shall furnish the Seller with all such records and other information as the
Seller may reasonably require to verify the amounts collected by the Purchaser
with respect to the Closing Accounts Receivable. The Purchaser shall not be
required to retain a collection agency, bring any suit, or take any other action
out of the Ordinary Course of Business to collect any of the Closing Accounts
Receivable. For a period of 120 days commencing on the Closing Date, the Seller
shall cause Joe Markham and Paul Rinando to perform such functions as directed
by the Purchaser, including, without limitation, participation in collection of
the Closing Accounts Receivable; provided that as long as any Closing Accounts
Receivable remain outstanding, and to the extent such activity facilitates the
collection of such Closing Accounts Receivable, Joe Markham shall dedicate the
necessary portion of his working time (up to and including 100% of his working
time) to participation in the collection of such Closing Accounts Receivable.
Notwithstanding anything to the contrary contained in this Agreement, Joe
Markham and Paul Rinando shall remain employees of the Seller, shall not be
deemed to be employees of the Purchaser, and shall not be entitled to any
benefits provided by the Purchaser. The Seller agrees to indemnify and hold
harmless the Purchaser with respect to any and all liabilities (other than the
reimbursement obligation set forth in the immediately following sentence) in
connection with the services to be performed by Joe Markham and Paul Rinando.
The Purchaser shall reimburse the Seller for the salaries of Joe Markham and
Paul Rinando during such 120-day period; provided that such salary amounts are
consistent with the salary amounts paid during the 12-month period preceding the
Closing Date.
(d) To the extent that the Purchaser has not collected the full amount
of the Closing Accounts Receivable and has been paid by the Seller in accordance
with Section 2.4(b), the Purchaser shall immediately reassign any such
uncollected Closing Accounts Receivable to the Seller.
(e) In the event that after the Closing Date the Seller shall receive
any remittance from or on behalf of any account debtor with respect to any
accounts receivable relating to the Business (excluding any Closing Accounts
Receivable that have already been paid in full by the
-15-
<PAGE>
Seller pursuant to this Section 2.4), the Seller shall endorse without recourse
such remittance to the order of the Purchaser and forward same to the Purchaser
promptly upon receipt thereof.
(f) In the event that the Purchaser shall receive any remittance from
or on behalf of any account debtor with respect to any Closing Accounts
Receivable that have already been paid in full by the Seller pursuant to this
Section 2.4, the Purchaser shall endorse such remittance to the order of the
Seller and forward the same to the Seller promptly upon receipt thereof.
2.5 Distribution of Holdback. On the 150th day after the
------------------------
Closing Date, the Purchaser shall pay to the Seller an amount equal to the
amount of the Holdback, if any, remaining after (i) all amounts owing to the
Purchaser pursuant to Section 2.2 (Purchase Price Adjustment) have been
satisfied, (ii) all amounts owing to the Purchaser pursuant to Section 2.4
(Account Receivable) have been satisfied, and (iii) all claims of the Purchaser
under Section 8.2 (Indemnification) which have theretofore been finally resolved
have been satisfied (the "Remaining Holdback") less any amount for which the
------------------
Purchaser in good faith claims, prior to such 150th day, that it is entitled to
receive indemnification pursuant to Section 8.2 (each, a "Pending Claim"). As
-------------
soon as practicable following final resolution of all Pending Claims, but in any
event no later than the second anniversary of the date hereof, the Purchaser
shall pay to the Sellers the remaining portion of the Holdback.
ARTICLE III
CONDITIONS TO CLOSING
---------------------
3.1 Conditions to the Purchaser's Obligations. The obligation
-----------------------------------------
of the Purchaser to consummate the transactions contemplated by this Agreement
is subject to the satisfaction of the following conditions as of the Closing
Date:
(a) The representations and warranties set forth in Article V hereof
shall be true and correct in all material respects at and as of the Closing Date
as though then made and as though the Closing Date were substituted for the date
of this Agreement throughout such representations and warranties (without taking
into account any disclosures made by the Seller or the Stockholders to the
Purchaser pursuant to Sections 4.1(g) or 5.25 hereof);
(b) The Seller and each Stockholder shall have performed and complied
with all of the covenants and agreements required to be performed by each of
them under this Agreement on or prior to the Closing;
(c) All consents by third parties that are required for the transfer
of the Acquired Assets to the Purchaser and the consummation of the other
transactions contemplated hereby or that are required in order to prevent a
breach of, a default under, a termination or modification of, or any
acceleration of, any obligations under any material contract to which the Seller
or any of its Subsidiaries is a party shall have been obtained, all on terms
reasonably satisfactory to the Purchaser;
(d) All governmental filings, authorizations and approvals that are
required for the transfer of the Acquired Assets to the Purchaser and the
consummation of the other transactions
-16-
<PAGE>
contemplated hereby shall have been duly made and obtained on terms reasonably
satisfactory to the Purchaser;
(e) The purchase of Acquired Assets by the Purchaser hereunder shall
not be prohibited by any applicable law or governmental regulation, shall not
subject the Purchaser to any penalty, liability or other onerous condition under
or pursuant to any applicable law or governmental regulation, and shall be
permitted by laws and regulations of the jurisdictions to which the Purchaser is
subject;
(f) The applicable waiting periods, if any, under the Hart-Scott-
Rodino Antitrust Improvement Act of 1976, as amended (the "HSR Act") shall have
-------
expired or been terminated;
(g) No action, suit, or proceeding shall be pending or threatened
before any court or quasi-judicial or administrative agency of any federal,
state, local, or foreign jurisdiction or before any arbitrator wherein an
unfavorable judgment, decree, injunction, order or ruling would prevent the
performance of this Agreement or any of the transactions contemplated hereby,
declare unlawful the transactions contemplated by this Agreement, cause such
transactions to be rescinded or materially and adversely affect the right of the
Purchaser to own, operate or control the Acquired Assets, and no judgment,
decree, injunction, order or ruling shall have been entered which has any of the
foregoing effects;
(h) Since the date hereof, there shall have been no Material Adverse
Effect;
(i) Payoff letters with respect to all of the Seller's and its
Subsidiaries' Indebtedness secured by any of the Acquired Assets outstanding as
of the Closing and releases of any and all Liens (other than Permitted
Encumbrances), including appropriate UCC termination statements, held by third
parties against the Acquired Assets shall have been obtained, all on terms
reasonably satisfactory to the Purchaser;
(j) The Purchaser shall have received an opinion, dated the Closing
Date, of Orgain, Bell & Tucker, L.L.P., counsel to the Seller and the
Stockholders, in form and substance satisfactory to Purchaser;
(k) The Purchaser and the Seller shall have entered into a real estate
lease (the "Beaumont Lease") for the Division's Beaumont, Texas facility located
--------------
on Cardinal Drive, and the rental rate under such lease shall be no greater than
the fair market rental rates for similar facilities in such location, and shall
be substantially the same as the rental rate under the Division's lease
arrangement for such facility during the 1997 fiscal year;
(l) On or prior to the Closing Date, the Stockholders shall have
delivered to the Purchaser all of the following:
(i) a certificate from the Seller and the Stockholders in a form
reasonably satisfactory to the Purchaser, dated the Closing Date, stating
that the preconditions specified in Sections 3.1(a) through (k) have been
satisfied;
-17-
<PAGE>
(ii) copies of all third party and governmental consents, approvals,
filings, releases and terminations required in connection with the
consummation of the transactions contemplated herein;
(iii) certified copies of the resolutions of the Stockholders and the
Seller's board of directors approving the transactions contemplated by this
Agreement;
(iv) certificates of the secretary of state of the State of Texas and
any other state where the Seller or any of its Subsidiaries is qualified to
do business providing that the Seller or such Subsidiary is in good
standing;
(v) landlord consents and estoppel certificates from the Seller's
and any of its Subsidiaries' landlords in form and substance satisfactory
to the Purchaser;
(vi) the consent of Administaff Companies, Inc. to the transactions
contemplated hereby in form an substance satisfactory to the Purchaser; and
(vii) such other documents, resolutions, certificates, opinions or
other instruments as the Purchaser may reasonably request with respect to
the Intermediary or otherwise to effect the transactions contemplated
hereby; and
(m) All proceedings to be taken by the Seller, any of its
Subsidiaries and the Stockholders in connection with the consummation of the
Closing Transactions and the other transactions contemplated hereby and all
certificates, opinions, instruments and other documents required to be delivered
by the Seller, any of its Subsidiaries and the Stockholders to effect the
transactions contemplated hereby reasonably requested by the Purchaser shall be
reasonably satisfactory in form and substance to the Purchaser.
Any condition specified in this Section 3.1 may be waived by the Purchaser;
provided that no such waiver shall be effective against the Purchaser unless it
is set forth in a writing executed by the Purchaser.
3.2 Conditions to the Seller's and the Intermediary's
-------------------------------------------------
Obligation. The obligations of the Seller and the Intermediary to consummate
the transactions contemplated by this Agreement are subject to the satisfaction
of the following conditions as of the Closing Date:
(a) The representations and warranties set forth in Article VI shall
be true and correct in all material respects at and as of the Closing Date as
though then made and as though the Closing Date were substituted for the date of
this Agreement throughout such representations and warranties (without taking
into account any disclosures made by the Purchaser to the Seller pursuant to
Sections 4.3(a) and 6.7 hereof);
(b) The Purchaser shall have performed and complied with all of the
covenants and agreements required to be performed by it under this Agreement on
or prior to the Closing;
-18-
<PAGE>
(c) All governmental filings, authorizations and approvals that are
required for the transfer of the Acquired Assets to the Purchaser and the
consummation of the other transactions contemplated hereby shall have been duly
made and obtained on terms reasonably satisfactory to the Seller;
(d) No action, suit, or proceeding shall be pending before any court
or quasi-judicial or administrative agency of any federal, state, local, or
foreign jurisdiction or before any arbitrator wherein an unfavorable judgment,
decree, injunction, order or ruling would prevent the performance of this
Agreement or any of the transactions contemplated hereby, declare unlawful the
transactions contemplated by this Agreement, cause such transactions to be
rescinded or materially and adversely affect the right of the Purchaser to own,
operate or control the Acquired Assets, and no judgment, decree, injunction,
order or ruling shall have been entered which has any of the foregoing effects;
(e) On or prior to the Closing Date, the Purchaser shall have
delivered to the Seller all of the following:
(i) a certificate from the Purchaser in a form reasonably
satisfactory to the Seller, dated the Closing Date, stating that the
preconditions specified in Sections 3.2(a) through (d), inclusive, have
been satisfied;
(ii) certificates of the secretary of state of the State of Delaware
providing that the Purchaser is in good standing;
(iii) certified copies of the resolutions of the Purchaser's board of
directors approving the transactions contemplated by this Agreement; and
(iv) such other documents or instruments as the Seller may reasonably
request to effect the transactions contemplated hereby; and
(f) All proceedings to be taken by the Purchaser in connection with
the consummation of the Closing Transactions and the other transactions
contemplated hereby and all certificates, opinions, instruments and other
documents required to be delivered by the Purchaser to effect the transactions
contemplated hereby reasonably requested by the Seller shall be reasonably
satisfactory in form and substance to the Seller.
Any condition specified in this Section 3.2 may be waived by the Seller;
provided that no such waiver shall be effective unless it is set forth in a
writing executed by the Seller.
ARTICLE IV
COVENANTS PRIOR TO CLOSING
4.1 AFFIRMATIVE COVENANTS OF THE SELLER AND EACH STOCKHOLDER. Prior
--------------------------------------------------------
to the Closing, unless the Purchaser otherwise agrees in writing and except as
expressly contemplated by this Agreement, the Stockholders shall cause the
Seller and
-19-
<PAGE>
each of its Subsidiaries to, the Seller and each of its Subsidiaries shall and
in the case of Sections 4.1(f), (g), (h) and (m) each Stockholder also shall:
(a) conduct the Division's business and operations only in the
Ordinary Course of Business;
(b) keep in full force and effect its corporate existence and all
rights, franchises and intellectual property relating or pertaining to its
business and use its reasonable best efforts to cause its current insurance (or
reinsurance) policies not to be canceled or terminated or any of the coverage
thereunder to lapse;
(c) use its reasonable best efforts to carry on the Business in the
same manner as presently conducted and to keep the Division's business
organization and properties intact, including its present business operations,
physical facilities, working conditions and employees and its present
relationships with lessors, licensors, suppliers and customers and others having
business relations with it;
(d) maintain the material assets of the Division in good repair, order
and condition (normal wear and tear excepted) consistent with current needs,
replace in accordance with prudent practices its inoperable, worn out or
obsolete assets with assets of good quality consistent with prudent practices
and current needs and, in the event of a casualty, loss or damage to any of such
assets or properties prior to the Closing Date, either repair or replace such
damaged property or use the proceeds of such insurance in such other manner as
mutually agreed upon by the Seller and the Purchaser;
(e) encourage employees to continue their employment with the
Purchaser and its Subsidiaries after the Closing;
(f) maintain the books, accounts and records of the Division in
accordance with past custom and practice as used in the preparation of the
Financial Statements;
(g) promptly (once the Seller or any Stockholder obtains actual
knowledge thereof) inform the Purchaser in writing of any variances from the
representations and warranties contained in Article V hereof or any breach of
any covenant hereunder by the Seller or the Stockholders;
(h) cooperate with the Purchaser and use reasonable best efforts to
cause the conditions to the Purchaser's obligation to close to be satisfied
(including, without limitation, the execution and delivery of all agreements
contemplated hereunder to be so executed and delivered and the making and
obtaining of all third party and governmental notices, filings, authorizations,
approvals, consents, releases and terminations);
(i) use reasonable best efforts to obtain all third party and
governmental approvals and consents necessary or desirable to consummate the
transactions contemplated hereby and to cause the other conditions to the
Purchaser's obligations hereunder to be satisfied;
-20-
<PAGE>
(j) maintain the existence of and use reasonable best efforts to
protect all Proprietary Rights used in the Business;
(k) maintain the existence of and protect all of the governmental
permits, licenses, approvals and other authorizations of the Business;
(l) comply with all applicable laws, ordinances, and regulations in
the operation of the Business; and
(m) cooperate with the Purchaser in the Purchaser's investigation of
the business and properties of the Division, to permit the Purchaser and its
employees, agents, accounting, legal and other authorized representatives to (i)
have full access to the premises, books and records of the Division at
reasonable hours, (ii) visit and inspect any of the properties of the Division,
and (iii) discuss the affairs, finances and accounts of the Division with the
directors, officers, partners, key employees, key customers, key sales
representatives, key suppliers and independent accountants of the Seller and
each of its Subsidiaries.
4.2 Negative Covenants of the Seller and Each Stockholder. Prior
-----------------------------------------------------
to the Closing, unless Purchaser otherwise agrees in writing and except as
expressly contemplated by this Agreement, each Stockholder shall cause the
Seller and each of its Subsidiaries to not and the Seller and each of its
Subsidiaries shall not (in each case, to the extent related to the Division):
(a) take any action that would require disclosure under Section 5.8;
(b) make any loans, enter into any transaction with any Insider or
make or grant any increase in any employee's or officer's compensation or make
or grant any increase in any employee benefit plan, incentive arrangement or
other benefit covering any of the employees of the Company or its Subsidiaries,
other than in the Ordinary Course of Business;
(c) establish or, except in the Ordinary Course of Business,
contribute to any pension, retirement, profit sharing or stock bonus plan or
multiemployer plan;
(d) except as specifically contemplated by this Agreement, enter into
any contract, agreement or transaction, other than in the Ordinary Course of
Business and at arm's length with unaffiliated Persons (provided that in any
event the Seller shall not enter into an advertising arrangement with Business
Industry Connection);
(e) declare, pay, make or otherwise effectuate any dividends,
distributions, redemptions, equity repurchases or other transactions involving
the Seller's or any of its Subsidiaries' capital stock or equity securities
(except with respect to (i) dividends paid for the purpose of reimbursing any
Stockholder for individual income tax liabilities related to the Seller or (ii)
dividends relating to the accumulated adjustments account);
(f) engage in any activity other than in the Ordinary Course of
Business which would accelerate the collection of its accounts or notes
receivable, delay the payment of its accounts
-21-
<PAGE>
payable, delay its capital expenditures, or reduce or otherwise restrict the
amount of inventory on hand; or
(g) sell, transfer, contribute, distribute, or otherwise dispose of
any securities, capital stock or assets (other than marketable securities) of
the Seller or of its Subsidiaries, or agree to do any of the foregoing, to any
Person, or negotiate or have any discussions with any Person with respect to any
of the foregoing, other than in the Ordinary Course of Business.
4.3 Covenants of Purchaser. Prior to the Closing, the Purchaser
----------------------
shall:
(a) promptly (once it obtains actual knowledge thereof) inform the
Seller in writing of any variances from the representations and warranties
contained in Article VI or any breach of any covenant hereunder by Purchaser;
(b) cooperate with Seller and use its reasonable best efforts to cause
the conditions to the Seller's obligation to close to be satisfied (including,
without limitation, the execution and delivery of all agreements contemplated
hereunder to be so executed and delivered and the making and obtaining of all
third party and governmental filings, authorizations, approvals, consents,
releases and terminations); and
(c) use reasonable best efforts to obtain all third party and
governmental approvals and consents necessary or desirable to consummate the
transactions contemplated hereby and to cause the other conditions to the
Seller's obligations hereunder to be satisfied.
ARTICLE V
REPRESENTATIONS AND WARRANTIES
CONCERNING THE SELLER AND THE STOCKHOLDERS
------------------------------------------
As a material inducement to Purchaser to enter into this Agreement,
the Seller and the Stockholders hereby jointly and severally represents and
warrants that:
5.1 Organization and Corporate Power. The Seller is a corporation
--------------------------------
duly organized, validly existing and in good standing under the laws of the
State of Texas and is qualified to do business in every jurisdiction in which it
is required to be qualified. All jurisdictions in which the Seller is qualified
to do business are set forth on the "Organization Schedule" attached hereto. The
---------------------
Seller has full power and authority and all licenses, permits and authorizations
necessary to own and operate its properties and to carry on its business as now
conducted. Correct and complete copies of the Seller's and each of its
Subsidiaries' articles of incorporation and by-laws have been furnished to the
Purchaser, which documents reflect all amendments made thereto at any time prior
to the date of this Agreement. Correct and complete copies of the minute books
containing the records of meetings of the stockholders and board of directors,
the stock certificate books and the stock record books of the Seller and each of
its Subsidiaries have been furnished to the Purchaser. Neither the Seller nor
any of its Subsidiaries is in default under or in violation of any provision of
its articles of incorporation or by-laws.
-22-
<PAGE>
5.2 Authorization of Transactions. The Seller and the Stockholders
-----------------------------
have full power and authority to execute and deliver the Transaction Documents
to which they are a party and to consummate the transactions contemplated hereby
and thereby. The Stockholders and the board of directors of the Seller, as
applicable, have duly approved the Transaction Documents to which the
Stockholders and/or the Seller are a party and have duly authorized the
execution and delivery of such Transaction Documents and the consummation of the
transactions contemplated thereby. No other corporate proceedings on the part of
the Stockholders or the Seller are necessary to approve and authorize the
execution and delivery of the Transaction Documents to which the Stockholders
and/or the Seller are a party and the consummation of the transactions
contemplated thereby. All Transaction Documents to which the Stockholders
and/or the Seller are a party have been duly executed and delivered by the
Stockholders and/or the Seller, as applicable, and constitute the valid and
binding agreements of the Stockholders and/or the Seller, as applicable,
enforceable against the Stockholders and/or the Seller in accordance with their
terms.
5.3 Capitalization. The authorized, issued and outstanding stock
--------------
of the Seller consists of 100,000 shares of Common Stock, par value $100 per
share, of which 8 shares are issued and outstanding. All of the issued and
outstanding shares of the Seller's capital stock have been duly authorized, are
validly issued, fully paid, and nonassessable, and are held of record and
beneficially by the Stockholders in the amounts set forth on the Schedule of
-----------
Stockholders free and clear of all Liens and are not subject to, nor were they
- ------------
issued in violation of, any preemptive rights or rights of first refusal. There
are no outstanding or authorized options, warrants, rights, contracts, calls,
puts, rights to subscribe, conversion rights or other agreements or commitments
to which the Seller is a party or which are binding upon the Seller providing
for the issuance, disposition or acquisition of any of its capital stock. There
are no outstanding or authorized stock appreciation, phantom stock or similar
rights with respect to the Seller or any of its Subsidiaries. Except as set
forth on the Schedule of Stockholders, there are no voting trusts, proxies or
------------------------
any other agreements or understandings with respect to the voting of the capital
stock of the Seller or any of its Subsidiaries. Neither the Seller nor any of
its Subsidiaries is subject to any obligation (contingent or otherwise) to
repurchase or otherwise acquire or retire any shares of its capital stock.
5.4 Subsidiaries; Investments. The attached "Subsidiaries
------------------------- ------------
Schedule" correctly sets forth the name of each of the Seller's direct or
indirect Subsidiaries, the jurisdiction of its incorporation, the number of
authorized, issued and outstanding shares of capital stock of such Subsidiary
and the Persons owning the outstanding capital stock of such Subsidiary. Each
Subsidiary is duly organized, validly existing and in good standing under the
laws of the jurisdiction of its incorporation, possesses all requisite corporate
power and authority and all material licenses, permits and authorizations
necessary to own its properties and to carry on its businesses as now being
conducted and is qualified to do business in every jurisdiction in which its
ownership of property or the conduct of business requires it to qualify. All of
the outstanding shares of capital stock of each Subsidiary are validly issued,
full paid and nonassessable, and all such shares are owned by the Seller or
another Subsidiary free and clear of any Lien and not subject to any option or
right to purchase any such shares. Except as set forth on the Subsidiaries
------------
Schedule, neither the Seller nor any of its Subsidiaries owns or holds the
- --------
right to acquire any shares of stock or any other security or interest in any
other Person.
-23-
<PAGE>
5.5 Absence of Conflicts. Except as set forth on the "Conflicts
-------------------- ---------
Schedule" attached hereto, the execution, delivery and performance of the
- --------
Transaction Documents and the consummation of the transactions contemplated
thereby by the Seller and each Stockholder do not and shall not (a) conflict
with or result in any breach of any of the terms, conditions or provisions of,
(b) constitute a default under, (c) result in a violation of, (d) give any third
party the right to modify, terminate or accelerate any obligation under, (e)
result in the creation of any Lien upon the Acquired Assets or (f) require any
authorization, consent, approval, exemption or other action by or notice or
declaration to, or filing with, any court or administrative or other
governmental body or agency, under the provisions of the articles of
incorporation or by-laws of the Seller or any of its Subsidiaries or any
indenture, mortgage, lease, loan agreement or other agreement or instrument to
which the Seller, any of its Subsidiaries or such Stockholder is bound or
affected, or any law, statute, rule or regulation to which the Seller, any of
its Subsidiaries or such Stockholder is subject or any judgment, order or decree
to which the Seller, any of its Subsidiaries or such Stockholder is subject.
5.6 FINANCIAL STATEMENTS AND RELATED MATTERS.
----------------------------------------
(a) Financial Statements. Attached hereto as the "Financial
-------------------- ---------
Statements Schedule" are copies of the Division's (i) unaudited balance sheet as
- -------------------
of November 30, 1997 (the "Latest Balance Sheet") and the related statements of
--------------------
income and cash flows for the 11-month period then ended and (ii) [un]audited
balance sheets and statements of income and cash flows for the fiscal years
ended December 31, 1996, 1995 and 1994. Each of the foregoing financial
statements (including in all cases the notes thereto, if any) (the "Financial
---------
Statements") is accurate and complete, is consistent with the Division's books
- ----------
and records (which, in turn, are accurate and complete), presents fairly the
Division's financial condition and results of operations as of the times and for
the periods referred to therein, and has been prepared in accordance with GAAP,
subject in the case of unaudited financial statements to changes resulting from
normal year-end adjustments for recurring accruals (which shall not be material
individually or in the aggregate) and to the absence of footnote disclosure.
(b) Receivables. The Division's notes and accounts receivable are
-----------
valid receivables, current, and are subject to no valid counterclaims or
setoffs, at the aggregate amount recorded on the Division's books and records as
of the close of business on the day before the Closing Date, net of an amount of
allowances for doubtful accounts which relate to those receivables computed in a
manner consistent with GAAP and the accounting practices used in the preparation
of the Latest Balance Sheet.
(c) Inventory. The Division's inventory, net of the reserves
---------
applicable to such inventory, consists of a quantity and quality which, except
as reflected in such reserve, is usable and saleable in the Ordinary Course of
Business, and the items of such inventory are not defective, slow-moving,
obsolete or damaged and are merchantable and fit for their particular use. The
Division has good title to such inventory, free and clear of all Liens (other
than Permitted Encumbrances).
5.7 Absence of Undisclosed Liabilities. Neither the Seller nor any
----------------------------------
of its Subsidiaries has any obligations or liabilities related to the Division
(whether accrued, absolute, contingent, unliquidated or otherwise, whether or
not known, whether due or to become due and regardless of when asserted) arising
out of transactions entered into at or prior to the Closing, or any
-24-
<PAGE>
action or inaction at or prior to the Closing, or any state of facts existing at
or prior to the Closing, except (i) obligations under executory contracts or
commitments described on the Contracts Schedule attached hereto or under
------------------
executory contracts and commitments which are not required to be disclosed
thereon (but not liabilities for breaches thereof), (ii) liabilities reflected
on the liabilities side of the Latest Balance Sheet, and (iii) liabilities which
have arisen after the date of the Latest Balance Sheet in the Ordinary Course of
Business or otherwise in accordance with the terms and conditions of this
Agreement (none of which is a liability for breach of contract, breach of
warranty, tort or infringement or a claim or lawsuit or an environmental
liability).
5.8 Absence of Certain Developments. Except as set forth on the
-------------------------------
"Developments Schedule" attached hereto and except as expressly contemplated by
- ----------------------
this Agreement, since the date of the Latest Balance Sheet, neither the Seller
nor any of its Subsidiaries has (in each case, to the extent related to the
Division):
(a) suffered any change that has had or could reasonably be expected
to have a Material Adverse Effect or suffered any theft, damage, destruction or
casualty loss in excess of $50,000, to its assets, whether or not covered by
insurance or suffered any substantial destruction of its books and records;
(b) redeemed or repurchased, directly or indirectly, any shares of
capital stock or other equity security or declared, set aside or paid any
dividends or made any other distributions (whether in cash or in kind) with
respect to any shares of its capital stock or other equity security;
(c) issued, sold or transferred any equity securities, any securities
convertible, exchangeable or exercisable into shares of its capital stock or
other equity securities, or warrants, options or other rights to acquire shares
of its capital stock or other of its equity securities;
(d) incurred or become subject to any liabilities, except liabilities
incurred in the Ordinary Course of Business;
(e) subjected any portion of its properties or assets to any Lien
(other than Permitted Encumbrances)
(f) sold, leased, assigned or transferred (including, without
limitation, transfers to Stockholders or any Insider) a portion of its tangible
assets, except for sales of inventory in the Ordinary Course of Business, or
canceled without fair consideration any material debts or claims owing to or
held by it;
(g) sold, assigned, licensed or transferred (including, without
limitation, transfers to Stockholders or any Insider) any Proprietary Rights
owned by, issued to or licensed to it or disclosed any confidential information
(other than pursuant to agreements requiring the disclosure to maintain the
confidentiality of and preserving all its rights in such confidential
information) or received any confidential information of any third party in
violation of any obligation of confidentiality;
(h) suffered any extraordinary losses or waived any rights of material
value;
-25-
<PAGE>
(i) entered into, amended or terminated any material lease, contract,
agreement or commitment, or taken any other action or entered into any other
transaction other than in the Ordinary Course of Business;
(j) entered into any other material transaction, or materially changed
any business practice;
(k) made or granted any bonus to any director, officer, employee or
sales representative, group of employees or consultant other than in the
Ordinary Course of Business, or made or granted any wage, salary or compensation
increase to any director, officer, employee or sales representative, group of
employees or consultant, or made or granted any increase in any employee benefit
plan or arrangement, or amended or terminated any existing employee benefit plan
or arrangement, or adopted any new employee benefit plan or arrangement (in each
case, other than increases in premiums in the Ordinary Course of Business);
(l) made any other change in employment terms for any of its
directors, officers, and employees outside the Ordinary Course of Business;
(m) conducted its cash management customs and practices other than in
the Ordinary Course of Business (including, without limitation, with respect to
collection of accounts receivable, purchases of inventory and supplies, repairs
and maintenance, payment of accounts payable and accrued expenses, levels of
capital expenditures and operation of cash management practices generally);
(n) except as set forth on the attached "Capital Expenditures
--------------------
Schedule," made any capital expenditures or commitments for capital expenditures
- --------
that aggregate in excess of $20,000;
(o) made any loans or advances to, or guarantees for the benefit of,
any Person;
(p) made charitable contributions, pledges, association fees or dues
in excess of $10,000; or
(q) committed to do any of the foregoing.
5.9 Assets.
------
(a) Except as set forth on the attached "Assets Schedule," the Seller
---------------
and each of its Subsidiaries have good and indefeasible title to, or a valid
leasehold interest in, the properties and assets used by them in connection with
the Business, located on their premises or shown on the Latest Balance Sheet or
acquired thereafter, free and clear of all Liens, except for Permitted
Encumbrances and except for properties and assets disposed of in the ordinary
course of business since the date of the Latest Balance Sheet. Except as
described on the Assets Schedule, (i) the Seller's and each of its
---------------
Subsidiaries' buildings, equipment and other tangible assets are in good
operating condition and are fit for use in the ordinary course of business, and
(ii) the equipment subject to the Master Lease Agreements between the Seller and
each of Cletex Trailer Leasing, Inc. and Fleet Acceptance Corporation is in the
condition required to satisfy the requirements of such
-26-
<PAGE>
Master Lease Agreements and the Seller has evidence that such equipment was
delivered to the Seller's customers in satisfactory condition and the Seller
will have an enforceable claim against any customer returning such equipment in
a damaged condition. The Seller and each of its Subsidiaries owns or leases all
buildings, machinery, equipment, and other tangible assets necessary for the
conduct of its business as presently conducted. The Acquired Assets constitute
all of the assets and rights necessary for the conduct of the Business as it is
presently conducted.
(b) Except for any representation or warranty set forth in this
Agreement, the tangible personal property that is part of the Acquired Assets is
sold AS IS, WHERE IS, AND WITH ALL FAULTS, ALL EXPRESS AND IMPLIED WARRANTIES OF
MERCHANT-ABILITY AND FITNESS FOR A PARTICULAR PURPOSE BEING HEREBY EXPRESSLY
DISCLAIMED.
(c) The Purchaser has been granted the right to conduct an
investigation of the Acquired Assets. The Purchaser and the Purchaser's agents
had the right of access to the Acquired Assets prior to the Closing for the
purpose of conducting such investigation. The Seller cooperated with the
Purchaser in connection with such investigation and furnished the Purchaser with
copies of all documents in the Seller's possession relating to the Acquired
Assets that were necessary to complete such investigation.
5.10 TITLE TO PROPERTIES.
-------------------
(a) Owned Properties. The "Real Property Schedule" sets forth a list
---------------- ----------------------
of all owned real property (collectively, the "Owned Real Property") used by the
-------------------
Seller or any of its Subsidiaries in the operation of the Businesses. With
respect to each such parcel of Owned Real Property: (i) such parcel is free and
clear of all encumbrances, except Permitted Encumbrances; (ii) there are no
leases, subleases, licenses, concessions, or other agreements, written or oral,
granting to any person the right of use or occupance of any portion of such
parcel; and (iii) there are no outstanding actions or rights of first refusal to
purchase such parcel, or any portion thereof or interest therein.
(b) Leased Properties. The "Leases Schedule" sets forth a list of all
----------------- ---------------
of the leases and subleases related to the Division (the "Leases") and each
------
leased and subleased parcel of real property related to the Division in which
the Seller or any of its Subsidiaries has a leasehold and subleasehold interest
(the "Leased Real Property"). Each of the Leases is in full force and effect
--------------------
and the Seller or its Subsidiary holds a valid and existing leasehold or
subleasehold interest under each of the Leases. The Seller has delivered to the
Purchaser true, correct, complete and accurate copies of each of the Leases
described in the Leases Schedule. With respect to each Lease listed on the
---------------
Leases Schedule: (i) the Lease is legal, valid, binding, enforceable and in
- ---------------
full force and effect; (ii) the Lease will continue to be legal, valid, binding,
enforceable and in full force and effect on identical terms following the
Closing; (iii) neither the Seller nor, to the knowledge of the Seller or any
Stockholder, any other party to the Lease is in breach or default, and no event
has occurred which, with notice or lapse of time, would constitute such a breach
or default or permit termination, modification or acceleration under the Lease;
(iv) no party to the Lease has repudiated any provision thereof; (v) there are
no disputes, oral agreements, or forbearance programs in effect as to the Lease;
(vi) the Lease has not been modified in any respect, except to the extent that
such modifications are disclosed by the documents delivered to the Purchaser;
and (vii) neither the Seller nor any of its
-27-
<PAGE>
Subsidiaries has assigned, transferred, conveyed, mortgaged, deeded in trust or
encumbered any interest in the Lease.
(c) Real Property Disclosure. Except as disclosed on the Real
------------------------ ----
Property Schedule and the Leases Schedule, there is no Real Property leased or
- ----------------- ---------------
owned by the Seller or any of its Subsidiaries used in the Business. The Owned
Real Property and Leased Real Property constitute collectively the Real
Property.
(d) No Proceedings. There are no proceedings in eminent domain or
--------------
other similar proceedings pending or, to the knowledge of the Seller or any
Stockholder, threatened, affecting any portion of the Real Property. There
exists no writ, injunction, decree, order or judgment outstanding, nor any
litigation, pending or threatened, relating to the ownership, lease, use,
occupancy or operation by any person of the Real Property.
(e) Current Use. The current use of the Real Property does not
-----------
violate in any material respect any instrument of record or agreement affecting
such Real Property. There is no violation of any covenant, condition,
restriction, easement, agreement or order of any governmental authority having
jurisdiction over any of the Real Property that affects such real property or
the use or occupancy thereof. No damage or destruction has occurred with
respect to any of the Real Property that, individually or in the aggregate, has
had or resulted in, or will have or result in, a Material Adverse Effect.
(f) Condition and Operation of Improvements. All buildings and all
---------------------------------------
components of all buildings, structures and other improvements included within
the Real Property (the "Improvements"), including, without limitation, the roofs
------------
and structural elements thereof and the heating, ventilation, air conditioning,
air pollution emission capture and abatement, plumbing, electrical, mechanical,
sewer, waste water and paving and parking equipment systems and facilities
included therein, are in good condition and repair and adequate to operate such
facilities as currently used and there are no facts or conditions affecting any
of the Improvements which would, individually or in the aggregate, interfere in
any significant respect with the use, occupancy or operation thereof as
currently used, occupied or operated or intended to be used, occupied or
operated. There are no structural deficiencies or latent defects affecting any
Improvements located upon the Real Property. All water, gas, electrical, steam,
compressed air, telecommunication, sanitary and storm sewage lines and systems
and other similar systems serving the Real Property are installed and operating
and are sufficient to enable the Real Property to continue to be used and
operated in the manner currently being used and operated, and any so-called
hook-up fees or other associated charges have been fully paid. Each such
utility or other service is provided by a public or private utility or service
company and enters the Real Property from an adjacent public street or valid
private easement owned by the supplier of such utility or other service. Each
Improvement has direct access to a public street adjoining the Real Property on
which such Improvement is situated over the driveways and accessways currently
being used in connection with the use and operation of such Improvement and no
existing accessway crosses or encroaches upon any property or property interest
not owned by the Seller or any Subsidiary. No Improvement or portion thereof is
dependent for its access, operation or utility on any land, building or other
improvement not included in the Real Property.
-28-
<PAGE>
(g) Permits. All certificates of occupancy, permits, licenses,
-------
franchises, approvals and authorizations (collectively, the "Real Property
-------------
Permits") of all governmental authorities having jurisdiction over the Real
- -------
Property, required or appropriate to have been issued to the Seller or any of
its Subsidiaries to enable the Real Property to be lawfully occupied and used
for all of the purposes for which it is currently occupied and used have been
lawfully issued and are, as of the date hereof, in full force and effect. The
Seller has delivered complete and correct copies of the Real Property Permits to
the Purchaser. Neither the Seller nor any of its Subsidiaries has received or
been informed by a third party of the receipt by it of any notice from any
governmental authority having jurisdiction over the Real Property threatening a
suspension, revocation, modification or cancellation of any Real Property Permit
and, to the knowledge of the Seller or any Stockholder, there is no basis for
the issuance of any such notice or the taking of any such action.
(h) Compliance with Laws. The Real Property is in full compliance
--------------------
with all applicable building, zoning, subdivision and other land use and similar
laws affecting the Real Property (collectively, the "Real Property Laws"), and
------------------
neither the Seller nor any of its Subsidiaries has received any notice of
violation or claimed violation of any Real Property Law. There is no pending
or, to the knowledge of the Seller or any Stockholder, any anticipated change in
any Real Property Law that will have or result in a significant adverse effect
upon the ownership, alteration, use, occupancy or operation of the Real
Properties or any portion thereof. No current use by the Seller or its
Subsidiary of the Real Properties is dependent on a nonconforming use or other
approval from a governmental authority, the absence of which would significantly
limit the use of any of the properties or assets in the operation of the
business of the Seller or any of its Subsidiaries.
(i) Specific Facilities. The Lease related to the Division's La
-------------------
Porte, Texas facility expires on March 1, 2001 and provides for rental payments
of $10,000 per month. The Lease related to the Division's Baton Rouge,
Louisiana facility expires on October 14, 1998 and provides for rental payments
of $3,000 per month. The Lease related to the Division's Sulphur, Louisiana
facility expires on November 9, 1999 and provides for rental payments of $3,200
per month.
5.11 Taxes. To the extent related to the
-----
Division, and except as set forth on the attached "Taxes Schedule,"
--------------
(a) the Seller and each of its Subsidiaries has timely filed all Tax
Returns which are required to be filed, and all such Tax Returns are true,
complete and accurate in all respects and have been prepared in compliance with
applicable law;
(b) all Taxes due and payable by the Seller and each of its
Subsidiaries, whether or not shown on a Tax Return, have been paid by the Seller
or each such Subsidiary and no Taxes are delinquent;
(c) the amount accrued as a current liability for taxes on the Latest
Balance Sheet shall be sufficient to pay in full all Taxes for taxable periods
(or portions thereof) ending on or before the date of the Latest Balance Sheet,
whether or not such Taxes are due on or before such date and, since the date of
the Latest Balance Sheet, neither the Seller nor any of its Subsidiaries have
incurred any liability for Taxes other than in the Ordinary Course of Business;
-29-
<PAGE>
(d) no deficiency for any amount of Tax which has not been resolved
has been asserted or assessed by a taxing authority against the Seller or any of
its Subsidiaries, and neither the Seller nor any Stockholder has knowledge that
any such assessment or asserted Tax liability shall be made;
(e) there is no action, suit, taxing authority proceeding or audit
now in progress, pending or, to the knowledge of the Seller or any Stockholder,
threatened against or with respect to the Seller or any of its Subsidiaries;
(f) neither the Seller nor the Stockholders reasonably expect any
taxing authority to claim or assess any additional Taxes in respect of the
Seller or any of its Subsidiaries for any period;
(g) neither the Seller nor any of its Subsidiaries has (i) waived any
statute of limitations, (ii) agreed to any extension of the period for
assessment or collection or (iii) executed or filed any power of attorney, in
each case with respect to any Taxes which waiver, agreement or power of attorney
is currently in force;
(h) neither the Seller nor any of its Subsidiaries has been a member
of an Affiliated Group (as defined in Section 1504 of the Code), or any similar
group defined under local, state or foreign Tax law and neither the Seller nor
any of its Subsidiaries has any liability for Taxes of any Person other than the
Seller or its Subsidiaries under Treasury Regulations Section 1.1502-6 or any
similar provision of local, state or foreign Tax law;
(i) neither the Seller nor any of its Subsidiaries is a party to or
bound by any Tax allocation, sharing, indemnity or similar agreement or
arrangement with any Person and neither the Seller nor any of its Subsidiaries
has current or potential contractual obligation to indemnify any other Person
with respect to Taxes;
(j) neither the Seller nor any of its Subsidiaries has any obligation
to make any payment that could be non-deductible under Section 280G of the Code
(or any corresponding provision of state, local or foreign Tax law);
(k) no claim has ever been made by a taxing authority in a
jurisdiction where the Seller or any of its Subsidiaries does not pay Taxes or
file Tax Returns that the Seller or any such Subsidiary is or may be subject to
Taxes assessed by such jurisdiction;
(l) the Seller and each of its Subsidiaries have withheld and paid
all Taxes required to have been withheld and paid in connection with amounts
paid or owing to any employee, creditor, independent contractor or other third
party;
(m) the Taxes Schedule contains a list of states, territories and
--------------
jurisdictions (whether foreign or domestic) in which the Seller and each of its
Subsidiaries are required to file Tax Returns relating to their respective
businesses; and
-30-
<PAGE>
(n) neither the Seller nor any of its Subsidiaries will be required
to include any amount in taxable income for any taxable period (or portion
thereof) ending after the Closing Date that is attributable to any taxable
period (or portion thereof) ending on or before the Closing Date as a result of
(i) any change in method of accounting for a taxable period ending on or prior
to the Closing Date, (ii) any "closing agreement," as described in Section 7121
of the Code (or any corresponding provision of state, local or foreign income
Tax law), entered into on or before the Closing Date, (iii) any installment sale
made on or before the Closing Date, or (iv) any deferred intercompany gain
described in Treasury Regulation Section 1.15102-13 or any excess loss account
described in Treasury Regulation Section 1.1502-19 and 1.1502-32 (or any
corresponding or similar provision or administrative rule of federal, state,
local or foreign income tax law) arising on or before the Closing Date.
5.12 CONTRACTS AND COMMITMENTS.
-------------------------
(a) Except as specifically contemplated by this Agreement and except
as set forth on the "Contracts Schedule" attached hereto, neither the Seller nor
------------------
any of its Subsidiaries is a party to or bound by, whether written or oral, any
(in each case, solely to the extent related to the Division):
(i) collective bargaining agreement or contract with any labor union
or any bonus, pension, profit sharing, retirement or any other form of
deferred compensation plan or any stock purchase, stock option,
hospitalization insurance or similar plan or practice, whether formal or
informal;
(ii) contract for the employment of any officer, individual employee
or other person on a full-time or consulting basis or any severance
agreements;
(iii) agreement or indenture relating to the borrowing of money or to
mortgaging, pledging or otherwise placing a Lien on any of its assets;
(iv) contract under which the Seller or any of its Subsidiaries has
advanced or loaned any other Person amounts in the aggregate exceeding
$25,000;
(v) agreements with respect to the lending or investing of funds;
(vi) license or royalty agreements;
(vii) guaranty of any obligation, other than endorsements made for
collection;
(viii) management, consulting, advertising, marketing, promotion,
technical services, advisory or other contract or other similar arrangement
relating to the design, marketing, promotion, management or operation of
the Business;
(ix) outstanding powers of attorney executed on behalf of the Seller;
-31-
<PAGE>
(x) lease or agreement under which it is lessee of, or holds or
operates, any personal property owned by any other party calling for
payments in excess of $10,000 annually;
(xi) lease or agreement under which it is lessor of or permits any
third party to hold or operate any property, real or personal, owned or
controlled by it;
(xii) contract or group of related contracts with the same party
continuing over a period of more than six months from the date or dates
thereof, not terminable by it on 30 days or less notice without penalties
or involving more than $10,000;
(xiii) any confidentiality agreement or similar arrangement;
(xiv) contract which prohibits it from freely engaging in business
anywhere in the world; or
(xv) other agreement material to it whether or not entered into in the
Ordinary Course of Business.
(b) Except as disclosed on the Contracts Schedule, (i) no contract or
------------------
commitment required to be disclosed on the Contracts Schedule has been breached
------------------
or canceled by the other party and neither the Seller nor any Stockholder has
knowledge of any anticipated breach by any other party to any contract required
to be disclosed on the Contracts Schedule, (ii) no customer or supplier has
------------------
indicated in writing or orally to the Seller, any of its Subsidiaries or any
Stockholder that it shall stop or decrease the rate of business done with the
Division or that it desires to renegotiate its contract or current arrangement
with the Seller or any of its Subsidiaries, (iii) the Seller and each of its
Subsidiaries have performed all the obligations required to be performed by them
in connection with the contracts or commitments required to be disclosed on the
Contracts Schedule and are not in default under or in breach of any contract or
- ------------------
commitment required to be disclosed on the Contracts Schedule, and no event has
------------------
occurred which with the passage of time or the giving of notice or both would
result in a default or breach thereunder, (iv) neither the Seller nor any of
its Subsidiaries has any present expectation or intention of not fully
performing any obligation pursuant to any contract required to be set forth on
the Contracts Schedule, and (vi) each agreement required to be set forth on the
------------------
Contracts Schedule is legal, valid, binding, enforceable and in full force and
- ------------------
effect and will continue as such following the consummation of the transactions
contemplated hereby.
(c) The Seller has provided the Purchaser with a true and correct copy
of all written contracts which are required to be disclosed on the Contracts
---------
Schedule, in each case together with all amendments, waivers or other changes
- --------
thereto (all of which are disclosed on the Contracts Schedule). The Contracts
------------------ ---------
Schedule contains an accurate and complete description of all material terms of
- --------
all oral contracts referred to therein.
5.13 PROPRIETARY RIGHTS.
------------------
(a) The attached "Proprietary Rights Schedule" contains a complete and
---------------------------
accurate list of all (a) patented or registered Proprietary Rights owned or used
by the Seller or any of its
-32-
<PAGE>
Subsidiaries in connection with the Business, (b) pending patent applications
and applications for registrations of other Intellectual Property Rights filed
by the Seller or any of its Subsidiaries in connection with the Business, (c)
unregistered trade names, internet domain names and corporate names owned or
used by the Seller or any of its Subsidiaries in connection with the Business
and (d) unregistered trademarks, service marks, and computer software owned or
used by the Seller or any of its Subsidiaries in connection with the Business.
The Proprietary Rights Schedule also contains a complete and accurate list of
---------------------------
all licenses and other rights granted by the Seller or any of its Subsidiaries
to any third party with respect to any Proprietary Rights related to the
Business and all licenses and other rights granted by any third party to the
Seller or any of its Subsidiaries with respect to any Proprietary Rights related
to the Business, in each case identifying the subject Proprietary Rights. Except
as set forth on the Proprietary Rights Schedule, the Seller and each of its
---------------------------
Subsidiaries own, free of all Liens (except Permitted Encumbrances), all right,
title and interest to, or have the right to use pursuant to a valid written
license, all Proprietary Rights necessary for the operation of the Business as
presently conducted and such rights will be owned or made available for use by
the Purchaser after the Closing on terms and conditions substantially identical
to those under which they were owned or used prior to the Closing. Except as set
forth on the Proprietary Rights Schedule, the loss or expiration of any
---------------------------
Proprietary Rights or related group of Proprietary Rights owned or used by the
Seller or any of its Subsidiaries related to the Business has not had a Material
Adverse Effect on the conduct of the Business and is not pending or, to the
knowledge of the Seller or any Stockholder, threatened or reasonably
foreseeable.
(b) Except as set forth on the Proprietary Rights Schedule, (i) the
---------------------------
Seller and each of its Subsidiaries owns and possesses without restriction as to
use, all right, title and interest in and to the Proprietary Rights necessary
for the operation of the Business as currently conducted; (ii) neither the
Seller nor any of its Subsidiaries has received any notices of invalidity,
infringement or misappropriation from any third party with respect to any such
Proprietary Rights; (iii) neither the Seller nor any of its Subsidiaries has
interfered with, infringed upon or misappropriated any Proprietary Rights of any
third parties or knowingly come into conflict with any Proprietary Rights of any
third parties; and (iv) to the knowledge of the Seller or any Stockholder, no
third party has interfered with, infringed upon, misappropriated, or otherwise
come into conflict with any Proprietary Rights of the Seller or its Subsidiaries
related to the Business.
(c) The transactions contemplated by this Agreement shall have no
adverse effect on the Purchaser's right, title and interest in and to any of the
Proprietary Rights related to the Business. The Seller and each of its
Subsidiaries has taken all necessary and desirable actions to maintain and
protect their Proprietary Rights related to the Business and shall continue to
maintain and protect those rights prior to the Closing so as to not adversely
affect the validity or enforcement of such Proprietary Rights.
5.14 LITIGATION; PROCEEDINGS. Except as set forth on the attached
-----------------------
"Litigation Schedule," there are no actions, suits, complaints, charges,
- --------------------
proceedings, orders, investigations or claims pending or, to the knowledge of
the Seller or any Stockholder, threatened against or affecting the Division (or
to the knowledge of the Seller or any Stockholder, pending or threatened against
or affecting any of the officers or key employees of the Division with respect
to the Division's businesses or proposed business activities) at law or in
equity, or before or by any governmental department, commission, board, bureau,
agency or instrumentality (including, without limitation,
-33-
<PAGE>
any actions, suits, complaints, charges, proceedings or investigations with
respect to the transactions contemplated by this Agreement); nor have there been
any such actions, suits, proceedings, orders, investigations or claims pending
against or affecting the Division during the past three years; and neither the
Seller nor any of its Subsidiaries is subject to any grievance arbitration
proceedings under collective bargaining agreements or otherwise or, to the
knowledge of the Seller or any Stockholder, any governmental investigations or
inquiries related to the Division. Neither the Seller nor any of its
Subsidiaries is subject to any judgment, order or decree of any court or other
governmental agency (or settlement enforceable therein), and neither the Seller
nor any of its Subsidiaries has received any opinion or memorandum or legal
advice from legal counsel to the effect that it is exposed, from a legal
standpoint, to any liability or disadvantage which may be material to the
Business.
5.15 BROKERAGE. Except as set forth on the "Brokerage Schedule"
--------- ------------------
attached hereto, there are no claims for brokerage commissions, finders' fees or
similar compensation in connection with the transactions contemplated by this
Agreement based on any arrangement or agreement made by or on behalf of the
Seller, any of its Subsidiaries or any Stockholder.
5.16 GOVERNMENTAL LICENSES AND PERMITS. The "Permits Schedule"
--------------------------------- ----------------
attached hereto contains a complete listing and summary description of all
permits, licenses, certificates, approvals and other authorizations of any
governmental entity or any department, agency or political subdivision thereof,
or other similar rights (collectively, the "Licenses") owned or possessed by the
--------
Seller or any of its Subsidiaries or used by it in the conduct of the Business.
Except as indicated on the Permits Schedule, the Seller and each of its
----------------
Subsidiaries own or possess all right, title and interest in and to all of the
Licenses that are necessary to conduct the Business as presently conducted,
including, without limitation, all Licenses required under any federal, state or
local law relating to public health and safety, employee health and safety,
pollution or protection of the environment. The Seller and each of its
Subsidiaries are in compliance with the terms and conditions of such Licenses
and have received no notices that they are in violation of any of the terms or
conditions of such Licenses. The Seller and each of its Subsidiaries have taken
all necessary action to maintain such Licenses. No loss or expiration of any
such License is threatened, pending or reasonably foreseeable other than
expiration in accordance with the terms thereof. Except as indicated on the
Permits Schedule, all of the Licenses shall survive the transactions
- ----------------
contemplated hereby.
5.17 EMPLOYEES. Except as set forth on the "Employees Schedule"
--------- ------------------
attached hereto, to the knowledge of the Seller or any Stockholder, no key
executive employee and no group of employees or independent contractors of the
Division has any plans to terminate his, her or its employment or relationship
as an independent contractor with the Division. The Seller and each of its
Subsidiaries have complied and remain in compliance with all applicable laws
relating to the employment of personnel and labor. Neither the Seller nor any of
its Subsidiaries is a party to or bound by any collective bargaining agreement,
nor has such party experienced any strikes, grievances, unfair labor practices
claims or other material employee or labor disputes related to the Division.
Neither the Seller nor any of its Subsidiaries has engaged in any unfair labor
practice. Neither the Seller nor any Stockholder has knowledge of any
organizational effort presently being made or threatened by or on behalf of any
labor union with respect to employees of the Division. Neither the Seller nor
any of its Subsidiaries has implemented any plant closing or mass layoff of
employees as those terms are defined in the Worker Adjustment Retraining and
Notification Act of
-34-
<PAGE>
1988, as amended ("WARN"), or any similar state or local law or regulation,
----
and no layoffs that could implicate such laws or regulations will have been
implemented before Closing without advance notification to the Purchaser.
5.18 EMPLOYEE BENEFIT MATTERS.
------------------------
(a) Except as set forth on the "Benefit Plans Schedule" attached
----------------------
hereto, with respect to current or former employees of the Division, neither the
Seller nor any of its Subsidiaries maintains or contributes to or has any actual
or potential liability with respect to any (i) deferred compensation or bonus or
retirement plans or arrangements, (ii) qualified or nonqualified defined
contribution or defined benefit plans or arrangements which are employee pension
benefit plans (as defined in Section 3(2) of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA")), or (iii) employee welfare benefit
-----
plans, (as defined in Section 3(1) of ERISA), stock option or stock purchase
plans, or material fringe benefit plans or programs whether in writing or oral
and whether or not terminated. Neither the Seller nor any of its Subsidiaries
has ever contributed to any multiemployer pension plan (as defined in Section
3(37) of ERISA), and neither the Seller nor any of its Subsidiaries has ever
maintained or contributed to any defined benefit plan (as defined in Section
3(35) of ERISA). The plans, arrangements, programs and agreements referred to
the preceding two sentences are referred to collectively as the "Plans."
-----
Neither the Seller nor any of its Subsidiaries maintains or contributes to any
Plan which provides health, accident or life insurance benefits to former
employees of the Division, their spouses or dependents, other than in accordance
with Section 4980B of the Code ("COBRA").
-----
(b) The Plans (and related trusts and insurance contracts) set forth
on the Benefit Plans Schedule comply in form and in operation with the
----------------------
requirements of applicable laws and regulations, including ERISA and the Code
and the nondiscrimination rules thereof. All contributions, premiums or
payments which are due on or before the Closing Date under each Plan have been
paid. Each Plan which is intended to be qualified under section 401(a) of the
Code (i) has been amended on a timely basis in compliance with the Code and (ii)
has received from the Internal Revenue Service a favorable determination letter
which considers the terms of such Plan as amended.
(c) All required reports and descriptions (including Form 5500 Annual
Reports, Summary Annual Reports and Summary Plan Descriptions) with respect to
the Plans set forth on the Benefit Plans Schedule have been properly and timely
----------------------
filed with the appropriate government agency and distributed to participants as
required. The Seller and each of its Subsidiaries have complied with the
requirements of COBRA.
(d) With respect to each Plan set forth on the Benefit Plans Schedule,
----------------------
(i) there have been no prohibited transactions as defined in Section 406 of
ERISA or Section 4975 of the Code, (ii) no fiduciary (as defined in Section
3(21) of ERISA) has any liability for breach of fiduciary duty or any other
failure to act or comply in connection with the administration or investment of
the assets of such Plans, and (iii) no actions, investigations, suits or claims
with respect to the assets thereof (other than routine claims for benefits) are
pending or threatened, and neither the Seller nor any Stockholder has knowledge
of any facts which would give rise to or could reasonably be expected to give
rise to any such actions, suits or claims.
-35-
<PAGE>
(e) With respect to each of the Plans listed on the Benefit Plans
-------------
Schedule, the Stockholders have furnished to the Purchaser true and complete
- --------
copies of (i) the plan documents, summary plan descriptions and summaries of
material modifications and other material employee communications, (ii) the Form
5500 Annual Report (including all schedules and other attachments for the most
recent three years), (iii) all related trust agreements, insurance contracts or
other funding agreements which implement such plans and (iv) all contracts
relating to each such plan, including, without limitation, service provider
agreements, insurance contracts, investment management agreements and
recordkeeping agreements.
(f) The Seller and each of its Subsidiaries has not incurred and has
no reason to expect that it will incur, any liability to the Pension Benefit
Guaranty Corporation (other than routine premium payments ) or otherwise under
Title IV of ERISA (including any withdrawal liability) or under the Code with
respect to any employee pension benefit plan (as defined in Section 3(2) of
ERISA) that the Seller or any member of its "controlled group" (within the
meaning of Code Section 414) maintains or ever has maintained or to which any of
them contributes, ever has contributed, or ever has been required to contribute.
5.19 INSURANCE. The "Insurance Schedule" attached hereto lists
--------- ------------------
and briefly describes each insurance policy maintained by the Seller and each of
its Subsidiaries with respect to the Division's properties, assets and business,
together with a claims history for the past five years. All of such insurance
policies are in full force and effect, and neither the Seller nor any of its
Subsidiaries is in default with respect to its obligations under any such
insurance policies and neither the Seller nor any of its Subsidiaries has been
denied insurance coverage. Except as set forth on the Insurance Schedule,
------------------
neither the Seller nor any of its Subsidiaries has any self-insurance or co-
insurance programs related to the Division, and the reserves set forth on the
Latest Balance Sheet are adequate to cover all anticipated liabilities with
respect to self-insurance or coinsurance programs.
5.20 OFFICERS AND DIRECTORS; BANK ACCOUNTS. The "Officers,
------------------------------------- ---------
Directors and Bank Accounts Schedule" attached hereto lists all officers and
- ------------------------------------
directors of the Seller and each of its Subsidiaries, and all bank accounts,
safety deposit boxes and lock boxes (designating each authorized signatory with
respect thereto) for the Division.
5.21 AFFILIATE TRANSACTIONS. Except as disclosed on the
----------------------
"Affiliated Transactions Schedule" attached hereto, no Insider is a party to any
- ---------------------------------
agreement, contract, commitment or transaction with the Seller or any of its
Subsidiaries which is pertaining to the Business or has any
interest in any property, real or personal or mixed, tangible or intangible,
used in or pertaining to the Business.
5.22 COMPLIANCE WITH LAWS. The Seller, each of its Subsidiaries
--------------------
and their officers, directors, partners, agents and employees have complied with
and are in compliance with all applicable laws, regulations and ordinances of
foreign, federal, state and local governments and all agencies thereof which are
applicable to the Business, the Division's business practices (including, but
not limited to, the Division's marketing and sales of its products and services)
or any owned or leased properties of the Seller or any of its Subsidiaries
related to the Division and to which the Seller or any of its Subsidiaries may
be subject, and no claims have been filed against the
-36-
<PAGE>
Seller or any of its Subsidiaries alleging a violation of any such laws or
regulations, and neither the Seller nor any of its Subsidiaries has received
notice of any such violations.
5.23 ENVIRONMENTAL MATTERS. Except as set forth on the
---------------------
"Environmental Schedule" attached hereto:
- -----------------------
(a) The Seller and each of its Subsidiaries have complied with and are
currently in compliance with all Environmental and Safety Requirements with
respect to the Business, and neither the Seller nor any of its Subsidiaries has
received any oral or written notice, report or information regarding any
liabilities (whether accrued, absolute, contingent, unliquidated or otherwise)
or any corrective, investigatory or remedial obligations arising under
Environmental and Safety Requirements which relate to the Division or any of its
properties or facilities.
(b) Without limiting the generality of the foregoing, the Seller and
each of its Subsidiaries have obtained and complied with, and are currently in
compliance with, all permits, licenses and other authorizations that may be
required pursuant to any Environmental and Safety Requirements for the occupancy
of the Division's properties or facilities or the operation of the Business. A
list of all such permits, licenses and other authorizations which are material
to the Business is set forth on the Environmental Schedule.
----------------------
(c) Neither this Agreement or the other Transaction Documents nor the
consummation of the transactions contemplated hereby and thereby shall impose
any obligations on the Seller or its Subsidiaries or otherwise for site
investigation or cleanup, or notification to or consent of any government
agencies or third parties under any Environmental and Safety Requirements
(including, without limitation, any so called "transaction-triggered" or
"responsible property transfer" laws and regulations).
(d) None of the following exists at any property or facility owned,
occupied or operated by the Seller or any of its Subsidiaries related to the
Division: (i) underground storage tanks or surface impoundments; (ii) asbestos-
containing material in any form or condition; (iii) materials or equipment
containing polychlorinated biphenyls; or (iv) landfills.
(e) Neither the Seller nor any of its Subsidiaries has treated,
stored, disposed of, arranged for or permitted the disposal of, transported,
handled or Released any substance (including, without limitation, any hazardous
substance) or owned, occupied or operated any facility or property related to
the Division, so as to give rise to liabilities of the Seller or any of its
Subsidiaries for response costs, natural resource damages or attorneys' fees
pursuant to CERCLA or any other Environmental and Safety Requirements.
(f) Without limiting the generality of the foregoing, no facts, events
or conditions relating to the past or present properties, facilities or
operations of the Seller or any of its Subsidiaries shall prevent, hinder or
limit continued compliance with Environmental and Safety Requirements in the
conduct of the Business, give rise to any corrective, investigatory or remedial
obligations pursuant to Environmental and Safety Requirements or give rise to
any other liabilities (whether accrued, absolute, contingent, unliquidated or
otherwise) pursuant to Environmental and Safety Requirements in the conduct of
the Business, including, without limitation, those liabilities
-37-
<PAGE>
relating to onsite or offsite Releases or threatened Releases of hazardous
materials, substances or wastes, personal injury, property damage or natural
resources damage.
(g) Neither the Seller nor any of its Subsidiaries has, either
expressly or by operation of law, knowingly assumed or undertaken any liability
or corrective investigatory or remedial obligation of any other Person relating
to any Environmental and Safety Requirements.
(h) No Environmental Lien has attached to any property owned, leased
or operated by the Seller or any of its Subsidiaries related to the Division.
5.24 DISCLOSURE. Neither this Agreement, the other Transaction
----------
Documents, nor any of the schedules, attachments or Exhibits hereto, contain any
untrue statement of a material fact or omit a material fact necessary to make
each statement contained herein or therein, not misleading; There is no fact
which has not been disclosed to the Purchaser of which the Seller or any
Stockholder has knowledge which has a Material Adverse Effect or could
reasonably be anticipated to have a Material Adverse Effect.
5.25 CLOSING DATE. All of the representations and warranties
------------
contained in this Article V and elsewhere in this Agreement and all information
delivered in any schedule, attachment or Exhibit hereto or in any writing
delivered to the Purchaser are true and correct on the date of this Agreement
and shall be true and correct on the Closing Date, except to the extent that the
Seller or any Stockholder has advised the Purchaser otherwise in writing prior
to the Closing.
ARTICLE VI
REPRESENTATIONS AND WARRANTIES CONCERNING THE PURCHASER
-------------------------------------------------------
As a material inducement to the Seller to enter into this Agreement,
the Purchaser hereby represents and warrants to the Seller that:
6.1 ORGANIZATION AND CORPORATE POWER. The Purchaser is a
--------------------------------
corporation duly organized, validly existing and in good standing under the laws
of the State of Delaware, with full corporate power and authority to enter into
this Agreement and the other agreements contemplated hereby to which the
Purchaser is a party and perform its obligations hereunder and thereunder.
6.2 AUTHORIZATION OF TRANSACTION. The execution, delivery and
----------------------------
performance of this Agreement and the other agreements contemplated hereby to
which the Purchaser is a party have been duly and validly authorized by all
requisite corporate action on the part of the Purchaser, and no other corporate
proceedings on its part are necessary to authorize the execution, delivery or
performance of this Agreement. This Agreement constitutes, and each of the
other agreements contemplated hereby to which the Purchaser is a party shall
when executed constitute, a valid and binding obligation of the Purchaser,
enforceable in accordance with their terms.
6.3 NO VIOLATION. The Purchaser is not subject to or obligated
------------
under its certificate of incorporation, its by-laws, any applicable law, or rule
or regulation of any governmental authority, or any agreement or instrument, or
any license, franchise or permit, or subject to any order, writ,
-38-
<PAGE>
injunction or decree, which would be breached or violated by its execution,
delivery or performance of this Agreement and the other agreements contemplated
hereby to which the Purchaser is a party.
6.4 Governmental Authorities and Consents. Except for the
-------------------------------------
filing pursuant to the HSR Act, the Purchaser is not required to submit any
notice, report or other filing with any governmental authority in connection
with the execution or delivery by it of this Agreement and the other agreements
contemplated hereby to which the Purchaser is a party or the consummation of the
transactions contemplated hereby or thereby. Except for approval in connection
with the filing under the HSR Act, no consent, approval or authorization of any
governmental or regulatory authority or any other party or person is required to
be obtained by the Purchaser in connection with its execution, delivery and
performance of this Agreement and the other agreements contemplated hereby to
which the Purchaser is a party or the transactions contemplated hereby or
thereby.
6.5 Litigation. There are no actions, suits, proceedings or
----------
orders pending or, to the Purchaser's knowledge, threatened against or affecting
the Purchaser at law or in equity, or before or by any federal, state, municipal
or other governmental department, commission, board, bureau, agency or
instrumentality, domestic or foreign, which would adversely affect the
Purchaser's performance under this Agreement and the other agreements
contemplated hereby to which the Purchaser is a party or the consummation of the
transactions contemplated hereby or thereby.
6.6 Brokerage. There are no claims for brokerage commissions,
---------
finders' fees or similar compensation in connection with the transactions
contemplated by this Agreement based on any arrangement or agreement made by or
on behalf of the Purchaser.
6.7 Closing Date. All of the representations and warranties
------------
contained in this Article VI and elsewhere in this Agreement and all information
delivered in any schedule, attachment or Exhibit hereto or in any writing
delivered to Stockholders are true and correct on the date of this Agreement and
shall be true and correct on the Closing Date, except to the extent that the
Purchaser has advised the Seller otherwise in writing prior to the Closing.
ARTICLE VII
TERMINATION
-----------
7.1 Termination. This Agreement may be terminated at any time
------------
prior to the Closing:
-39-
<PAGE>
(a) by mutual written consent of the Seller and the Purchaser;
(b) by the Seller or the Purchaser if there has been a material
misrepresentation or breach on the part of the other Party of the
representations, warranties or covenants set forth in this Agreement or if
events have occurred which have made it impossible to satisfy a condition
precedent to the terminating Party's obligations to consummate the transactions
contemplated hereby unless such terminating Party's willful or knowing breach of
this Agreement has caused the condition to be unsatisfied; or
(c) by the Seller or the Purchaser if the Closing has not occurred on
or prior to April 1, 1998; provided, however, that neither the Purchaser nor the
Seller shall be entitled to terminate this Agreement pursuant to this Section
7.1(c) if such Party's willful or knowing breach of this Agreement has prevented
the consummation of the transactions contemplated hereby at or prior to such
time.
7.2 Effect of Termination. In the event of termination of this
---------------------
Agreement by either the Seller or the Purchaser as provided in Section 7.1, this
Agreement shall forthwith become void and there shall be no liability on the
part of any Party to any other Party under this Agreement, except that the
provisions of Section 9.7 and Article X shall continue in full force and effect
and except that nothing herein shall relieve any Party from liability for any
breach of this Agreement prior to such termination.
ARTICLE VIII
INDEMNIFICATION AND RELATED MATTERS
-----------------------------------
8.1 Survival. All representations, warranties, covenants and
--------
agreements set forth in this Agreement or in any writing or certificate
delivered in connection with this Agreement shall survive the Closing Date and
the consummation of the transactions contemplated hereby and shall not be
affected by any examination made for or on behalf of any Party, the knowledge of
any of such Party's officers, directors, stockholders, employees or agents, or
the acceptance of any certificate or opinion. Notwithstanding the foregoing, no
Party shall be entitled to recover for any Loss pursuant to Section 8.2(a)(i) or
Section 8.2(c)(i) unless written notice of a claim thereof is delivered to the
other Party prior to the Applicable Limitation Date. For purposes of this
Agreement, the term "Applicable Limitation Date" shall mean the second
--------------------------
anniversary of the Closing Date; provided that the Applicable Limitation Date
with respect to the following Losses shall be as follows: (i) with respect to
any Loss arising from or related to a breach of the representations and
warranties of the Seller and Stockholders set forth in Sections 5.11 (Taxes) and
5.18 (Employee Benefits Matters), the Applicable Limitation Date shall be the
60th day after expiration of the statute of limitations (including any
extensions thereto to the extent that such statute of limitations may be tolled)
applicable to the Tax or ERISA statute, regulation or other authority which gave
rise to such Loss, (ii) with respect to any Loss arising from or related to a
breach of the representations and warranties of the Seller and Stockholders set
forth in Section 5.23 (Environmental), the Applicable Limitation Date shall be
the fifth anniversary of the Closing Date, and (iii) with respect to any Loss
arising from or related to a breach of the representations and warranties of the
Seller and Stockholders set forth in Section 5.1 (Organization and Corporate
Power), Section 5.2 (Authorization of Transactions), Section 5.3
(Capitalization), Section 5.5 (Absence of Conflicts), or Section 5.15
(Brokerage) and with respect to any Loss arising from or related to a breach of
the representations and warranties of Purchaser set forth in Section 6.1
(Organization an Corporate Power), 6.2 (Authorization of Transactions), 6.3 (No
Violation) or 6.6 (Brokerage), there shall be no Applicable Limitation Date
(i.e., such representations and warranties shall survive forever).
-40-
<PAGE>
8.2 Indemnification.
---------------
(a) The Seller and the Stockholders shall jointly and severally
indemnify the Purchaser and each of its officers, directors, stockholders,
employees, agents, representatives, affiliates, successors and assigns
(collectively, the "Purchaser Parties") and hold each of them harmless from and
-----------------
against and pay on behalf of or reimburse such Purchaser Parties in respect of
the entirety of any Losses the Purchaser Parties may suffer, sustain or become
subject to, through and after the date of the claim for indemnification
resulting from, arising out of, relating to, in the nature of, or caused by:
(i) the breach of any representation or warranty made by the Seller or
any Stockholder contained in this Agreement or any certificate delivered by
the Seller or any Stockholder to the Purchaser with respect thereto in
connection with the Closing;
(ii) the breach of any covenant or agreement made by the Seller or any
Stockholder contained in this Agreement or any certificate delivered by the
Seller or any Stockholder to the Purchaser with respect thereto in
connection with the Closing;
(iii) any Excluded Liabilities; or
(iv) the Section 1031 Exchange.
The Purchaser's remedy for any indemnification of Losses hereunder may be
satisfied by proceeding against the Seller or one or more Stockholders
individually for all or any portion of any such Loss.
(b) The indemnification provided for in Section 8.2(a)(i) above is
subject to the following limitations:
(i) The Seller and the Stockholders will be liable to the Purchaser
Parties with respect to claims referred to in Section 8.2(a)(i) only if
Purchaser gives the Seller written notice thereof within the Applicable
Limitation Date;
(ii) The aggregate amount of all payments made by the Seller and the
Stockholders in satisfaction of claims for indemnification pursuant to
Section 8.2(a)(i) shall not exceed $20,000,000 (the "Cap"); and
---
(iii) The aggregate amount of all payments made by the same
individual Stockholder in satisfaction of claims for indemnification
pursuant to Section 8.2(a)(i) shall not exceed such Stockholder's pro rata
portion of the Cap determined by multiplying the amount of the Cap by a
fraction, the numerator of which is the number of shares of capital stock
of the Seller owned by such Stockholder on the Closing Date and the
denominator of which is the total number of shares of capital stock of the
Seller owned on the Closing Date by all of the Stockholders signatories
hereto.
-41-
<PAGE>
Notwithstanding any implication to the contrary contained in this Agreement, so
long as the Purchaser delivers written notice of a claim for which the Purchaser
is entitled to indemnification hereunder to the Seller no later than the
Applicable Limitation Date, the Seller and the Stockholders shall be required to
indemnify the Purchaser Parties for all Losses (up to the Cap) which the
Purchaser Parties may incur in respect of the matters which are the subject of
such claim, regardless of when incurred.
(c) The Purchaser shall indemnify the Seller and the Stockholders and
hold each Stockholder, the Seller and its officers, directors, stockholders,
employees, agents, representatives, affiliates, successors and assigns
(collectively, the "Seller Parties") and hold each of them harmless from and
--------------
against and pay on behalf of or reimburse such Seller Parties in respect of the
entirety of any Losses the Seller Parties may suffer, sustain or become subject
to, through and after the date of the claim for indemnification resulting from,
arising out of, relating to, in the nature of, or caused by:
(i) the breach of any representation or warranty made by the Purchaser
contained in this Agreement or any certificate delivered by the Purchaser
to the Seller with respect thereto in connection with the Closing;
(ii) the breach of any covenant or agreement made by the Purchaser
contained in this Agreement or any certificate delivered by the Purchaser
to the Seller with respect thereto in connection with the Closing; or
(iii) any Assumed Liabilities.
(d) The indemnification provided for in Section 8.2(c)(i) above is
subject to the following limitations:
(i) The Purchaser will be liable to the Seller Parties with respect to
claims referred to in Section 8.2(c)(i) only if the Seller gives the
Purchaser written notice thereof within the Applicable Limitation Date; and
(ii) The aggregate amount of all payments made by the Purchaser in
satisfaction of claims for indemnification pursuant to Section 8.2(c)(i)
shall not exceed the Cap.
Notwithstanding any implication to the contrary contained in this Agreement, so
long as the Seller delivers written notice of a claim to the Purchaser no later
than the Applicable Limitation Date, the Purchaser shall be required to
indemnify the Seller Parties for all Losses (up to the Cap) which the Seller
Parties may incur in respect of the matters which are the subject of such claim,
regardless of when incurred.
-42-
<PAGE>
(e) If a party hereto seeks indemnification under this Article VIII,
such party (the "Indemnified Party") shall give written notice to the other
-----------------
party (the "Indemnifying Party") as soon as practicable, and in any event within
------------------
60 days, after receiving written notice of any action, lawsuit, proceeding,
investigation or other claim against it (if by a third party) or discovering the
liability, obligation or facts giving rise to such claim for indemnification,
describing the claim, the amount thereof (if known and quantifiable), and the
basis thereof; provided that the failure to so notify the Indemnifying Party
shall not relieve the Indemnifying Party of its or his obligations hereunder
except to the extent such failure shall have materially prejudiced the
Indemnifying Party. In that regard, if any action, lawsuit, proceeding,
investigation or other claim shall be brought or asserted by any third party
which, if adversely determined, would entitle the Indemnified Party to indemnity
pursuant to this Article VIII, the Indemnified Party shall notify the
Indemnifying Party as soon as practicable, and in any event within 60 days,
after receiving written notice of such action, lawsuit, proceeding,
investigation or other claim of the same in writing, specifying in detail the
basis of such claim and the facts pertaining thereto and the Indemnifying Party
shall be entitled to participate in the defense of such action, lawsuit,
proceeding, investigation or other claim giving rise to the Indemnified Party's
claim for indemnification at its expense, and at its option (subject to the
limitations set forth below) shall be entitled to appoint lead counsel of such
defense with reputable counsel reasonably acceptable to the Indemnified Party;
provided that, as a condition precedent to the Indemnifying Party's right to
assume control of such defense, it must first:
(i) enter into an agreement with the Indemnified Party (in form and
substance reasonably satisfactory to the Indemnified Party) pursuant to
which the Indemnifying Party agrees to be fully responsible for all Losses
relating to such claims and that it will provide full indemnification to
the Indemnified Party for all Losses relating to such claim, and
(ii) unconditionally guarantees the payment and performance of any
liability or obligation which may arise with respect to such claim or the
facts giving rise to such claim for indemnification, and
(iii) furnish the Indemnified Party with reasonable evidence that the
Indemnifying Party is and will be able to satisfy any such liability;
and provided further that the Indemnifying Party shall not have the right to
assume control of such defense and shall pay the fees and expenses of counsel
retained by the Indemnified Party (and reasonably acceptable to the Indemnifying
Party), if the claim which the Indemnifying Party seeks to assume control (i)
seeks non-monetary relief, (ii) involves criminal or quasi-criminal allegations,
(iii) involves a claim to which the Indemnified Party reasonably believes an
adverse determination would be detrimental to or injure the Indemnified Party's
reputation or future business prospects, or (iv) involves a claim which, upon
petition by the Indemnified Party, the appropriate court rules that the
Indemnifying Party failed or is failing to vigorously prosecute or defend.
-43-
<PAGE>
If the Indemnifying Party is permitted to assume and control the defense
and elects to do so, the Indemnified Party shall have the right to employ
counsel separate from counsel employed by the Indemnifying Party in any such
action and to participate in the defense thereof, but the fees and expenses of
such counsel employed by the Indemnified Party shall be at the expense of the
Indemnified Party unless (i) the employment thereof has been specifically
authorized by the Indemnifying Party in writing, or (ii) the Indemnifying Party
has been advised by counsel that a reasonable likelihood exists of a conflict of
interest between the Indemnifying Party and the Indemnified Party.
If the Indemnifying Party shall control the defense of any such claim, the
Indemnifying Party shall obtain the prior written consent of the Indemnified
Party (which shall not be unreasonably withheld) before entering into any
settlement of a claim or ceasing to defend such claim, if pursuant to or as a
result of such settlement or cessation, injunction or other equitable relief
will be imposed against the Indemnified Party or if such settlement does not
expressly unconditionally release the Indemnified Party from all liabilities and
obligations with respect to such claim, without prejudice.
(f) The Indemnifying Party shall pay the Indemnified Party in
immediately available funds promptly after the Indemnified Party provides the
Indemnifying Party with written notice of a claim hereunder and the Parties
reasonably agree that there is a reasonable basis for such claim.
(g) In the event the Indemnified Party receives payment from the
Indemnifying Party pursuant to this Section 8.2, and the Indemnified Party has a
valid claim against a third party with respect to the Loss giving rise to such
payment, the Indemnified Party shall either (i) diligently pursue such claim and
reimburse the Indemnifying Party for the amount of such payment from any
proceeds actually received from such third party with respect to such Loss
(after deducting the cost of pursuing such claim), or (ii) allow the
Indemnifying Party to pursue such claim.
(h) Amounts paid to or on behalf of the Seller, the Stockholders or
the Purchaser as indemnification shall be treated as adjustments to the Purchase
Price.
ARTICLE IX
ADDITIONAL AGREEMENTS
---------------------
9.1 Continuing Assistance. Subsequent to the Closing, the
---------------------
Seller, the Stockholders and the Purchaser (at their own cost) shall assist each
other (including making records available) in the preparation of their
respective Tax Returns and the filing and execution of Tax elections, if
required, as well as any audits or litigation that ensue as a result of the
filing thereof, to the extent that such assistance is reasonably requested.
9.2 Tax Matters.
-----------
(a) All transfer, documentary, sales, use, stamp, registration and
other such Taxes and fees (including any penalties and interest thereon)
incurred in connection with this Agreement shall be paid by the Seller or the
Stockholders when due, and the Seller and the Stockholders shall, at his or its
own expense, file all necessary Tax Returns and other documentation with respect
to all such transfer, documentary, sales, use, stamp, registration and other
Taxes and fees, and if required by applicable law, the Purchaser shall, and
shall cause its affiliates to, join in the execution of any such Tax Returns and
other documentation.
-44-
<PAGE>
(b) All real property taxes, personal property taxes, ad valorem
-- -------
obligations and similar taxes imposed on a periodic basis, in each case levied
with respect to the Acquired Assets, other than conveyance taxes provided for in
Section 9.2(a), for a taxable period which includes (but does not end on) the
Closing Date shall be apportioned between the Seller and the Purchaser as of the
Closing Date based on the number of days of such taxable period included in the
pre-Closing Tax period and the number of days of such taxable period included in
the post-Closing period. The Seller shall be liable for the proportionate
amount of such Taxes that is attributable to the pre-Closing Tax period. Within
90 days after the Closing, the Seller and the Purchaser shall present a
reimbursement to which each is entitled under this Section 9.2(b) together with
such supporting evidence as is reasonably necessary to calculate the proration
amount. The proration amount shall be paid by the party owing it to the other
within 10 days after delivery of such statement. Thereafter, the Seller shall
notify the Purchaser upon receipt of any bill for real or personal property
taxes relating to the Acquired Assets, part or all of which are attributable to
the post-Closing Tax period, and shall promptly deliver such bill to the
Purchaser who shall pay the same to the appropriate taxing authority, provided
that if such bill covers the pre-Closing Tax period, the Seller shall also remit
prior to the due date of assessment to the Purchaser payment for the
proportionate amount of such bill that is attributable to the pre-Closing Tax
period. In the event that either the Seller or the Purchaser shall thereafter
make a payment for which it is entitled to reimbursement under this Section
9.2(b), the other party shall make such reimbursement promptly but in no event
later than 30 days after the presentation of a statement setting forth the
amount of reimbursement to which the presenting party is entitled along with
such supporting evidence as is reasonably necessary to calculate the amount of
reimbursement. Any payment required under this Section 9.2(b) and not made
within 10 days of delivery of the statement shall bear interest at the rate per
annum determined, from time to time, under the provisions of Section 6621(a)(2)
of the Code for each day until paid.
9.3 Press Releases and Announcements. Prior to the Closing
--------------------------------
Date, no press releases related to this Agreement and the transactions
contemplated herein, or other announcements to the employees, customers or
suppliers of the Seller shall be issued without the mutual approval of all
Parties, except for any public disclosure which any Party in good faith believes
is required by law or regulation (in which case the disclosure shall be prepared
jointly by the Seller and the Purchaser). After the Closing Date, no press
releases related to this Agreement and the transactions contemplated herein, or
other announcements to the employees, customers or suppliers of the Seller shall
be issued without the Purchaser's consent (which shall not be unreasonably
withheld).
9.4 Further Transfers. The Seller shall execute and deliver
-----------------
such further instruments of conveyance and transfer and take such additional
action as the Purchaser may reasonably request to effect, consummate, confirm or
evidence the transfer to the Purchaser of the Acquired Assets and any other
transactions contemplated hereby.
9.5 SPECIFIC PERFORMANCE. The Seller and the Stockholders
--------------------
acknowledge that the Business is unique and recognize and affirm that in the
event of a breach of this Agreement by the Seller or the Stockholders, money
damages may be inadequate and the Purchaser may have no adequate remedy at law.
Accordingly, the Seller and the Stockholders agree that the Purchaser shall have
the right, in addition to any other rights and remedies existing in its favor,
to enforce its rights and the Seller's and the Stockholders' obligations
hereunder not only by an action or actions for damages but also by an action or
actions for specific performance, injunctive and/or other equitable relief.
-45-
<PAGE>
9.6 Transition Assistance. Neither the Seller nor any
---------------------
Stockholder shall in any manner take any action which is designed, intended, or
might be reasonably anticipated to have the effect of discouraging customers,
suppliers, lessors, licensors and other business associates from maintaining the
same business relationships with the Purchaser after the date of this Agreement
as were maintained with the Seller with respect to the Division prior to the
date of this Agreement.
9.7 Expenses. Except as otherwise provided herein, the Seller
--------
and the Stockholders and the Purchaser shall pay all of their own fees, costs
and expenses (including, without limitation, fees, costs and expenses of legal
counsel, investment bankers, brokers or other representatives and consultants
and appraisal fees, costs and expenses) incurred in connection with the
negotiation of the this Agreement and the other agreements contemplated hereby,
the performance of its obligations hereunder and thereunder, and the
consummation of the transactions contemplated hereby and thereby.
9.8 Books and Records. Unless otherwise consented to in writing
-----------------
by the Seller or the Purchaser (as the case may be), the Purchaser and the
Seller will not, for a period of seven years following the date hereof, destroy,
alter or otherwise dispose of any of the books and records of the Seller
acquired by the Purchaser hereunder or retained by the Seller or any Stockholder
without first offering to surrender to the Seller, the Stockholders or the
Purchaser such books and records or any portion thereof of which the Seller, the
Stockholders or the Purchaser may intend to destroy, alter or dispose. The
Purchaser, the Seller and the Stockholders will allow the other party's
representatives, attorneys and accountants access to such books and records,
upon reasonable request during such party's normal business hours, for the
purpose of examining and copying the same in connection with any matter whether
or not related to or arising out of this Agreement or the transactions
contemplated hereby.
9.9 NONCOMPETITION, NONSOLICITATION AND CONFIDENTIALITY.
---------------------------------------------------
(a) Noncompetition.
--------------
(i) In consideration of the mutual covenants provided for herein to
the Seller and the Stockholders at the Closing and in consideration of the
additional payment set forth below, during the period beginning on the
Closing Date and ending on the fifth anniversary of the Closing Date (the
"Noncompete Period"), neither the Seller nor Will Crenshaw, Colby Crenshaw,
------------------
Casey Crenshaw, Heather Crenshaw-Petkovesk or any of the Stockholders (the
Seller, Will Crenshaw, Colby Crenshaw, Casey Crenshaw, Heather Crenshaw-
Petkovesk and the Stockholders are collectively referred to herein as the
"Noncompeting Parties") shall engage (whether as an owner, operator,
----------------------
manager, employee, officer, director, consultant, advisor, representative
or otherwise) directly or indirectly in any business that competes with the
Business as it is conducted, or was conducted during the 12-month period
ending on the Closing Date, in any geographic area in which such Business
is conducted as of the Closing Date or during such 12-month period.
-46-
<PAGE>
(ii) For purposes hereof, engaging in the following activities or
businesses is not prohibited under this Section 9.9(a):
(A) manufacturing, repairing, maintaining, renting, leasing, selling
or financing any item to the Offshore Market (as defined below) other than
renting or leasing roll-off containers, roll-off trailers, stainless steel
tanker trailers, aluminum end dumps, frac tanks, polytanks (other than
polytanks designed specifically for the Offshore Market) or roll-off vacuum
tanks or boxes (other than roll-off vacuum tanks or boxes designed
specifically for the Offshore Market);
(B) manufacturing, repairing, maintaining, selling, financing or
entering into capital leases of products manufactured directly by the
Seller or its Subsidiaries;
(C) pressure washing and tank cleaning activities such as those
conducted by Crenshaw Enterprises as of the Closing Date; or
(D) ownership of less than 5% of the outstanding stock of any publicly
traded corporation.
(iii) For purposes of this Section 9.9(a), the "Offshore Market"
---------------
means the marine, offshore drilling, offshore production, offshore
pipeline, and associated maintenance industries and all dockside activities
associated therewith.
(iv) The parties hereto agree that the covenant set forth in this
Section 9.9 is reasonable with respect to its duration, geographical area
and scope. If the final judgment of a court of competent jurisdiction
declares that any term or provision of this Section 9.9(a) is invalid or
unenforceable, the Parties agree that the court making the determination of
invalidity or unenforceability shall have the power to reduce the scope,
duration, or area of the term or provision, to delete specific words or
phrases, or to replace any invalid or unenforceable term or provision with
a term or provision that is valid and enforceable and that comes closest to
expressing the intention of the invalid or unenforceable term or provision,
and this Agreement shall be enforceable as so modified after the expiration
of the time within which the judgment may be appealed. As further
consideration for the obligations of the Noncompeting Parties pursuant to
this Section 9.9(a), the Purchaser shall pay to the Noncompeting Parties
$150,000 on the Closing Date, allocated among the Noncompeting Parties in
accordance with Noncompete Allocation Schedule attached hereto.
------------------------------
(b) Nonsolicitation. During the Noncompete Period, no Noncompeting
---------------
Party shall directly or indirectly through another Person (i) induce or attempt
to induce any employee of the Purchaser to leave the employ of the Purchaser, or
in any way interfere with the relationship between the Purchaser and any
employee thereof, (ii) hire any person who is then an employee of the Purchaser
or was an employee of the Seller or any of its Subsidiaries in connection with
the Business at any time during the one-year period immediately preceding the
Closing (provided that the Noncompeting Parties may hire John Virgilio or Mike
Brieden if such individual resigns or is fired by the Purchaser), or (iii)
induce or attempt to induce any customer, supplier, licensee, licensor,
franchisee or other business relation of the Purchaser to cease doing business
with the Purchaser, or in any way interfere with the relationship between any
such customer, supplier, licensee or business relation and the Purchaser.
-47-
<PAGE>
(c) Confidentiality. Each Noncompeting Party shall treat and hold as
---------------
confidential any information concerning the business and affairs of the Business
that is not already generally available to the public (the "Confidential
------------
Information"), refrain from using any of the Confidential Information except in
- -----------
connection with this Agreement, and deliver promptly to the Purchaser or
destroy, at the request and option of the Purchaser, all tangible embodiments
(and all copies) of the Confidential Information which are in his or its
possession or under his or its control. In the event that any Noncompeting
Party is requested or required (by oral question or request for information or
documents in any legal proceeding, interrogatory, subpoena, civil investigative
demand, or similar process) to disclose any Confidential Information, such
Noncompeting Party shall notify the Purchaser promptly of the request or
requirement so that the Purchaser may seek an appropriate protective order or
waive compliance with the provisions of this Section 9.9(c). If, in the absence
of a protective order or the receipt of a waiver hereunder, the Noncompeting
Party is, on the advice of counsel, compelled to disclose any Confidential
Information to any tribunal or else stand liable for contempt, such Noncompeting
Party may disclose the Confidential Information to the tribunal; provided that
such disclosing Noncompeting Party shall use his or its reasonable best efforts
to obtain, at the request of the Purchaser, an order or other assurance that
confidential treatment shall be accorded to such portion of the Confidential
Information required to be disclosed as the Purchaser shall designate.
(d) Trade Names. Neither the Seller nor any Stockholder shall use or
-----------
permit any of its or his Affiliates to use the "Dragon Rental" name, or any name
confusingly similar thereto (other than the name "Tiger Tanks by Dragon
Products") in any manner anywhere in the world after Closing; provided that,
without limiting the generality of the preceding clause, for purposes of this
Agreement, any name containing both (i) the word "Dragon," or any derivative
----
thereof or any word confusingly similar thereto and (ii) the word "Rental," or
---
any derivative thereof or any word confusingly similar thereto, shall be deemed
to be confusingly similar to the name "Dragon Rental."
(e) Remedy for Breach. Each Noncompeting Party acknowledges and
-----------------
agrees that in the event of a breach by any Noncompeting Party of any of the
provisions of this Section 9.9, monetary damages shall not constitute a
sufficient remedy. Consequently, in the event of any such breach, the Seller,
Purchaser and/or their respective successors or assigns may, in addition to
other rights and remedies existing in their favor, apply to any court of law or
equity of competent jurisdiction for specific performance and/or injunctive or
other relief in order to enforce or prevent any violations of the provisions
hereof, in each case without the requirement of posting a bond or proving actual
damages.
9.10 EMPLOYEES.
---------
(a) A true, correct and complete list of all of the Division's
employees (including leased employees) (the "Division Employees") indicating the
------------------
rate of pay of each such employee during the twelve months preceding the date
hereof and the status of each such employee as active, on leave, full-time,
part-time or otherwise is set forth on the "Division Employees Schedule"
---------------------------
attached hereto.
(b) Except for the employees set forth on the "Excluded Employees
------------------
Schedule" attached hereto (the "Excluded Employees"), the Purchaser will offer
- -------- ------------------
at-will employment to all active full-time Division Employees as of the Closing
Date (the "Continuing Employees") with substantially equivalent salary and wages
--------------------
as such employees received immediately prior to the Closing Date and benefits
which are similar to those which are generally provided by the Purchaser to its
employees. Nothing in this Section 9.10 shall obligate Purchaser to continue to
employ any Continuing Employee for any period of time.
-48-
<PAGE>
(c) The Seller will be responsible for and shall pay (and the
Stockholders shall cause the Seller to pay) to the Division's employees (i) all
amounts of wages, bonuses and other renumeration (including, without limitation,
discretionary benefits and bonuses) payable to such employees with respect to
the period ending on the day prior to the Closing Date, (ii) any workers'
compensation claims, amounts payable under Plans maintained by Seller and other
amounts payable on an ongoing basis to such employees in connection with events
or incidents occurring prior to the Closing Date, except to the extent that such
amounts are paid under insurance, (iii) amounts equal to the vacation pay, sick
leave pay and floating holiday pay earned or accrued by such employees as of the
close of business on the Closing Date, whether or not such pay is vested or has
been accrued on the books of the Division at such close of business, based upon
the remuneration of such employees, normally used in computing such vacation
pay, sick leave pay and floating holiday pay and (iv) all severance payments, if
any, due to such employees as a result of the termination of their employment
with the Seller. Seller shall also be responsible for and shall pay any related
payroll burden (including, without limitation, FICA and other employment taxes)
with respect to payments made under this Section 9.10(c).
9.11 Seller's Use of Name. Upon consummation of the Closing, the
--------------------
Seller will cease using the name "Dragon Rental" (and any name confusingly
similar thereto, other than the name "Tiger Tanks by Dragon Products"), it being
the intent of the Parties that from and after the Closing the Purchaser will
have the sole right as against the Seller and all other Persons to conduct
business under such name and that the Purchaser will commence doing so at the
time of the Closing.
9.12 Allocation of Purchase Price. The allocation ("Allocation")
---------------------------- ----------
of the Purchase Price among the Acquired Assets shall be made as set forth on
the "Purchase Price Allocation Schedule" attached hereto. The Allocation shall
----------------------------------
be determined jointly by the Purchaser and the Seller reasonably and in good
faith, and such Allocation shall be used by the Parties in preparing (a) Form
8594, Asset Acquisition Statement, for each of the Purchaser and the Seller, and
(b) all Tax Returns. Each of the Purchaser and the Seller shall file Form 8594,
prepared in accordance with this Section, with its federal income Tax Return for
its Tax period including the Closing Date.
9.13 Third Party Consents. Notwithstanding anything to the
--------------------
contrary contained in this Agreement, this Agreement shall not constitute an
agreement to transfer, sell or otherwise assign any instrument, contract, lease,
license, permit or other agreement or arrangement which is not permitted to be
assigned in connection with a transaction of the type contemplated by this
Agreement (collectively, the "Unassigned Contracts"). The beneficial interest
--------------------
in and to each Unassigned Contract shall in any event pass to the Purchaser at
the Closing; and the Seller and each of the Stockholders covenants and agrees to
cooperate with the Purchaser in any lawful and economically feasible arrangement
to provide the Purchaser with the Seller's entire interest in the benefits under
each of the Unassigned Contracts. If and only if the Purchaser receives the
economic benefits under an Unassigned Contract, the Purchaser agrees to accept
the burdens and perform the obligations under such Unassigned Contract as
subcontractor of the Seller. Furthermore, if the other party(ies) to an
Unassigned Contract subsequently consent to the assignment of such contract to
the Purchaser (without modification thereto which is adverse to the Purchaser),
the Purchaser shall thereupon agree to assume and perform all liabilities and
obligations arising thereunder after the date of such consent, at which time
such Unassigned Contract shall be deemed an Acquired Asset. The Seller and each
of the Stockholders agrees to indemnify the Purchaser and hold it harmless
against any Losses which the Purchaser may suffer, sustain or become subject to,
as a result of any claims by any party to any of the Unassigned Contracts for
breach of contract in connection with the consummation of the transactions
contemplated by this Agreement.
9.14 Bulk Sales Law. The Seller will bear any loss, liability,
--------------
obligation or cost suffered by the Seller or the Purchaser as a result of the
Parties' noncompliance with any provision of any bulk sales law which is
applicable to the transfer of the Acquired Assets pursuant to this Agreement.
-49-
<PAGE>
ARTICLE X
MISCELLANEOUS
-------------
10.1 Amendment and Waiver. This Agreement may be amended and any
--------------------
provision of this Agreement may be waived, provided that any such amendment or
waiver shall be binding upon a Party only if such amendment or waiver is set
forth in a writing executed by Purchaser, the Seller and the Stockholders. No
course of dealing between or among any persons having any interest in this
Agreement shall be deemed effective to modify, amend or discharge any part of
this Agreement or any rights or obligations of any Party under or by reason of
this Agreement.
10.2 Notices. All notices, demands and other communications
-------
given or delivered under this Agreement shall be in writing and shall be deemed
to have been given when personally delivered, mailed by first class mail, return
receipt requested, or delivered by express courier service or telecopied (with
hard copy to follow). Notices, demands and communications to the Stockholders,
the Seller and the Purchaser shall, unless another address is specified in
writing, be sent to the address or telecopy number indicated below:
- --------------------------------------
Notices to the Seller and the
Stockholders: with a copy to:
- -------------------------------------- --------------------------------------
c/o Orgain, Bell & Tucker, L.L.P.
The Modern Group, Inc. 470 Orleans
1655 Louisiana Beaumont, Texas 77701
Beaumont, Texas 77701 Telecopy: (409) 838-6959
Telecopy: (409) 833-5170 Attention: J. H. Peacock, Esq.
Attention: President John W. Johnson, Esq.
Notices to Purchaser: with a copy to:
- -------------------------------------- --------------------------------------
c/o Kirkland & Ellis
National Equipment Services, Inc. 200 East Randolph Drive
1800 Sherman Avenue, Suite 100 Chicago, Illinois 60601
Evanston, Illinois 60201 Telecopy: (312) 861-2200
Telecopy: (847) 733-1078 Attention: Sanford E. Perl, Esq.
Attention: Kevin P. Rodgers
10.3 Binding Agreement; Assignment. This Agreement and all of
-----------------------------
the provisions hereof shall be binding upon and inure to the benefit of the
Parties and their respective successors and permitted assigns; provided that
neither this Agreement nor any of the rights, interests or obligations hereunder
may be assigned by the Seller or any Stockholder without the prior written
consent of Purchaser or by Purchaser (except as otherwise provided in this
Agreement) without the prior written consent of the Seller; provided further
that:
(a) the Purchaser may at any time prior to the Closing, at its sole
discretion, assign, in whole or in part, its rights and obligations pursuant to
this Agreement to one or more of its Affiliates;
(b) the Purchaser may assign its rights under this Agreement for
collateral security purposes to any lender providing financing to Purchaser or
any of its Affiliates and any such lender may exercise all of the rights and
remedies of the Purchaser hereunder; and
(c) the Purchaser may assign its rights under this Agreement, in whole
or in part, to any subsequent purchaser of the Purchaser or any material portion
of its assets (whether such sale is structured as a sale of stock, a sale of
assets, a merger or otherwise); provided that the Purchaser shall remain liable
for the obligations of the Purchaser hereunder.
10.4 Severability. Whenever possible, each provision of this
------------
Agreement shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement is held to be prohibited
by or invalid under applicable law, such provision shall be ineffective only to
the extent of such prohibition or invalidity, without invalidating the remainder
of such provisions or the remaining provisions of this Agreement.
-50-
<PAGE>
10.5 NO STRICT CONSTRUCTION. The language used in this Agreement
----------------------
shall be deemed to be the language chosen by the Parties to express their mutual
intent, and no rule of strict construction shall be applied against any Party.
10.6 Captions. The captions used in this Agreement are for
--------
convenience of reference only and do not constitute a part of this Agreement and
shall not be deemed to limit, characterize or in any way affect any provision of
this Agreement, and all provisions of this Agreement shall be enforced and
construed as if no caption had been used in this Agreement.
10.7 Entire Agreement. This Agreement and the documents referred
----------------
to herein contain the entire agreement between the Parties and supersede any
prior understandings, agreements or representations by or between the Parties,
written or oral, which may have related to the subject matter hereof in any way.
10.8 Counterparts. This Agreement may be executed in multiple
------------
counterparts, each of which shall be deemed an original but all of which taken
together shall constitute one and the same instrument.
10.9 Governing Law. All questions concerning the construction,
-------------
validity and interpretation of this Agreement shall be governed by and construed
in accordance with the domestic laws of the State of Texas, without giving
effect to any choice of law or conflict of law provision (whether of the State
of Texas or any other jurisdiction) that would cause the application of the laws
of any jurisdiction other than the State of Texas.
10.10 Parties in Interest. Nothing in this Agreement, express or
-------------------
implied, is intended to confer on any person other than the Parties and their
respective successors and assigns any rights or remedies under or by virtue of
this Agreement.
10.11 Performance.
-----------
(a) Will Crenshaw hereby agrees that all covenants and agreements set
forth in this Agreement with respect to actions to be taken by, or to be
refrained from being taken by, the Seller or the Stockholders (other than the
obligation to make indemnification payments pursuant to Section 8.2) shall also
apply to Will Crenshaw as if the name "Will Crenshaw" were substituted for the
word "Seller" in all such covenants and agreements.
(b) The beneficiaries of each Stockholder that is a trust shall (i)
personally guaranty the obligations of such Stockholder pursuant to the
Transaction Documents to which such Stockholder is a party and (ii) indemnify
and hold harmless the Purchaser Parties with respect to the obligations of such
Stockholder pursuant to the Transaction Document to which such Stockholder is a
party.
* * * * *
-51-
<PAGE>
IN WITNESS WHEREOF, the Parties have executed this Asset Purchase Agreement as
of the date first written above.
NES ACQUISITION CORP.
By: /s/ Paul Ingersoll
--------------------------------------
Its: Vice President
---------------------------------------
THE MODERN GROUP, INC.
By: /s/ B. M. Merufee
-------------------------------------
Its: President
-------------------------------------
STOCKHOLDERS: /s/ Heather Kirgan Crenshaw
-------------------------------------------
HEATHER KIRGAN CRENSHAW
/s/ Will B. Crenshaw, II
-------------------------------------------
WILL B. CRENSHAW, II
COLBY CLARENCE CRENSHAW TRUST
By: /s/ John Crenshaw
-------------------------------------
Name: John Crenshaw
Title: Trustee
JONATHAN CASEY HOPKINS CRENSHAW
TRUST
By: /s/ John Crenshaw
------------------------------------
Name: John Crenshaw
Title: Trustee
With respect to Sections 9.9 and 10.11 only:
/s/ Will Crenshaw
- ----------------------------------------------------
WILL CRENSHAW
/s/ Colby Clarence Crenshaw
- --------------------------------------------
COLBY CLARENCE CRENSHAW
/s/ Jonathan Casey Hopkins Crenshaw
- --------------------------------------
JONATHAN CASEY HOPKINS CRENSHAW
-52-
<PAGE>
SECOND SIGNATURE PAGE TO ASSET PURCHASE AGREEMENT
SOUTHEAST TEXAS INTERMEDIARY, INC.
By: /s/ Dan Phares
----------------------------------------
Its: President
----------------------------------------
-53-
<PAGE>
Exhibit 10.26
-------------
ASSET PURCHASE AGREEMENT
------------------------
THIS ASSET PURCHASE AGREEMENT is made as of February 9, 1998, by and
between Cormier Equipment Corporation, a Maine corporation (the "Seller") and
------
NES Acquisition Corp., a Delaware corporation (the "Purchaser"). The Seller and
---------
the Purchaser are referred to herein collectively as the "Parties" and
-------
individually as a "Party."
-----
WHEREAS, the Seller is engaged in the equipment rental business (the
"Business"); and
- ---------
WHEREAS, upon the terms and subject to the conditions set forth in
this Agreement, the Purchaser desires to acquire from the Seller, and the Seller
desires to sell to the Purchaser, substantially all of the Seller's business,
assets and properties (operating as a going concern) constituting the Business
and certain associated liabilities.
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Parties, intending to be
legally bound, agree as follows:
ARTICLE I
DEFINITIONS
-----------
1.1 Definitions. For purposes hereof, the following terms, when used
-----------
herein with initial capital letters, shall have the respective meanings set
forth herein:
"Affiliate" of any Person means any other Person controlling,
---------
controlled by or under common control with such first Person, where "control"
-------
means the possession, directly or indirectly, of the power to direct the
management and policies of a Person whether through the ownership of voting
securities or otherwise.
"Affiliated Group" means an affiliated group as defined in Section
----------------
1504 of the Code (or any similar combined, consolidated or unitary group defined
under state, local or foreign income Tax law).
"Agreement" means this Asset Purchase Agreement, including all
---------
Exhibits and Schedules hereto, as it may be amended from time to time in
accordance with its terms.
"Baseline Net Asset Value" means $9,188,900.
------------------------
"Business Day" means a day other than a Saturday, Sunday or other day
------------
on which commercial banks are authorized or required to close under the laws of
the United States.
-1-
<PAGE>
"Cash" means cash, cash equivalents and marketable securities
----
(including, without limitation, all money market accounts, mutual fund accounts
and repurchase agreements).
"CERCLA" means the Comprehensive Environmental Response, Compensation
------
and Liability Act of 1980, as amended.
"Code" means the United States Internal Revenue Code of 1986, as
----
amended.
"Confidential Information" means all information concerning the
------------------------
business and affairs of the Seller that is not already generally available to
the public.
"Environmental Affiliates" of any Person means, with respect to any
------------------------
particular matter, all other Persons whose liabilities or obligations with
respect to that particular matter have been assumed by, or are otherwise deemed
by law to be those of, such first Person.
"Environmental and Safety Requirements" means all federal, state,
-------------------------------------
local and foreign statutes, regulations, ordinances and similar provisions
having the force or effect of law, all judicial and administrative orders and
determinations, all contractual obligations and all common law concerning public
health and safety, worker health and safety and pollution or protection of the
environment, including all such standards of conduct and bases of obligations
relating to the presence, use, production, generation, handling, transport,
treatment, storage, disposal, distribution, labeling, testing, processing,
discharge, release, threatened release, control, or cleanup of any hazardous
materials, substances or wastes, chemical substances or mixtures, pesticides,
pollutants, contaminants, toxic chemicals, petroleum products or by-products,
asbestos, polychlorinated biphenyls (or PCBs), noise or radiation.
"Environmental Lien" means any Lien, whether recorded or unrecorded,
------------------
in favor of any governmental entity or any department, agency or political
subdivision thereof relating to any liability of the Seller, any Subsidiary or
any Stockholder or any Environmental Affiliate of the Seller, any Subsidiary or
any Stockholder arising under any Environmental and Safety Requirement.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
-----
amended.
"GAAP" means, as at December 31, 1996, United States generally
----
accepted account ing principles, consistently applied in accordance with the
accounting policies reflected in the Financial Statements, to the extent such
accounting policies comply with United States generally accepted accounting
principles.
"Knowledge" (whether or not such term is capitalized) of the Seller
---------
means the knowledge of Joseph Y. Cormier, Roger E. Jarvais, or Phillip G. James
(the Seller's directors and key executives) after reasonable inquiry by one or
more of them.
"Indebtedness" of any Person means, without duplication: (a)
------------
indebtedness for borrowed money or for the deferred purchase price of property
or services in respect of which such Person is liable, contingently or
otherwise, as obligor or otherwise, whether accrued, current, long term or
otherwise (other than trade payables and other current liabilities incurred in
the ordinary
-2-
<PAGE>
course of business) and any commitment by which such Person assures a creditor
against loss, including contingent reimbursement obligations with respect to
letters of credit; (b) indebtedness guaranteed in any manner by such Person,
including a guarantee in the form of an agreement to repurchase or reimburse;
and (c) obligations under capitalized leases in respect of which such Person is
liable, contingently or otherwise, as obligor, guarantor or otherwise, or in
respect of which obligations such Person assures a creditor against loss.
"Insider" means, any officer, director, stockholder, partner or
-------
Affiliate, as applicable, of the Seller or any individual related by marriage or
adoption to any such individual or any entity in which any such Person owns any
beneficial interest.
"Liens" means any mortgage, pledge, security interest, encumbrance,
-----
lien or charge of any kind (including, without limitation, any conditional sale
or other title retention agreement or lease in the nature thereof), any sale of
receivables with recourse against the Seller or any Affiliate, any filing or
agreement to file a financing statement as debtor under the Uniform Commercial
Code or any similar statute other than to reflect ownership by a third party of
property leased to the Seller or any of its Subsidiaries under a lease which is
not in the nature of a conditional sale or title retention agreement, or any
subordination arrangement in favor of another Person (other than any
subordination arising in the ordinary course of business).
"Loss" means, with respect to any Person, any damage, liability,
----
demand, claim, action, cause of action, cost, damage, deficiency, Tax, penalty,
fine or other loss or expense, whether or not arising out of a third party
claim, including all interest, penalties, reasonable attorneys' fees and
expenses and all amounts paid or incurred in connection with any action, demand,
proceeding, investigation or claim by any third party (including any
governmental entity or any department, agency or political subdivision thereof)
against or affecting such Person.
"Material Adverse Effect" means any material adverse effect on the
-----------------------
business, financial condition, operations, results of operations, employee
relations, customer or supplier relations, or assets of the Seller and its
Subsidiaries taken as a whole.
"NES" means National Equipment Services, Inc., a Delaware corporation
---
and parent of the Purchaser.
"Net Asset Value" means, as of a given time, (i) the book value of the
---------------
Acquired Assets at such time, determined in accordance with GAAP as applied in a
manner consistent with the Latest Balance Sheet (to the extent the Latest
Balance Sheet was prepared in accordance with GAAP), minus (ii) the book value
of the Assumed Liabilities at such time, determined in accordance with GAAP as
applied in a manner consistent with the Latest Balance Sheet (to the extent the
Latest Balance Sheet was prepared in accordance with GAAP).
"Ordinary Course of Business" means the ordinary course of the
---------------------------
Seller's or any of its Subsidiaries' business consistent with past practice
(including, without limitation, with respect to collection of accounts
receivable, purchases of inventory and supplies, repairs and maintenance,
payment of accounts payable and accrued expenses, levels of capital expenditures
and operation of cash management practices generally).
-3-
<PAGE>
"Permitted Liens" means (a) statutory liens for current taxes or other
---------------
governmental charges with respect to the Real Property not yet due and payable
or the amount or validity of which is being contested in good faith by
appropriate proceedings by the Seller and for which appropriate reserves have
been established in accordance with GAAP; (b) mechanics, carriers workers,
repairers and similar statutory liens arising or incurred in the ordinary course
of business for amounts which are not delinquent and which are not, individually
or in the aggregate, material to the Business; (c) zoning, entitlement, building
and other land use laws, ordinances and regulations imposed by governmental
agencies having jurisdiction over the Real Property which do not materially
impair the occupancy or use of the Real Property for the purposes for which it
is used in connection with the Business; (d) covenants, conditions,
restrictions, easements and other similar matters of record affecting title to
the Real Property which do not materially impair the occupancy or use of the
Real Property for the purposes for which it is used in connection with the
Business, and matters determined to be Permitted Liens pursuant to Section 3.1
hereof, if any; (e) Liens with respect to Indebtedness being repaid at or prior
to the Closing by the Purchaser pursuant to Section 2.3(a) below or by the
Seller; (f) Liens incurred or deposits made in the Ordinary Course of Business
in connection with worker's compensation, unemployment insurance and other types
of social security benefits, or to secure the performance of statutory
obligations, surety and appeal bonds and other similar obligations; (g)
precautionary filings under the Uniform Commercial Code by bailors, operating
lessors and consignors; (h) Liens identified on the "Additional Permitted Liens
--------------------------
Schedule" attached hereto; (i) mortgages and other Liens encumbering fee title
- --------
to the Leased Real Property that do not arise by, through or under the Seller;
and (j) with respect to any parcel of Leased Real Property as to which the
Purchaser exercises an option to purchase or otherwise acquires fee title
subsequent to Closing, all matters affecting title to the parcel and all matters
which an accurate survey and inspection would show (the Purchaser having elected
not to obtain Title Commitments and Surveys for the Leased Real Property
pursuant to Section 3.1).
.
"Person" means an individual, a partnership, a corporation, an
------
association, a limited liability company, a joint stock company, a trust, a
joint venture, an unincorporated organization, a governmental entity or any
department, agency or political subdivision thereof and any other entity.
"Proprietary Rights" means all (i) patents, patent applications,
------------------
patent disclosures and inventions, (ii) trademarks, service marks, trade dress,
trade names, logos, internet domain names and corporate names and registrations
and applications for registration thereof together with all of the goodwill
associated therewith, (iii) copyrights (registered or unregistered) and
copyrightable works and registrations and applications for registration thereof,
(iv) mask works and registrations and applications for registration thereof, (v)
computer software, data, data bases and documentation thereof, (vi) trade
secrets and other confidential information (including, without limitation,
ideas, formulas, compositions, inventions (whether patentable or unpatentable
and whether or not reduced to practice), know-how, manufacturing and production
processes and techniques, research and development information, drawings,
specifications, designs, plans, proposals, technical data, copyrightable works,
financial and marketing plans and customer and supplier lists and information),
(vii) other intellectual property rights and (viii) copies and tangible
embodiments thereof (in whatever form or medium).
"Release" has the meaning set forth in CERCLA.
-------
-4-
<PAGE>
"Stockholders" means the stockholders of the Seller.
------------
"Subsidiary" means, with respect to any Person, any corporation a
----------
majority of the total voting power of shares of stock of which is entitled
(without regard to the occurrence of any contingency) to vote in the election of
directors, managers or trustees thereof is at the time owned or controlled,
directly or indirectly, by that Person or one or more of the other Subsidiaries
of that Person or a combination thereof, or any partnership, limited liability
company, association or other business entity a majority of the partnership or
other similar ownership interest of which is at the time owned or controlled,
directly or indirectly, by that Person or one or more Subsidiaries of that
Person or a combination thereof. For purposes of this definition, a Person is
deemed to have a majority ownership interest in a partnership, limited liability
company, association or other business entity if such Person is allocated a
majority of the gains or losses of such partnership, limited liability company,
association or other business entity or is or controls the managing director or
general partner of such partnership, limited liability company, association or
other business entity. Although there are numerous references throughout this
Agreement to phrase "the Seller and its Subsidiaries" and other phrases of
similar import, in the event the Seller does not have any Subsidiaries, then
such phrases shall be deemed to be references to solely the Seller.
"Tax Returns" means returns, declarations, reports, claims for refund,
-----------
information returns or other documents (including any related or supporting
schedules, statements or information) filed or required to be filed in
connection with the determination, assessment or collection of Taxes of any
party or the administration of any laws, regulations or administrative
requirements relating to any Taxes.
"Taxes" means any federal, state, local, or foreign income, gross
-----
receipts, license, payroll, employment, excise, severance, stamp, occupation,
premium, windfall profits, environmental, customs duties, capital stock,
franchise, profits, withholding, social security, unemployment, disability, real
property, personal property, sales, use, transfer, registration, value added,
alternative or add-on minimum, or other tax, fee, assessment or charge of any
kind whatsoever, including any interest, penalty, or addition thereto, whether
disputed or not.
"Transaction Documents" means this Agreement, and all other
---------------------
agreements, instruments, certificates and other documents to be entered into or
delivered by any Party in connection with the transactions contemplated to be
consummated pursuant to this Agreement.
"Treasury Regulations" means the United States Treasury Regulations
--------------------
promulgated pursuant to the Code.
1.2 Other Definitional Provisions.
-----------------------------
(a) Accounting Terms. Accounting terms which are not otherwise
----------------
defined in this Agreement have the meanings given to them under GAAP as applied
in accordance with the accounting policies reflected in the Financial Statements
(to the extent such accounting policies comply with GAAP). To the extent that
the definition of accounting term that is defined in this Agreement is
inconsistent with the meaning of such term under GAAP, the definition set forth
in this Agreement will control.
-5-
<PAGE>
(b) "Hereof," etc. The terms "hereof," "herein" and "hereunder" and
------------
terms of similar import are references to this Agreement as a whole and not to
any particular provision of this Agreement. Section, clause, Schedule and
Exhibit references contained in this Agreement are references to Sections,
clauses, Schedules and Exhibits in or to this Agreement, unless otherwise
specified.
(c) Successor Laws. Any reference to any particular Code section or
--------------
any other law or regulation will be interpreted to include any revision of or
successor to that section regardless of how it is numbered or classified.
1.3 Cross Reference of Other Definitions. Each capitalized term
------------------------------------
listed below is defined in the corresponding Section of this Agreement:
Term Section
- ---- -------
Accounts Receivable 2.3(d)
Allocation 9.13
Acquired Assets 2.1(a)
Actual Net Asset Value 2.3(b)
Agreement Preface
Applicable Limitation Date 8.1
Assumed Liabilities 2.1(c)
Basket 8.2(b)(ii)
breaching party 7.1(b)
Business Recitals
Cap 8.2(b)(iii)
Cash Portion 2.2
Closing 2.5(a)
Closing Date 2.5(a)
Closing Review 2.3(b)
Closing Transactions 2.5(b)
COBRA 5.18(a)
Continuing Employees 9.11(b)
Cormier Employment Agreement 3.1(k)
Draft Balance Sheet 2.3(b)
Equipment Purchase Agreement 3.1(n)
ERISA 5.18(a)
Excluded Assets 2.1(b)
Excluded Employees 9.11(b)
Excluded Liabilities 2.1(d)
Financial Statements 5.6(a)
Firm 2.3(b)
Holdback 2.2
HSR Act 3.1(d)
Improvements 5.10(e)
Indemnified Party 8.2(e)
Indemnifying Party 8.2(e)
-6-
<PAGE>
James Employment and Noncompetition Agreement 3.1(l)
Jarvais Employment and Noncompetition Agreement 3.1(l)
Latest Balance Sheet 5.6(a)
Leased Real Property 5.10(b)
Leases 5.10(b)
Licenses 5.16
Noncompete Period 9.10(a)
Objection Notice 2.3(b)
Owned Real Property 5.10(a)
Party Preface
Pending Claim 2.4
Plans 5.18(a)
Prime Rate 2.2
Purchase Price 2.2
Purchaser Preface
Purchaser Parties 8.2(a)
Real Property 2.1(a)(vi)
Real Property Permits 5.10(f)
Real Property Purchase Agreement 3.1(m)
Receivables Determination Date 2.3(d)
Remaining Holdback 2.4
Seller Preface
Seller Parties 8.2(c)
Stock Transfer Agreement 3.1(o)
Surveys 3.1(q)
terminating party 7.1(b)
Title Commitments 3.1(p)(i)
Title Defect 3.1(p)(i)
Title Insurer 3.1(p)(i)
Title Notice 3.1(p)(i)
Title Policies 3.1(p)(ii)
Unassigned Contracts 9.14
Uncollected Receivable Amount 2.3(d)
WARN 5.17
ARTICLE II
PURCHASE AND SALE; ASSUMPTION OF CERTAIN LIABILITIES; CLOSING
-------------------------------------------------------------
2.1 Purchase and Sale.
-----------------
(a) Acquired Assets. Upon the terms and subject to the conditions set
---------------
forth in this Agreement, at the Closing the Seller shall sell, assign, transfer
and deliver to the Purchaser, and the Purchaser shall purchase, all properties,
assets, rights and interests of every kind and nature, whether tangible or
intangible, and wherever located and by whomever possessed, owned by the Seller
or in
-7-
<PAGE>
which the Seller has an interest as of the Closing Date, except as set forth in
Section 2.1(b) below (collectively, the "Acquired Assets"), including, without
---------------
limitation:
(i) all accounts and notes receivables (whether current or
noncurrent);
(ii) all Cash, securities and other investments;
(iii) all Proprietary Rights, along with all income, royalties,
damages and payments due or payable as of the Closing or thereafter,
including, without limitation, damages and payments for past, present or
future infringements or misappropriations thereof, the right to sue and
recover for past infringements or misappropriations thereof and any and all
corresponding rights that, now or hereafter, may be secured throughout the
world;
(iv) all of the Seller's rights existing under leases,
contracts, licenses, permits, distribution arrangements, sales and purchase
agreements, accounts receivable, other agreements and business
arrangements, including, without limitation, all contracts and agreements
described on the Contracts Schedule attached hereto, except for those
------------------
contracts listed on the Excluded Contracts Schedule attached hereto;
---------------------------
(v) all rental equipment owned by the Seller wherever located;
(vi) all real property owned or leased by the Seller, and all
plants, buildings and other improvements located on such owned or leased
property, and all easements, licenses, rights of way, and all appurtenances
to such owned or leased property, including, without limitation, all
appurtenant rights in and to public streets, whether or not vacated
(collectively, the "Real Property");
-------------
(vii) all leasehold improvements and all machinery, equipment
(including all transportation and office equipment), fixtures, trade
fixtures, tools, dyes and furniture owned by the Seller wherever located,
including, without limitation, all such items which are located in any
building, warehouse, office or other space leased, owned or occupied by the
Seller or used in connection with the Real Property;
(viii) all inventories of work in process, semi-finished and
finished goods, stores, replacement and spare parts, packaging materials,
operating supplies, and fuels, owned by the Seller wherever located;
(ix) all office supplies, production supplies, spare parts,
other miscellaneous supplies, and other tangible property of any kind
wherever located, including, without limitation, all property of any kind
located in any building, office or other space leased, owned or occupied by
the Seller or in any warehouse where any of the Seller's properties and
assets may be situated;
(x) all prepayments and prepaid expenses;
(xi) all vehicles owned or leased by the Seller wherever
located;
-8-
<PAGE>
(xii) all of the Seller's claims, causes of action, choses in
action, rights of recovery and rights of set-off of any kind (exclusive of
those, if any, of the Seller against any person who is an existing or
former stockholder, director or officer of the Seller, none of which are to
be acquired by the Purchaser except to the extent reflected on the face of
the Latest Balance Sheet);
(xiii) the right to receive and retain mail, accounts receivable
payments and other communications relating to the Business;
(xiv) the right to bill and receive payment for products shipped
or delivered and services performed but unbilled or unpaid as of the
Closing;
(xv) all lists, records and other information pertaining to
accounts, personnel and referral sources, all lists and records pertaining
to suppliers and customers; and all books, ledgers, files and business
records of every kind; whether evidenced in writing, electronically
(including, without limitation, by computer) or otherwise;
(xvi) all advertising, marketing and promotional materials and
all other printed or written materials;
(xvii) all permits, licenses, certifications and approvals from
all permitting, licensing, accrediting and certifying agencies, and the
rights to all data and records held by such permitting, licensing and
certifying agencies;
(xviii) all telephone numbers (e.g. "800" numbers) used by the
Seller;
(xix) all goodwill as a going concern and all other intangible
properties;
(xx) the name "Cormier Equipment Corporation"; and
(xxi) except as specified in Section 2.1(b) below, all other
property owned by the Seller, or in which it has an interest on the Closing
Date, including, without limitation, all fixed assets included on the
Latest Balance Sheet and any and all subsequent improvements or additions
thereon through the Closing Date.
(b) Excluded Assets. Notwithstanding Section 2.1(a) above, the
---------------
following assets are expressly excluded from the purchase and sale contemplated
hereby and, as such, are not Acquired Assets (collectively, the "Excluded
--------
Assets"):
- ------
(i) all monies to be received by the Seller from the Purchaser;
(ii) all rights of the Seller under this Agreement;
(iii) all qualifications to do business as a foreign
corporation;
-9-
<PAGE>
(iv) all arrangements with registered agents relating to foreign
qualifications;
(v) all taxpayer and other identification numbers;
(vi) all seals, minute books, stock transfer books, blank stock
certificates, and other documents relating to the organization,
maintenance, and existence of the Seller as a corporation; and
(vii) the vehicles, boats and equipment listed on the attached
Excluded Assets Schedule.
------------------------
(c) Assumed Liabilities. Subject to Section 2.1(d) below and except
-------------------
as specifically set forth elsewhere in this Agreement, as additional
consideration for the Acquired Assets, at the Closing the Purchaser will assume
the following liabilities and obligations of the Seller (the "Assumed
-------
Liabilities"):
- -----------
(i) all accounts payable and accrued payroll and other expenses
of the Seller which are set forth on the face of the Latest Balance Sheet
or which are accrued or incurred by the Seller in the Ordinary Course of
Business since the date of the Latest Balance Sheet; and
(ii) all liabilities and obligations of the Seller pursuant to
the real property leases to be assumed by the Purchaser and pursuant to
executory contracts, orders and commitments which are described on the
attached Contracts Schedule (other than any liability resulting from,
------------------
arising out of, or relating to any breach thereof occurring at or prior to
the Closing), except for the contracts listed on the Excluded Contracts
------------------
Schedule attached hereto, and all other Seller obligations with respect to
--------
all equipment in the rental fleet that is on rent from any other supplier,
all equipment covered by operating leases in the Ordinary Course of
Business, and all equipment on rent to third parties.
(d) Excluded Liabilities. Except as set forth in Section 2.1(c)
--------------------
above, the Purchaser shall not assume or become liable for, and shall not be
deemed to have assumed or have become liable for (i) any items set forth on the
attached Specific Indemnity Schedule, and (ii) any of the Seller's liabilities
---------------------------
and obligations not expressly assumed by the Purchaser pursuant to Section
2.1(c) above, whether accrued, absolute or contingent, whether known or unknown,
whether disclosed or undisclosed, whether due or to become due and whether
related to the Acquired Assets or otherwise, and regardless of when asserted,
including, without limitation, any liabilities or obligations arising from or
relating to the Acquired Assets or the Seller's operation of the Business prior
to the Closing Date , including, without limitation, any liabilities or
obligations for violations of applicable laws, regulations or ordinances,
breaches of contracts, or infringements of rights of third parties, in each case
to the extent occurring at or prior to the Closing. The "Excluded Liabilities"
--------------------
shall include all items referenced under clauses (i) and (ii) of this Section
2.1(d).
2.2 PURCHASE PRICE FOR ACQUIRED ASSETS. The aggregate purchase
----------------------------------
price to be paid to the Seller for the Acquired Assets (the "Purchase Price")
--------------
will consist of the assumption by
-10-
<PAGE>
the Purchaser of the Assumed Liabilities and the payment of $27,500,000, which
amount shall be paid as follows: (a) the Purchaser shall deliver to the Sellers
$26,125,000 (as adjusted pursuant to Section 2.3 below) in cash (as adjusted,
the "Cash Portion"); and (b) the Purchaser shall maintain $1,375,000 in a book
------------
entry account of the Purchaser (the "Holdback"). The Holdback shall be available
--------
to satisfy any amounts owing to the Purchaser pursuant to Section 2.3 and/or
Section 8.2. Interest shall accrue at the Prime Rate (as defined below) on the
undistributed portion of the Holdback. The interest on the Holdback shall also
be available to satisfy any amounts owing to the Purchaser pursuant to Section
2.3 and/or Section 8.2. For the purposes hereof, the "Prime Rate" shall mean the
----------
rate of interest published as the "prime rate" in The Wall Street Journal,
-----------------------
Midwest Edition, on the Closing Date.
2.3 Purchase Price Adjustments.
--------------------------
(a) Closing Date Adjustments. At the Closing, the Purchase Price will
------------------------
be decreased dollar-for-dollar by an amount equal to the amount necessary to
discharge fully the then outstanding balance of the Seller's and its
Subsidiaries' Indebtedness secured by any of the Acquired Assets (including,
without limitation, prepayment penalties and premiums), in which case the
Purchaser shall promptly apply such amount to payment of the Indebtedness. For
these purposes, Indebtedness shall not be deemed outstanding at Closing if and
to the extent that the Seller has made arrangement for payment thereof in
accordance with Section 2.5(b)(iii) below.
(b) Post-Closing Determination. Within 90 days after the Closing
--------------------------
Date, the Purchaser and its auditors will conduct a review (the "Closing
-------
Review") of the Net Asset Value as of the close of business on the day before
- ------
the Closing Date and will prepare and deliver to the Seller a computation of the
Net Asset Value as of the close of business on the day before the Closing Date
(the "Draft Balance Sheet"). The Purchaser and its auditors will make available
-------------------
to the Seller and its auditors all records and work papers used in preparing the
Draft Balance Sheet. If the Seller disagrees with the computation of the Net
Asset Value reflected on the Draft Balance Sheet, the Seller may, within thirty
(30) days after receipt of the Draft Balance Sheet, deliver a notice (an
"Objection Notice") to the Purchaser setting forth the Seller's calculation of
- -----------------
the Net Asset Value as of the close of business on the day before the Closing
Date. The Purchaser and the Seller will use reasonable best efforts to resolve
any disagreements as to the computation of the Net Asset Value, but if they do
not obtain a final resolution within thirty (30) days after the Purchaser has
received the Objection Notice, the Purchaser and the Seller will jointly retain
an independent accounting firm of recognized national standing (the "Firm") to
----
resolve any remaining disagreements. For these purposes, an accounting firm
shall not be considered "independent" if such firm (or any Affiliate thereof)
has performed services during the past four years for either Party or its
principal stockholders. If the Purchaser and the Seller are unable to agree on
the choice of the Firm, then the Firm will be a so-called "big-six" accounting
firm (or successor thereof) selected by lot (after excluding one firm designated
by the Purchaser and one firm designated by the Seller). The Purchaser and the
Seller will direct the Firm to render a determination within 30 days of its
retention. The Purchaser and the Seller and their respective agents will
cooperate with the Firm during its engagement. The Firm's determination will be
based solely on presentations by the Purchaser and the Seller (i.e., not on
independent review), and on the definition of the Net Asset Value included
herein. The determination of the Firm will be conclusive and binding upon the
Purchaser and the Seller. The Purchaser and the Seller shall bear the costs and
expenses of the Firm based on the
-11-
<PAGE>
percentage which the portion of the contested amount not awarded to each Party
bears to the amount actually contested by such Party. The amount of the Net
Asset Value, as finally determined pursuant to this Section 2.3(b), is referred
to herein as the "Actual Net Asset Value."
----------------------
(c) Post-Closing Adjustment.
-----------------------
(i) Payment by the Purchaser. If the Actual Net Asset Value is
------------------------
greater than the Baseline Net Asset Value, the Purchaser will, within five
(5) Business Days after the determination thereof, pay to the Seller an
amount equal to the excess of the Actual Net Asset Value over the Baseline
Net Asset Value. Such payment will be made by wire transfer or delivery of
other immediately available funds.
(ii) Payment by the Seller. If the Actual Net Asset Value is less
---------------------
than the Baseline Net Asset Value, the Seller will, within five (5)
Business Days after the determination thereof, pay to the Purchaser an
amount equal to the excess of the Baseline Net Asset Value over the Actual
Net Asset Value. Such payment will be made by wire transfer or delivery of
other immediately available funds.
(iii) Dispute. If, pursuant to Section 2.3(b) above, there is a
-------
dispute as to the final determination of the Actual Net Assets, the
Purchaser and the Seller shall promptly pay to the other, as appropriate,
such amounts as are not in dispute, pending final determination of such
dispute pursuant to Section 2.3(b).
(d) Accounts Receivable Adjustment. Notwithstanding anything herein
------------------------------
to the contrary, and in addition to any other adjustments set forth in this
Agreement, the Purchase Price will be reduced dollar-for-dollar by the aggregate
amount of the gross notes and accounts receivable of the Seller in existence as
of the Closing included in the Acquired Assets (the "Accounts Receivable"),
-------------------
which are uncollected by the Purchaser (the "Uncollected Receivables Amount") as
------------------------------
of the 115th day following the Closing Date (the "Receivables Determination
-------------------------
Date"); provided, however, that the Uncollected Receivables Amount shall be
- ---- -------- -------
reduced by any amount accrued or reserved against the Net Asset Value for
doubtful accounts. If there is an Uncollected Receivables Amount, the Purchaser
shall be entitled to receive the Uncollected Receivables Amount from the
Holdback within two (2) Business Days after the Receivables Determination Date;
provided, however, that if the amount then left in the Holdback is less than the
amount of the Uncollected Receivables Amount, the Seller shall pay to the
Purchaser, within two (2) Business Days after the Receivables Determination
Date, the amount by which the Holdback is less than Uncollected Receivables
Amount by wire transfer or delivery of other immediately available funds. The
Purchaser will attempt to collect the Accounts Receivable in the Ordinary Course
of Business (i.e., the Purchaser will use the same level of diligence in its
collection efforts after the Closing as the Seller used prior to the Closing).
The Purchaser shall not be required to take any action out of the Ordinary
Course of Business to collect any of the Accounts Receivable (i.e., the
Purchaser will not be required to use a level of diligence in its collection
efforts after the Closing in excess of that of the Seller prior to the Closing).
To the extent that the Purchaser has not collected the full amount of the
Accounts Receivable and the Purchaser has been compensated therefor in
accordance with this Section 2.3(d), the Purchaser shall assign any such
uncollected Accounts Receivable to the Seller.
-12-
<PAGE>
At the request of the Seller, the Purchaser shall promptly inform the Seller as
to the collection status of all Accounts Receivables and the collection efforts
employed by the Purchaser.
2.4 DISTRIBUTION OF HOLDBACK. On the 120th day after the Closing
------------------------
Date, the Purchaser shall pay to the Seller an amount equal to the amount of the
Holdback (together with all accrued but undistributed interest thereon), if any,
remaining after (i) all amounts owing to the Purchaser pursuant to Section 2.3
have been satisfied and (ii) all claims of the Purchaser under Section 8.2 which
have theretofore been finally resolved have been satisfied (the "Remaining
---------
Holdback") less any amount for which the Purchaser claims, prior to such 120th
- --------
day, that it is entitled to receive indemnification pursuant to Section 8.2
(each, a "Pending Claim"). As soon as practicable following final resolution of
-------------
all Pending Claims, the Purchaser shall pay to the Seller an aggregate amount
equal to the portion, if any, of the Holdback (together with all accrued but
undistributed interest thereon) which remains after payment of the Remaining
Holdback and final resolution of all Pending Claims.
2.5 Closing Transactions.
--------------------
(a) Closing. The closing of the transactions contemplated by this
-------
Agreement (the "Closing") shall take place at the offices of Kirkland & Ellis,
-------
200 East Randolph Drive, Chicago, Illinois 60601, commencing at 10:00 a.m. on
the Business Day following the satisfaction or waiver of all conditions to the
obligations of the Parties to consummate the transactions contemplated hereby
(other than conditions with respect to actions the respective Parties will take
at the Closing itself), or at such other place or on such other date as may be
mutually agreeable to the Purchaser and the Seller; provided that in any event,
if the Purchaser's senior lenders require that the Closing take place at the
offices of their attorneys, the Parties agree that the Closing shall take place
at such offices. The date and time of the Closing are herein referred to as the
"Closing Date."
------------
(b) Closing Transactions. Subject to the conditions set forth in this
--------------------
Agreement, the Parties shall consummate the following transactions (the "Closing
-------
Transactions") on the Closing Date:
- ------------
(i) the Seller shall convey to the Purchaser good title to all of the
Acquired Assets, free and clear of all Liens other than Permitted Liens,
and deliver to the Purchaser special warranty deeds for the Owned Real
Property (or the reasonable equivalent used in the state in which the Owned
Real Property is located), bills of sale, assignment of leases and
contracts and all other instruments of conveyance which are necessary or
desirable to effect transfer of the Acquired Assets, in form and substance
reasonably satisfactory to the Purchaser;
(ii) the Purchaser shall deliver to the Seller such instruments of
assumption as are necessary or desirable, in form and substance
satisfactory to the Seller, in order for the Purchaser to assume the
Assumed Liabilities;
(iii) the Seller shall repay, or cause to be repaid, all amounts
necessary to discharge fully the then outstanding balance of the Seller's
Indebtedness (including, without limitation, prepayment penalties and
premiums) by wire transfer of immediately available
-13-
<PAGE>
funds as directed by the holders of such Indebtedness at or prior to the
Closing, and the Seller shall deliver to the Purchaser all appropriate
payoff letters and shall make arrangements reasonably satisfactory to the
Purchaser for such holders to deliver all related lien releases and
canceled notes at the Closing;
(iv) the Purchaser shall deliver to the Seller the Cash Portion of
the Purchase Price by wire transfer of immediately available funds; and
(v) the Seller and the Purchaser, as applicable, shall deliver the
opinions, certificates and other documents and instruments required to be
delivered by or on behalf of such Party under Article III.
ARTICLE III
CONDITIONS TO CLOSING
---------------------
3.1 Conditions to the Purchaser's Obligations. The obligation
-----------------------------------------
of the Purchaser to consummate the transactions contemplated by this Agreement
is subject to the satisfaction of the following conditions as of the Closing
Date:
(a) The representations and warranties set forth in Article V hereof
shall be true and correct in all material respects at and as of the Closing Date
as though then made and as though the Closing Date were substituted for the date
of this Agreement throughout such representations and warranties (without taking
into account any disclosures made by the Seller to the Purchaser pursuant to
Sections 4.1(g) or 5.24 hereof); provided that mere changes in interest rates
or general economic or market conditions over which the Seller has no control
shall not be deemed to constitute events which cause such representations and
warranties to not be true and correct in all material respects;
(b) The Seller shall have performed and complied with all of the
covenants and agreements required to be performed by it under this Agreement on
or prior to the Closing;
(c) All consents by third parties that are required for the transfer
of the Acquired Assets to the Purchaser and the consummation of the other
transactions contemplated hereby or that are required in order to prevent a
breach of, a default under, a termination or modification of, or any
acceleration of, any obligations under any material contract to which the Seller
or any of its Subsidiaries is a party shall have been obtained, all on terms
reasonably satisfactory to the Purchaser;
(d) All governmental filings, authorizations and approvals that are
required for the transfer of the Acquired Assets to the Purchaser and the
consummation of the other transactions contemplated hereby shall have been duly
made and obtained on terms reasonably satisfactory to the Purchaser and the
applicable waiting periods, if any, under the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended (the "HSR Act") shall have expired or been
-------
terminated;
(e) The purchase of Acquired Assets by the Purchaser hereunder shall
not be prohibited by any applicable law or governmental regulation, shall not
subject the Purchaser to any penalty, liability or other onerous condition under
or pursuant to any applicable law or governmental
-14-
<PAGE>
regulation, and shall be permitted by laws and regulations of the jurisdictions
to which the Purchaser is subject, provided, however, that this condition shall
-------- -------
not apply to those prohibitions, penalties, liabilities, or onerous conditions
that arise from a willful or knowing breach or violation by the Purchaser;
(f) No action, suit, or proceeding shall be pending or threatened
before any court or quasi-judicial or administrative agency of any federal,
state, local, or foreign jurisdiction or before any arbitrator wherein an
unfavorable judgment, decree, injunction, order or ruling would in any material
respect prevent the performance of this Agreement or any of the transactions
contemplated hereby, declare unlawful the transactions contemplated by this
Agreement, cause such transactions to be rescinded or affect the right of the
Purchaser to own, operate or control the Acquired Assets, and no judgment,
decree, injunction, order or ruling shall have been entered which has any of the
foregoing effects;
(g) Since the date hereof, there shall have been no Material Adverse
Effect, other than changes in interest rates or general economic or market
conditions over which the Seller has no control;
(h) Payoff letters with respect to all of the Seller's and its
Subsidiaries' Indebtedness outstanding as of the Closing and releases of any and
all associated Liens, including appropriate UCC termination statements, held by
third parties against the Acquired Assets shall have been obtained, all on terms
reasonably satisfactory to the Purchaser;
(i) The Purchaser shall have received an opinion, dated the Closing
Date, of Verrill & Dana, counsel to the Seller, in form and substance
satisfactory to the Purchaser to the effect that the Seller is duly incorporated
and in good standing in the State of Maine and that the Transaction Documents to
which the Seller is a party have been duly authorized by all necessary action of
its directors and stockholders and that the Transaction Documents to which the
Seller or certain of the Stockholders is a party have been duly executed and
delivered by the Seller or such Stockholder, as the case may be;
(j) On or prior to the Closing Date, the Seller shall have delivered
to the Purchaser all of the following:
(i) a certificate from the Seller in a form reasonably satisfactory to
the Purchaser, dated the Closing Date, stating that the preconditions
specified in Sections 3.1(a) through (h) have been satisfied;
(ii) copies of all third party and governmental consents, approvals,
filings, releases and terminations required to be delivered by the Seller
in connection with the consummation of the transactions contemplated
herein;
(iii) certified copies of the resolutions of the Stockholders and the
Seller's board of directors approving the transactions contemplated by this
Agreement;
-15-
<PAGE>
(iv) certificates of the secretary of state of the State of Maine and
any other state where the Seller or any of its Subsidiaries is qualified to
do business providing that the Seller or such Subsidiary is in good
standing;
(v) landlord consents (if necessary) and estoppel certificates from
the Seller's and any of its Subsidiaries' landlords in form and substance
reasonably satisfactory to the Purchaser provided, however, if the Seller
is unable to obtain an estoppel certificate from one or more landlords, the
Seller shall deliver a seller's certificate in lieu thereof, which
certificate shall be in form and substance reasonably satisfactory to the
Purchaser; and
(vi) such other documents or instruments as the Purchaser may
reasonably request to effect the transactions contemplated hereby;
(k) Joseph Y. Cormier and the Purchaser shall have entered into an
agreement relating to his employment with the Purchaser substantially in the
form of Exhibit A attached hereto, and such employment agreement shall be in
---------
full force and effect (the "Cormier Employment Agreement");
----------------------------
(l) Each of Roger E. Jarvais and Phillip G. James and the Purchaser
shall have entered into an agreement relating to his employment with the
Purchaser and his agreement not to compete with the Purchaser, substantially in
the form of Exhibits B-1 and B-2 attached hereto, and such employment agreements
--------------------
shall be in full force and effect (the "Jarvais Employment and Noncompetition
-------------------------------------
Agreement" and "James Employment and Noncompetition Agreement", respectively);
- --------- ---------------------------------------------
(m) The Purchaser and each of the owners of the properties identified
on Exhibit C attached hereto shall have entered into real property purchase
---------
agreements with respect to such properties substantially in the form of Exhibit
-------
C attached hereto (the "Real Property Purchase Agreements"), and such Real
- - ---------------------------------
Property Purchase Agreements shall be in full force and effect;
(n) The Purchaser and The Walton Company shall have entered into an
equipment purchase agreement substantially in the form of Exhibit D attached
---------
hereto, and such equipment purchase agreement shall be in full force and effect
(the "Equipment Purchase Agreement");
----------------------------
(o) NES and the Stockholders who purchase shares of NES's capital
stock at the Closing shall have entered into a stock transfer agreement
substantially in the form of Exhibit E attached hereto (the "Stock Transfer
--------- --------------
Agreement"), and such Stock Transfer Agreement shall be in full force and
- ---------
effect; and
(p) Title Insurance.
---------------
(i) The Purchaser, using reasonable diligence, shall have obtained, in
preparation for Closing, a commitment for an ALTA Owner's Policy of Title
Insurance for each parcel of Owned Real Property (the "Title Commitments") (to
-----------------
the extent that there are any search charges associated with obtaining the Title
Commitments and such search charges do not exceed $1,500.00, the Purchaser, at
its sole cost and expense, shall pay such search charges. In the event
-16-
<PAGE>
such search charges exceed $1,500.00, the cost and expense of such search
charges in excess of $1,500.00 shall be paid fifty percent (50%) by the
Purchaser and fifty percent (50%) by the Seller), issued by a title insurer
reasonably satisfactory to the Purchaser (the "Title Insurer"), in such amount
-------------
as the Purchaser reasonably determines to be the fair market value (including
all improvements thereon), committing to insure the Purchaser's interest in such
parcel as of Closing, subject only to the Permitted Liens. The Purchaser shall
provide the Seller with a copy of each Title Commitment promptly upon receipt of
all of the Title Commitments for each parcel of Owned Real Property, and copies
of all correspondence between the Purchaser or its attorneys with the Title
Insurer related to the Title Commitments. The Purchaser shall have fifteen (15)
days from the date on which the Purchaser or its counsel receives the Title
Commitments and Surveys (as hereinafter defined) (the fifteen (15) days shall
not start to run until the Purchaser or its counsel shall have received a Title
Commitment and Survey (as hereinafter defined) for each of the parcels of Owned
Real Property) to provide written notice to the Seller (the "Title Notice") of
------------
title defects or encumbrances affecting the Real Property other than the
Permitted Liens (the "Title Defects"). To the extent that the Purchaser, in its
-------------
Title Notice, does not object to a Title Defect, such Title Defect shall be
included in the term "Permitted Liens" as used herein. The Seller shall notify
the Purchaser, within fifteen (15) days after receipt of the Title Notice,
whether the Seller agrees to cure or remove (or cause the cure or removal of)
any Title Defects prior to or on the date of Closing, and the Seller shall have
until the Closing, at its sole cost and expense, to cure or remove any Title
Defects that the Seller has agreed to cure or remove. For purposes of this
Section, the Seller shall be deemed to have cured or remedied any Title Defect
if the Title Insurer will remove the Title Defect from the Title Commitments or
the Purchaser is able to obtain a commitment from the Title Insurer to issue an
endorsement to the Purchaser's title insurance policy providing affirmative
coverage for such Title Defect. The Seller shall not be obligated to cure or
remove any Title Defects except for: (i) any mortgage or other security interest
granted by the Seller; (ii) any uncontested lien with respect to monetary claims
against the Seller for the payment of a readily ascertainable amount; or (iii)
any contested lien (a lien shall be deemed "contested" if the Company in good
faith disputes the validity or size of the underlying claim in an amount equal
to or less than $100,000.00) with respect to any claim against the Seller, if
such lien may be removed prior to Closing by payment of the lien or the posting
of a bond or other security satisfactory to the Title Insurer so that the Title
Insurer would be willing to remove (or endorse over) such lien from the Title
Policy. If the Seller elects not to cure any one of the Title Defects listed in
the Purchaser's Title Notice (except those Title Defects listed in the preceding
sentence for which the Seller has an affirmative obligation to remove) and the
Seller has so notified the Purchaser in writing of such election within the
above-stated time limits, the Purchaser shall, within fifteen (15) days of
receiving such written notice, provide the Seller with written notice that it
either: (1) elects to terminate this Agreement, whereupon all obligations of the
parties hereunder shall cease except with respect to provisions that
specifically survive the termination of this Agreement, (2) elects first to cure
or remedy the Title Defect itself, whereby the Seller shall reasonably cooperate
with the Purchaser or the Title Insurer, at the sole cost and expense of the
Purchaser, and execute any documents reasonably requested by the Title Insurer
(such as factual affidavits which do not contain indemnities) to remove or to
remedy the Title Defect provided such documents do not impose any liabilities or
costs on the Seller; provided, however, if the Purchaser is unable, using
reasonable diligence, to remove or to remedy the Title Defect within thirty (30)
days of providing the Seller with its notice that it intends to remedy or to
remove the Title Defect itself, the Purchaser shall elect, within said thirty
(30) days, either: (i) to terminate this Agreement by providing written notice
to the Seller in accordance with clause (1) above or (ii) to
-17-
<PAGE>
accept the Title Defects in accordance with clause (3) below or (3) elects to
accept title to the Owned Real Property subject to the Title Defects without any
right to damages, in which case the specific Title Defects listed in the
Seller's written notice of Title Defects which the Seller elects not to cure
shall be deemed to be Permitted Liens (as that term is used hereunder);
(ii) The Purchaser, using reasonable diligence, shall have received
title insurance policies or mark-ups of the Title Commitments in a so-called
"New York" style closing (the "Title Policies") on or before the Closing, from
--------------
the Title Insurer based upon the Title Commitments. The cost and expense of
such Title Policies and the cost and expense of any search charges in excess of
$1,500.00, to be paid fifty percent (50%) by the Purchaser and fifty percent
(50%) by the Seller. Each such Title Policy will be dated as of the date of
closing and (a) insure title to the applicable parcels of real estate and all
recorded easements benefitting such parcels, subject only to Permitted Liens,
(b) to the extent available from the Title Insurer in the applicable
jurisdiction contain the following endorsements: (i) "extended coverage
endorsement" insuring over the general exceptions contained customarily in such
policies, (ii) ALTA Zoning Endorsement 3.1, with parking (or equivalent), (iii)
an endorsement insuring that the parcel described in such Title Policy is the
parcel shown on the survey delivered with respect to such parcel, (iv) an
endorsement insuring that each street adjacent to such parcel is a public street
and that there is direct pedestrian and vehicular access to such street from
such parcel, (v) if the real estate covered by such policy consists of more than
one record parcel, a "contiguity" endorsement insuring that all of the record
parcels are contiguous to one another, (vi) a tax number endorsement and (vii)
such other endorsements as the Purchaser's lender may reasonably request; and
(iii) The Purchaser shall have received from the Seller
executed owner's affidavits for the Owned Real Property as reasonably required
by the Title Insurer to insure over general exceptions for parties in
possession, mechanics' and materialmens' liens and unrecorded liens for taxes
and assessments other than taxes and assessments not yet due and payable as of
the Closing. The Purchaser also shall have obtained, using reasonable
diligence, if required by the Title Insurer, so-called "utility letters" in
sufficient form to allow for the Title Insurer to insure over exceptions for
easements or claims of easements not shown by the public records, and the Seller
shall reasonably cooperate with the Purchaser with respect to obtaining such
utility letters at no cost to the Seller other than the reasonable costs of
legal review and administrative costs; and
(q) The Purchaser shall have obtained, using reasonable diligence, in
preparation for the Closing, current surveys of each parcel of Owned Real
Property, prepared by a licensed surveyor, reasonably satisfactory to the
Purchaser, and conforming to 1992 ALTA/ACSM Minimum Detail Requirements for
Urban Land Title Surveys ("Surveys"), and such standards as the Title Insurer
-------
may require as a condition to the removal of any survey exceptions from the
Title Policy, and certified to the Seller, the Purchaser, the Purchaser's lender
and the Title Insurer in a form satisfactory to such parties. The Purchaser
shall provide the Seller with a copy of each Survey promptly upon receipt of all
of the Surveys for the Owned Real Property, and copies of all correspondence
between the Purchaser or its attorneys with the surveyor. The Survey shall
disclose the location of all Improvements, plottable easements, party walls,
sidewalks, roadways, utility lines (to the extent observable from the surface)
and such matters shown customarily on such surveys, show access affirmatively to
public streets and roads, and include Table A Item Nos. 1-4 and 6-14. The
Purchaser shall have fifteen (15) days from the date on which the Purchaser or
its counsel
-18-
<PAGE>
receives the Surveys and the Title Commitments (the fifteen (15) days shall not
start to run until the Purchaser or its counsel shall have received a Title
Commitment and a Survey for each of the parcels of Owned Real Property) to
provide written notice to the Seller (the "Survey Notice") of any encroachments,
-------------
boundary problems, zoning problems, entitlement problems, building and other
land use law problems, violations of ordinances or regulations imposed by
governmental agencies having jurisdiction over the Real Property which is the
subject of the Survey or other survey defects affecting the Real Property other
than the Permitted Liens (the "Survey Defects"). To the extent that the
--------------
Purchaser, in its Survey Notice, does not object to a Survey Defect, such Survey
Defect shall be included in the term "Permitted Liens" as used herein. The
Seller shall notify the Purchaser, within fifteen (15) days after receipt of the
Survey Notice, whether or not the Seller is willing to cure or to remove (or
cause the cure or removal of) any Survey Defects prior to or on the date of
Closing, and the Seller shall have until the Closing to cure or remove any
Survey Defects that the Seller has agreed to cure or remove. For purposes of
this Section, the Seller shall be deemed to have cured or remedied any Survey
Defect if the Title Insurer will remove it from the Title Commitments or the
Purchaser is able to obtain a commitment from the Title Insurer to issue an
endorsement to the Purchaser's title insurance policy providing affirmative
coverage for such Survey Defect. If the Seller elects not to cure any Survey
Defects and the Seller has so notified the Purchaser in writing within the
above-stated time limits, the Purchaser shall, within fifteen (15) days of
receiving such written notice, provide the Seller with written notice that it
either: (1) elects to terminate this Agreement, whereupon all obligations of the
parties hereunder shall cease except with respect to provisions that
specifically survive the termination of this Agreement, (2) elects first to cure
or remedy the Survey Defect itself, whereby the Seller shall reasonably
cooperate with the Purchaser or the Title Insurer, at the sole cost and expense
of the Purchaser, and execute any documents reasonably requested by the Title
Insurer (such as factual affidavits which do not contain indemnities) to remove
or to remedy the Survey Defect provided such documents do not impose any
liabilities or costs on the Seller; provided, however, if the Purchaser is
unable, using reasonable diligence, to remove or to remedy the Survey Defect
within thirty (30) days of providing the Seller with its notice that it intends
to remedy or to remove the Survey Defect itself, the Purchaser shall elect,
within said thirty (30) days, either: (i) to terminate this Agreement by
providing written notice to the Seller in accordance with clause (1) above or
(ii) to accept the Survey Defects in accordance with clause (3) below or or (3)
elects to accept title to the Owned Real Property subject to the uncured Survey
Defects without any right to damages, in which case the specific Survey Defects
listed in the Seller's written notice of Survey Defects which the Seller elects
not to cure shall be deemed to be Permitted Liens (as that term is used
hereunder). The cost and expense of such Surveys to be paid fifty percent (50%)
by the Purchaser and fifty percent (50%) by the Seller.
(r) Seller shall have executed an assignment of lease of the real
property located at 609 Airport Road, Lawrenceville, Georgia and listed on
Leases Schedule attached hereto. The form of the assignment of lease shall be
- ---------------
reasonably acceptable to Purchaser and Purchaser shall have all of the same
rights and obligations as Seller under the current lease with WASCOD Partners V
including, without limitation, that the term of the lease shall expire on
December 31, 1998 and the monthly rent shall be Three Thousand Three Hundred and
00/100 Dollars ($3,300.00). The assignment of lease shall be expressly
consented to by WASCOD Partners V. Purchaser shall have the option to extend
such lease for two (2) months. Such lease shall be assignable by WASCOD
Partners V.
-19-
<PAGE>
(s) WASCOD Partners VII (the fee simple owner of the real property
located at 1010 Commercial Drive, Interstate Commercial Park, Brunswick, Georgia
(the "Brunswick Property") and listed on Leases Schedule attached hereto) shall
------------------ ---------------
have executed a lease of the Brunswick Property with the Purchaser. The terms
of the lease of the Brunswick Property shall be reasonably satisfactory to
Purchaser including, without limitation, that: (i) the term of the lease shall
be for three (3) years, (ii) the monthly rent for the first (1st) lease year
shall be the lesser of: (x) the fair market rental value of the Brunswick
Property as determined by the parties or, if the parties cannot agree, as
determined by a licensed real estate appraiser or (y) Four Thousand Two Hundred
Fifty-Five and 00/100 Dollars ($4,255.00), (iii) the monthly rental for each
additional lease year shall be adjusted pursuant to a standard consumer price
index escalation clause, (iv) the lease shall be on other terms and conditions
which are custom and standard in the area in which the Brunswick Property is
located, and (v) the lease shall be assignable by WASCOD Partners VII.
Any condition specified in this Section 3.1 may be waived by the Purchaser;
provided that no such waiver shall be effective against the Purchaser unless it
is set forth in a writing executed by the Purchaser.
3.2 Conditions to the Seller's Obligation. The obligation of
-------------------------------------
the Seller to consummate the transactions contemplated by this Agreement is
subject to the satisfaction of the following conditions as of the Closing Date:
(a) The representations and warranties set forth in Article VI shall
be true and correct in all material respects at and as of the Closing Date as
though then made and as though the Closing Date were substituted for the date of
this Agreement throughout such representations and warranties (without taking
into account any disclosures made by the Purchaser to the Seller pursuant to
Sections 4.3(a) and 6.7 hereof);
(b) The Purchaser shall have performed and complied with all of the
covenants and agreements required to be performed by it under this Agreement on
or prior to the Closing;
(c) All governmental filings, authorizations and approvals that are
required for the transfer of the Acquired Assets to the Purchaser and the
consummation of the other transactions contemplated hereby shall have been duly
made and obtained on terms reasonably satisfactory to the Seller and the
applicable waiting periods, if any, under the HSR Act shall have expired or been
terminated;
(d) No action, suit, or proceeding shall be pending before any court
or quasi-judicial or administrative agency of any federal, state, local, or
foreign jurisdiction or before any arbitrator wherein an unfavorable judgment,
decree, injunction, order or ruling would, in any material respect, prevent the
performance of this Agreement or any of the transactions contemplated hereby,
declare unlawful the transactions contemplated by this Agreement, cause such
transactions to be rescinded or affect the right of the Purchaser to own,
operate or control the Acquired Assets, and no judgment, decree, injunction,
order or ruling shall have been entered which has any of the foregoing effects;
-20-
<PAGE>
(e) The Purchaser and Joseph Y. Cormier shall have entered into the
Cormier Employment Agreement;
(f) The Purchaser and each of the owners of the properties identified
on Exhibit C attached hereto shall have entered into the Real Property Purchase
---------
Agreements, and such Real Property Purchase Agreements shall be in full force
and effect;
(g) The Purchaser and The Walton Company shall have entered into the
Equipment Purchase Agreement, and such Equipment Purchase Agreement shall be in
full force and effect;
(h) On or prior to the Closing Date, the Purchaser shall have
delivered to the Seller all of the following:
(i) a certificate from the Purchaser in a form reasonably satisfactory
to the Seller, dated the Closing Date, stating that the preconditions
specified in Sections 3.2(a) through (d), inclusive, have been satisfied;
(ii) certificates of the secretary of state of the State of Delaware
providing that the Purchaser is in good standing;
(iii) certified copies of the resolutions of the Purchaser's board of
directors approving the transactions contemplated by this Agreement;
(iv) such other documents or instruments as the Seller may reasonably
request to effect the transactions contemplated hereby; and
Any condition specified in this Section 3.2 may be waived by the Seller;
provided that no such waiver shall be effective unless it is set forth in a
writing executed by the Seller.
ARTICLE IV
COVENANTS PRIOR TO CLOSING
--------------------------
4.1 AFFIRMATIVE COVENANTS OF THE SELLER. Prior to the Closing,
-----------------------------------
unless the Purchaser otherwise agrees in writing and except as expressly
contemplated by this Agreement, the Seller and each of its Subsidiaries shall,
except as described on the Permitted Pre-Closing Covenant Exceptions Schedule
--------------------------------------------------
attached hereto:
(a) conduct its business and operations only in the Ordinary Course of
Business;
(b) keep in full force and effect its corporate existence and all
rights, franchises and intellectual property relating or pertaining to its
business and use its reasonable best efforts to cause its current insurance (or
reinsurance) policies not to be canceled or terminated or any of the coverage
thereunder to lapse;
-21-
<PAGE>
(c) use its reasonable best efforts to carry on the business of the
Seller and of each of its Subsidiaries in the same manner as presently conducted
and to keep the Seller's and each of its Subsidiaries' business organization and
properties intact, including its present business operations, physical
facilities, working conditions and employees and its present relationships with
lessors, licensors, suppliers and customers and others having business relations
with it;
(d) maintain the material assets of the Seller and each of its
Subsidiaries in good repair, order and condition (normal wear and tear excepted)
consistent with current needs, replace in accordance with prudent practices its
inoperable, worn out or obsolete assets with assets of good quality consistent
with prudent practices and current needs and, in the event of a casualty, loss
or damage to any of such assets or properties prior to the Closing Date, either
repair or replace such damaged property or use the proceeds of such insurance in
such other manner as mutually agreed upon by the Seller and the Purchaser;
(e) encourage employees to continue their employment with the
Purchaser and its Subsidiaries after the Closing;
(f) maintain the books, accounts and records of the Seller and each of
its Subsidiaries in accordance with past custom and practice as used in the
preparation of the Financial Statements;
(g) promptly (once the Seller obtains knowledge thereof) inform the
Purchaser in writing of any material variances from the representations and
warranties contained in Article V hereof or any material breach of any covenant
hereunder by the Seller;
(h) cooperate with the Purchaser and use reasonable best efforts to
cause the conditions to the Purchaser's obligation to close to be satisfied
(including, without limitation, the execution and delivery of all agreements
contemplated hereunder to be so executed and delivered and the making and
obtaining of all third party and governmental notices, filings, authorizations,
approvals, consents, releases and terminations); provided, however, that the
Seller shall have no greater obligation with resect to title and survey issues
than the Seller's obligations as set forth in Sections 3.1(p) and 3.1 (q);
(i) use reasonable best efforts to obtain all third party and
governmental approvals and consents necessary or desirable to consummate the
transactions contemplated hereby and to cause the other conditions to the
Purchaser's obligations hereunder to be satisfied;
(j) maintain the existence of and use reasonable best efforts to
protect all material Proprietary Rights used in the business of the Seller and
each of its Subsidiaries;
(k) maintain the existence of and protect all of the material
governmental permits, licenses, approvals and other authorizations of the
business of the Seller and each of its Subsidiaries;
(l) comply in all material respects with all applicable laws,
ordinances, and regulations in the operation of the business of the Seller and
each of its Subsidiaries; and
-22-
<PAGE>
(m) cooperate with the Purchaser in the Purchaser's investigation of
the business and properties of the Seller and each of its Subsidiaries, to
permit the Purchaser and its employees, agents, accounting, legal and other
authorized representatives to (i) have full access to the premises, books and
records of the Seller and each of its Subsidiaries at reasonable hours, (ii)
visit and inspect any of the properties of the Seller and each of its
Subsidiaries, and (iii) discuss the affairs, finances and accounts of the Seller
and each of its Subsidiaries with the directors, officers, partners, key
employees, key customers, key sales representatives, key suppliers and
independent accountants of the Seller and each of its Subsidiaries. Any entry
by the Purchaser or its authorized agents upon the premises of the Seller and
its Subsidiaries shall be at the Purchaser's sole risk and expense; provided,
further, that the Purchaser shall not create a nuisance, and shall restore any
damage cause by its entry; provided, further, that the Purchaser shall defend,
indemnify and hold the Seller and its Subsidiaries harmless from and against any
and all claims, demands, liabilities, costs and expenses including, without
limitation, reasonable attorneys' fees, arising out of or related to such entry
and activities by the Purchaser, its agents, servants or its independent
contractors. The foregoing indemnity shall survive the Closing and any
termination of this Agreement.
4.2 Negative Covenants of the Seller. Prior to the Closing,
--------------------------------
unless the Purchaser otherwise agrees in writing and except as expressly
contemplated by this Agreement, the Seller and each of its Subsidiaries shall
not, except as described on the Permitted Pre-Closing Covenant Exceptions
-----------------------------------------
Schedule attached hereto:
- --------
(a) take any action that would require disclosure under Section 5.8;
(b) make any loans, enter into any transaction with any Insider or
make or grant any increase in any employee's or officer's compensation or make
or grant any increase in any employee benefit plan, incentive arrangement or
other benefit covering any of the employees of the Seller or its Subsidiaries;
(c) establish or, except in the Ordinary Course of Business,
contribute to any pension, retirement, profit sharing or stock bonus plan or
multiemployer plan covering the employees of the Seller or its Subsidiaries;
(d) except as specifically contemplated by this Agreement, enter into
any contract, agreement or transaction, other than in the Ordinary Course of
Business and at arm's length with unaffiliated Persons;
(e) declare, pay, make or otherwise effectuate any dividends, bonuses,
distributions, redemptions, equity repurchases or other transactions involving
the Seller's or any of its Subsidiaries' capital stock or equity securities
(except with respect to (i) dividends paid for the purpose of reimbursing any
Stockholder for individual income tax liabilities related to the Seller or (ii)
dividends relating to the accumulated adjustments account);
(f) engage in any activity other than in the Ordinary Course of
Business which would accelerate the collection of its accounts or notes
receivable, delay the payment of its accounts payable, delay its capital
expenditures, or reduce or otherwise restrict the amount of inventory on hand;
or
-23-
<PAGE>
(g) sell, transfer, contribute, distribute, or otherwise dispose of
any securities, capital stock or assets (other than marketable securities) of
the Seller or of its Subsidiaries, or agree to do any of the foregoing, to any
Person, or negotiate or have any discussions with any Person with respect to any
of the foregoing, other than in the Ordinary Course of Business.
4.3 Covenants of the Purchaser. Prior to the Closing, the
--------------------------
Purchaser shall:
(a) promptly (once it obtains knowledge thereof) inform the Seller in
writing of any variances from the representations and warranties contained in
Article VI or any breach of any covenant hereunder by the Purchaser;
(b) cooperate with the Seller and use its reasonable best efforts to
cause the conditions to the Seller's obligation to close to be satisfied
(including, without limitation, the execution and delivery of all agreements
contemplated hereunder to be so executed and delivered and the making and
obtaining of all third party and governmental filings, authorizations,
approvals, consents, releases and terminations); and
(c) treat and hold as confidential all Confidential Information,
refrain from using any of the Confidential Information except in connection with
this Agreement, and deliver promptly to the Seller or destroy, at the request
and option of the Seller, all tangible embodiments (and all copies) of the
Confidential Information which are in its possession, as applicable, or under
its control, as applicable. In the event that the Purchaser is requested or
required (by oral question or request for information or documents in any legal
proceeding, interrogatory, subpoena, civil investigative demand, or similar
process) to disclose any Confidential Information, the Purchaser shall notify
the Seller promptly of the request or requirement so that the Seller may seek an
appropriate protective order or waive compliance with the provisions of this
Section 4.3(c). If, in the absence of a protective order or the receipt of a
waiver hereunder, the Purchaser is, on the advice of counsel, compelled to
disclose any Confidential Information to any tribunal or else stand liable for
contempt, the Purchaser may disclose the Confidential Information to the
tribunal; provided that the Purchaser shall use its best efforts to obtain, at
the request of the Seller, an order or other assurance that confidential
treatment shall be accorded to such portion of the Confidential Information
required to be disclosed as the Seller shall designate.
ARTICLE V
REPRESENTATIONS AND WARRANTIES
CONCERNING THE SELLER
---------------------
As a material inducement to the Purchaser to enter into this Agreement, the
Seller represents and warrants that:
5.1 Organization and Corporate Power. The Seller is a
--------------------------------
corporation duly organized, validly existing and in good standing under the laws
of the State of Maine and is qualified to do business in every jurisdiction in
which it is required to be qualified. All jurisdictions in which the Seller is
qualified to do business are set forth on the "Organization Schedule" attached
---------------------
hereto. The Seller has full power and authority and all licenses, permits and
authorizations necessary to own
-24-
<PAGE>
and operate its properties and to carry on its business as now conducted.
Correct and complete copies of the Seller's and each of its Subsidiaries'
articles of incorporation and by-laws have been furnished to the Purchaser,
which documents reflect all amendments made thereto at any time prior to the
date of this Agreement. Correct and complete copies of the minute books
containing the records of meetings of the stockholders and board of directors,
the stock certificate books and the stock record books of the Seller and each of
its Subsidiaries have been furnished to the Purchaser. Neither the Seller nor
any of its Subsidiaries is in default under or in violation of any provision of
its articles of incorporation or by-laws.
5.2 Authorization of Transactions. The Seller and the
-----------------------------
Stockholders have full power and authority to execute and deliver the
Transaction Documents to which they are a party and to consummate the
transactions contemplated hereby and thereby. The Stockholders and the board of
directors of the Seller have duly approved the Transaction Documents to which
the Stockholders and the Seller are a party and have duly authorized the
execution and delivery of such Transaction Documents and the consummation of the
transactions contemplated thereby. No other corporate proceedings on the part
of the Stockholders or the Seller are necessary to approve and authorize the
execution and delivery of the Transaction Documents to which the Stockholders
and the Seller are a party and the consummation of the transactions contemplated
thereby. All Transaction Documents to which the Stockholders and the Seller are
a party have been duly executed and delivered by the Stockholders and the Seller
and constitute the valid and binding agreements of the Stockholders and the
Seller, enforceable against the Stockholders and the Seller in accordance with
their terms.
5.3 Capitalization. The authorized stock of the Seller consists
--------------
of 2,000,000 shares of Common Stock, par value $.10 per share, of which 588,000
shares are issued and outstanding, and are held of record and beneficially by
the Stockholders in the amounts set forth on the Schedule of Stockholders.
------------------------
5.4 No Subsidiaries. The Seller has no, and for the last ten
---------------
years has not had any, Subsidiaries, and neither owns nor controls any equity
interest in any other corporation, partnership, joint venture, or other business
entity or any right to acquire such an interest.
5.5 Absence of Conflicts. Except as set forth on the "Conflicts
-------------------- ---------
Schedule" attached hereto, the execution, delivery and performance of the
- --------
Transaction Documents and the consummation of the transactions contemplated
thereby by the Seller and each Stockholder do not and shall not (a) conflict
with or result in any breach of any of the terms, conditions or provisions of,
(b) constitute a default under, (c) result in a violation of, (d) give any third
party the right to modify, terminate or accelerate any obligation under, (e)
result in the creation of any Lien upon the Acquired Assets or (f) require any
authorization, consent, approval, exemption or other action by or notice or
declaration to, or filing with, any court or administrative or other
governmental body or agency, under the provisions of the articles of
incorporation or by-laws of the Seller or any of its Subsidiaries or any
indenture, mortgage, lease, loan agreement or other agreement or instrument to
which the Seller, any of its Subsidiaries or such Stockholder is bound or
affected, or any law, statute, rule or regulation to which the Seller, any of
its Subsidiaries or such Stockholder is subject or any judgment, order or decree
to which the Seller, any of its Subsidiaries or such Stockholder is subject.
-25-
<PAGE>
5.6 Financial Statements and Related Matters.
----------------------------------------
(a) Financial Statements. Attached hereto as the "Financial
-------------------- ---------
Statements Schedule" are copies of the Seller's and its Subsidiaries' (i)
- -------------------
unaudited consolidated and consolidating balance sheet as of October 31, 1997
(the "Latest Balance Sheet") and the related statements of income and cash flows
--------------------
for the ten-month period then ended and (ii) audited consolidated and
consolidating balance sheets and statements of income and cash flows for the
fiscal years ended December 31, 1996 and 1995. Each of the foregoing financial
statements (including in all cases the notes thereto, if any) (the "Financial
---------
Statements") presents fairly the Seller's and its Subsidiaries' financial
- ----------
condition and results of operations as of the times and for the periods referred
to therein, and has been prepared in accordance with GAAP, subject in the case
of unaudited financial statements to changes resulting from normal year-end
adjustments for recurring accruals (which shall not be material individually or
in the aggregate) and to the absence of footnote disclosure.
(b) Inventory. The Seller's and its Subsidiaries' inventory, except
---------
as reflected in the reserves applicable to such inventory, is usable and
saleable or rentable in the Ordinary Course of Business, and of merchantable
quality. The Seller and each of its Subsidiaries has good title to such
inventory, free and clear of all Liens (other than Permitted Liens).
5.7 Absence of Undisclosed Liabilities. Neither the Seller nor
----------------------------------
any of its Subsidiaries has any obligations or liabilities (whether accrued,
absolute, contingent, unliquidated or otherwise, whether or not known, whether
due or to become due and regardless of when asserted) arising out of
transactions entered into at or prior to the Closing, or any action or inaction
at or prior to the Closing, or any state of facts existing at or prior to the
Closing, except (i) obligations under executory contracts or commitments
described on the Contracts Schedule attached hereto or under executory contracts
------------------
and commitments which are not required to be disclosed thereon (but not
liabilities for breaches thereof), (ii) liabilities reflected or reserved
against on the Latest Balance Sheet, and (iii) liabilities which have arisen
after the date of the Latest Balance Sheet in the Ordinary Course of Business or
otherwise in accordance with the terms and conditions of this Agreement (none of
which is a liability for breach of contract, breach of warranty, tort or
infringement or a claim or lawsuit or an environmental liability).
5.8 Absence of Certain Developments. Except as set forth on the
-------------------------------
"Developments Schedule" attached hereto and except as expressly contemplated by
---------------------
this Agreement, since August 31, 1997, neither the Seller nor any of its
Subsidiaries has:
(a) suffered any change that has had or could reasonably be expected
to have a Material Adverse Effect or suffered any theft, damage, destruction or
casualty loss in excess of $50,000, to its assets, whether or not covered by
insurance or suffered any substantial destruction of its books and records;
(b) redeemed or repurchased, directly or indirectly, any shares of
capital stock or other equity security or declared, set aside or paid any
dividends or made any other distributions (whether in cash or in kind) with
respect to any shares of its capital stock or other equity security;
-26-
<PAGE>
(c) issued, sold or transferred any equity securities, any securities
convertible, exchangeable or exercisable into shares of its capital stock or
other equity securities, or warrants, options or other rights to acquire shares
of its capital stock or other of its equity securities;
(d) incurred or become subject to any liabilities, except liabilities
incurred in the Ordinary Course of Business or reflected on the Latest Balance
Sheet;
(e) subjected any portion of its properties or assets to any Lien
(other than Liens that will be extinguished or released at Closing and Permitted
Liens);
(f) sold, leased, assigned or transferred (including, without
limitation, transfers to Stockholders or any Insider) a portion of its tangible
assets, except for sales or leases of inventory in the Ordinary Course of
Business, or canceled without fair consideration any material debts or claims
owing to or held by it;
(g) sold, assigned, licensed or transferred (including, without
limitation, transfers to Stockholders or any Insider) any Proprietary Rights
owned by, issued to or licensed to it or disclosed any confidential information
(other than pursuant to agreements requiring the disclosure to maintain the
confidentiality of and preserving all its rights in such confidential
information) or received any confidential information of any third party in
violation of any obligation of confidentiality;
(h) suffered any extraordinary losses or waived any rights of material
value without fair consideration;
(i) entered into, amended or terminated any material lease, contract,
agreement or commitment, other than in the Ordinary Course of Business;
(j) entered into any other material transaction except in the Ordinary
Course of Business, or materially changed its business practices;
(k) made or granted any bonus or any wage, salary or compensation
increase to any director, officer, employee or sales representative, group of
employees or consultant or made or granted any increase in any employee benefit
plan or arrangement, or amended or terminated any existing employee benefit plan
or arrangement or adopted any new employee benefit plan or arrangement;
(l) made any other change in employment terms for any of its
directors, officers, and employees outside the Ordinary Course of Business;
(m) conducted its general cash management customs and practices other
than in the Ordinary Course of Business (including, without limitation, with
respect to collection of accounts receivable, purchases of inventory and
supplies, repairs and maintenance, payment of accounts payable and accrued
expenses, levels of capital expenditures and operation of cash management
practices generally);
-27-
<PAGE>
(n) made any capital expenditures or commitments for capital
expenditures that aggregate in excess of $150,000;
(o) made any loans or advances to, or guarantees for the benefit of,
any Person;
(p) made charitable contributions, pledges, association fees or dues
in excess of $75,000; or
(q) committed to do any of the foregoing.
5.9 Assets. Except as set forth on the attached "Assets
------ ------
Schedule," the Seller and each of its Subsidiaries have good and marketable
- --------
title to, or a valid leasehold interest in, the prop erties and assets used by
them, located on their premises or shown on the Latest Balance Sheet or acquired
thereafter, free and clear of all Liens, except for Liens to be discharged at or
before Closing and Permitted Liens and except for properties and assets disposed
of in the ordinary course of business since the date of the Latest Balance
Sheet. Except as described on the Assets Schedule, the Seller's and each of its
---------------
Subsidiaries' equipment and other tangible assets are, in operating condition
(ordinary wear and tear excepted) and are fit for use in the Ordinary Course of
Business. The Acquired Assets constitute all of the assets and rights necessary
for the conduct of the Business as it is presently conducted.
5.10 Title to Properties.
-------------------
(a) Owned Properties. The "Owned Real Property Schedule" attached
---------------- ----------------------------
hereto sets forth a list of all real property owned by the Seller (collectively,
the "Owned Real Property"). To the knowledge of the Seller (without
-------------------
investigating title) with respect to each such parcel of Owned Real Property,
except as set forth in the Owned Real Property Schedule: (i) such parcel is free
and clear of all encumbrances, except Permitted Liens; (ii) there are no leases,
subleases, licenses, concessions, or other agreements, written or oral, granting
to any person the right of use or occupance of any portion of such parcel; and
(iii) there are no outstanding options or rights of first refusal to purchase
such parcel (other than the right of the Purchaser pursuant to this Agreement),
or any portion thereof or interest therein. To the knowledge of the Seller
(without investigating title) the current use of the Owned Real Property does
not violate in any material respect any instrument of record or agreement
affecting such Owned Real Property. To the knowledge of the Seller (without
investigating title) there is no violation of any covenant, condition,
restriction, easement, agreement or order of any governmental authority having
jurisdiction over any of the Owned Real Property that materially adversely
affects such real property or the use or occupancy thereof. No damage or
destruction has occurred with respect to any of the Owned Real Property that,
individually or in the aggregate, has had or resulted in, or will have or result
in, a significant adverse effect on the operation of the Seller's business. The
Purchaser hereby agrees that none of the representations and warranties
contained in this Section 5.10(a) or the last two sentences of 5.10(e) shall
survive the Closing.
(b) Leased Properties. The "Leases Schedule" sets forth a list of all
----------------- ---------------
of the leases and subleases (the "Leases") and each leased and subleased parcel
------
of real property in which the Seller or any of its Subsidiaries has a leasehold
and subleasehold interest (the "Leased Real Property"). To the knowledge of the
--------------------
Seller (without investigating title) each of the Leases is in full force and
effect
-28-
<PAGE>
and the Seller or its Subsidiary holds a valid and existing leasehold or
subleasehold interest under each of the Leases. The Seller has delivered to the
Purchaser true, correct, complete and accurate copies of each of the Leases
described in the Leases Schedule. With respect to each Lease listed on the
---------------
Leases Schedule: (i) to the knowledge of the Seller (without investigating
- ---------------
title) the Lease is legal, valid, binding, enforceable and in full force and
effect; (ii) to the knowledge of the Seller (without investigating title) the
Lease will be legal, valid, binding, enforceable and in full force and effect on
identical terms as of the Closing; (iii) neither the Seller nor, to the
knowledge of the Seller, any other party to the Lease is in breach or default,
and, to the knowledge of the Seller, no event has occurred which, with notice or
lapse of time, would constitute such a breach or default or permit termination,
modification or acceleration under the Lease; (iv) no party to the Lease has
repudiated any provision thereof; (v) there are no disputes, oral agreements, or
forbearance programs in effect as to the Lease; (vi) the Lease has not been
modified in any respect, except to the extent that such modifications are
disclosed by the documents delivered to the Purchaser; and (vii) neither the
Seller nor any of its Subsidiaries has assigned, transferred, conveyed,
mortgaged, deeded in trust or encumbered any interest in the Lease except for
Liens to be discharged at or before Closing and Permitted Liens.
Notwithstanding the foregoing, no representation or warranty is given in this
Section 5.10(b) with respect to the Leases which relate to the properties being
sold to the Purchaser pursuant to the Real Property Purchase Agreements.
(c) Real Property Disclosure. Except as disclosed on the Owned Real
------------------------ ----------
Property Schedule or the Leases Schedule, there is no Real Property leased or
- ----------------- ---------------
owned by the Seller or any of its Subsidiaries used in their businesses.
(d) No Proceedings. There are no proceedings in eminent domain or
--------------
other similar proceedings pending or, to the knowledge of the Seller,
threatened, affecting any portion of the Real Property. There exists no writ,
injunction, decree, order or judgment outstanding, nor any litigation, pending
or, to the knowledge of the Seller, threatened, relating to the ownership,
lease, use, occupancy or operation by the Seller or any of its Subsidiaries of
the Real Property.
(e) Condition and Operation of Improvements. To the knowledge of the
---------------------------------------
Seller all buildings and all components of all buildings, structures and other
improvements included within the Real Property (the "Improvements"), including,
------------
without limitation, the roofs and structural elements thereof and any heating,
ventilation, air conditioning, air pollution emission capture and abatement,
plumbing, electrical, mechanical, sewer, waste water and paving and parking
equipment systems and facilities included therein, are in working condition and
adequate to operate such facilities as currently used and there are no facts or
conditions affecting any of the Improvements which would, individually or in the
aggregate, interfere in any significant respect with the use, occupancy or
operation thereof as currently used, occupied or operated. To the knowledge of
the Seller there are no structural deficiencies or latent defects affecting any
Improvements located upon the Owned Real Property which would, individually or
in the aggregate, interfere in any significant respect with the use, occupancy
or operation thereof as currently used, occupied or operated. To the knowledge
of the Seller all water, gas, electrical, steam, compressed air,
telecommunication, sanitary and storm sewage lines and systems and other similar
systems serving the Real Property are installed and operating and are sufficient
to enable the Real Property to continue to be used and operated in the manner
currently being used and operated, and any so-called hook-up fees or other
associated charges have been fully paid. To the knowledge of the Seller
(without investigating title), each
-29-
<PAGE>
Improvement has direct access to a public street adjoining the Real Property on
which such Improvement is situated over the driveways and accessways currently
being used in connection with the use and operation of such Improvement and no
existing accessway crosses or encroaches upon any property or property interest
not owned by the Seller and being conveyed to the Purchaser. To the knowledge of
the Seller (without investigating title), no Improvement or portion thereof is
dependent for its access, operation or utility on any land, building or other
improvement not included in the Real Property.
(f) Permits. To the knowledge of the Seller (without investigating
-------
title) all certificates of occupancy, permits, licenses, franchises, approvals
and authorizations (collectively, the "Real Property Permits") of all
---------------------
governmental authorities having jurisdiction over the Real Property, required to
have been issued to the Seller or any of its Subsidiaries to enable the Real
Property to be lawfully occupied and used for all of the purposes for which it
is currently occupied and used have been lawfully issued and are, as of the date
hereof, in full force and effect. The Seller has delivered complete and correct
copies of the Real Property Permits in the possession of the Seller or its
Subsidiaries to the Purchaser. To the knowledge of the Seller (without
investigating title), neither the Seller nor any of its Subsidiaries has
received or been informed by a third party of the receipt by it of any notice
from any governmental authority having jurisdiction over the Real Property
threatening a suspension, revocation, modification or cancellation of any Real
Property Permit and, to the knowledge of the Seller, there is no basis for the
issuance of any such notice or the taking of any such action.
(g) Compliance with Laws. To its knowledge, neither the Seller nor
--------------------
any of its Subsidiaries has received any notice of violation or claimed
violation of any laws, regulations and ordinances applicable to the Real
Property. To the knowledge of the Seller, there is no pending or any
anticipated change in any laws, regulations and ordinances applicable to the
Real Property that will have or result in a significant adverse effect upon the
ownership, alteration, use, occupancy or operation of the Real Property. To the
knowledge of the Seller, no current use by the Seller or its Subsidiary of the
Real Property is dependent on a nonconforming use status which is not lawfully
grandfathered or otherwise permitted or dependent on an approval from a
governmental authority which has not been issued, if the absence of the lawful
nonconforming use status or absence of the approval would significantly limit
the use of the Real Property in the operation of the business of the Seller or
any of its Subsidiaries.
5.11 Taxes. Except as set forth on the attached "Taxes
----- -----
Schedule,"
(a) the Seller and each of its Subsidiaries has timely filed all Tax
Returns which are required to be filed, and all such Tax Returns are true,
complete and accurate in all respects and have been prepared in compliance with
applicable law;
(b) all Taxes due and payable by the Seller and each of its
Subsidiaries, whether or not shown on a Tax Return, have been paid by the Seller
or each such Subsidiary and no Taxes are delinquent;
-30-
<PAGE>
(c) no deficiency for any amount of Tax which has not been resolved
has been asserted or assessed by a taxing authority against the Seller or any of
its Subsidiaries, and the Seller has no knowledge that any such assessment or
asserted Tax liability shall be made;
(d) there is no action, suit, taxing authority proceeding or audit
now in progress, pending or, to the knowledge of the Seller, threatened against
or with respect to the Seller or any of its Subsidiaries;
(e) neither the Seller nor the Stockholders reasonably expect any
taxing authority to claim or assess any additional Taxes against the Seller or
any of its Subsidiaries for any period;
(f) neither the Seller nor any of its Subsidiaries has (A) waived any
statute of limitations, (B) agreed to any extension of the period for assessment
or collection or (C) executed or filed any power of attorney, in each case with
respect to any Taxes which waiver, agreement or power of attorney is currently
in force;
(g) neither the Seller nor any of its Subsidiaries has been a member
of an Affiliated Group (as defined in Section 1504 of the Code), or any similar
group defined under local, state or foreign Tax law and neither the Seller nor
any of its Subsidiaries has any liability for Taxes of any Person other than the
Seller or its Subsidiaries under Treasury Regulations Section 1.1502-6 or any
similar provision of local, state or foreign Tax law;
(h) neither the Seller nor any of its Subsidiaries is a party to or
bound by any Tax allocation, sharing, indemnity or similar agreement or
arrangement with any Person and neither the Seller nor any of its Subsidiaries
has current or potential contractual obligation to indemnify any other Person
with respect to Taxes;
(i) neither the Seller nor any of its Subsidiaries has any obligation
to make any payment that could be non-deductible under Section 280G of the Code
(or any corresponding provision of state, local or foreign Tax law);
(j) no claim has ever been made by a taxing authority in a
jurisdiction where the Seller or any of its Subsidiaries does not pay Taxes or
file Tax Returns that the Seller or any such Subsidiary is or may be subject to
Taxes assessed by such jurisdiction;
(k) the Seller and each of its Subsidiaries have withheld and paid
all Taxes required to have been withheld and paid in connection with amounts
paid or owing to any employee, creditor, independent contractor or other third
party;
(l) a valid election to be an S Corporation (as defined in Section
1361 of the Code and any corresponding provision of state, local or foreign law)
has been in effect with respect to the Seller at all times since January 1,
1988; and
(m) the Taxes Schedule contains a list of states, territories and
--------------
jurisdictions (whether foreign or domestic) in which the Seller and each of its
Subsidiaries are required to file Tax Returns relating to their respective
businesses.
-31-
<PAGE>
5.12 Contracts and Commitments.
-------------------------
(a) Except as specifically contemplated by this Agreement and except
as set forth on the "Contracts Schedule" attached hereto, neither the Seller nor
------------------
any of its Subsidiaries is a party to or bound by, whether written or oral, any:
(i) collective bargaining agreement or contract with any labor union
or any bonus, pension, profit sharing, retirement or any other form of
deferred compensation plan or any stock purchase, stock option,
hospitalization insurance or similar plan or practice, whether formal or
informal;
(ii) contract for the employment of any officer, individual employee
or other person on a full-time or consulting basis or any severance
agreements not terminable by the Seller at will;
(iii) agreement or indenture relating to the borrowing of money or to
mortgaging, pledging or otherwise placing a Lien on any of its assets;
(iv) contract under which the Seller or any of its Subsidiaries has
advanced or loaned any other Person amounts in the aggregate exceeding
$25,000;
(v) agreements with respect to the lending or investing of funds of
the Seller, not terminable at will;
(vi) material license or royalty agreements;
(vii) guaranty by the Seller of any obligation, other than
endorsements made for collection and other than by assignment of a contract
entered into in the Ordinary Course of Business;
(viii) management, consulting, advertising, marketing, promotion,
technical services, advisory or other contract or other similar arrangement
relating to the design, marketing, promotion, management or operation of
the Business, calling for payments by the Seller in excess of $75,000
annually;
(ix) outstanding powers of attorney executed on behalf of the Seller,
other than designations of agents for service of process and other such
arrangements in the Ordinary Course of Business;
(x) lease or agreement under which it is lessee of, or holds or
operates, any personal property owned by any other party calling for
payments in excess of $75,000 annually;
(xi) lease or agreement under which it is lessor of or permits any
third party to hold or operate any property, real or personal, owned or
controlled by it, calling for payments to the Seller in excess of $75,000
annually;
-32-
<PAGE>
(xii) contract or group of related contracts with the same party
continuing over a period of more than six months (6) from the date or dates
thereof, not terminable by it on 60 days or less notice without penalties
or involving more than $75,000;
(xiii) any confidentiality agreement or similar arrangement which is
material to the Business or which is to be assumed by the Purchaser;
(xiv) contract which prohibits it from freely engaging in business
anywhere in the world; or
(xv) other unrecorded agreement material to it whether or not entered
into in the Ordinary Course of Business.
(b) Except as disclosed on the Contracts Schedule, (i) no contract or
------------------
commitment required to be disclosed on the Contracts Schedule has been breached
------------------
or canceled by the other party and the Seller has no knowledge of any
anticipated breach by any other party to any contract set forth on the Contracts
---------
Schedule, (ii) since August 31, 1997, no supplier or material customer has
- --------
indicated in writing or orally to the Seller, any of its Subsidiaries or any
Stockholder that it shall stop or materially decrease the rate of business done
with the Seller or any of its Subsidiaries or that it desires to renegotiate, in
any material respect, any contract or current arrangement with the Seller or any
of its Subsidiaries, (iii) the Seller and each of its Subsidiaries have
performed all the obligations required to be performed by them in connection
with the contracts or commitments required to be disclosed on the Contracts
---------
Schedule and are not in default under or in breach of any contract or commitment
- --------
required to be disclosed on the Contracts Schedule, and no event has occurred
------------------
which with the passage of time or the giving of notice or both would result in a
default or breach thereunder, (iv) neither the Seller nor any of its
Subsidiaries has any present expectation or intention of not fully performing
any obligation pursuant to any contract set forth on the Contracts Schedule, and
------------------
(vi) each such agreement is legal, valid, binding, enforceable and in full force
and effect.
(c) The Seller has provided the Purchaser with a true and correct copy
of all written contracts which are required to be disclosed on the Contracts
---------
Schedule, in each case together with all amendments, waivers or other changes
- --------
thereto (all of which are disclosed on the Contracts Schedule). The Contracts
------------------ ---------
Schedule contains an accurate and complete description of all material terms of
- --------
all oral contracts referred to therein.
5.13 Proprietary Rights.
------------------
(a) The attached "Proprietary Rights Schedule" contains a complete and
---------------------------
accurate list of all (a) patented or registered Proprietary Rights owned or used
by the Seller or any of its Subsidiaries, (b) pending patent applications and
applications for registrations of other Intellectual Property Rights filed by
the Seller or any of its Subsidiaries, (c) unregistered trade names, internet
domain names and corporate names owned or used by the Seller or any of its
Subsidiaries and (d) unregistered trademarks, service marks, and computer
software (other than "off the shelf" software) owned or used by the Seller or
any of its Subsidiaries. The Proprietary Rights Schedule also contains a
---------------------------
complete and accurate list of all licenses and other rights granted by the
Seller or any of its
-33-
<PAGE>
Subsidiaries to any third party with respect to any Proprietary Rights and all
licenses and other rights granted by any third party to the Seller or any of its
Subsidiaries with respect to any Proprietary Rights, in each case identifying
the subject Proprietary Rights. Except as set forth on the Proprietary Rights
------------------
Schedule, the Seller and each of its Subsidiaries own, free of all Liens (except
- --------
Permitted Liens), all right, title and interest to, or have the right to use
pursuant to a valid written license, all Proprietary Rights necessary for the
operation of their businesses as presently conducted and such rights will be
owned or made available for use by the Seller and each of its Subsidiaries after
the Closing on terms and conditions identical to those under which they owned or
used such rights prior to the Closing. Except as set forth on the Proprietary
-----------
Rights Schedule, the loss or expiration of any Proprietary Rights or related
- ---------------
group of Proprietary Rights owned or used by the Seller or any of its
Subsidiaries has not had a Material Adverse Effect on the conduct of their
businesses and is not pending or, to the knowledge of the Seller, threatened or
reasonably foreseeable.
(b) Except as set forth on the Proprietary Rights Schedule, (i) the
---------------------------
Seller and each of its Subsidiaries owns and possesses without restriction as to
use the Proprietary Rights necessary for the operation of the Seller's and each
of its Subsidiaries' businesses as currently conducted; (ii) neither the Seller
nor any of its Subsidiaries has received any notices of invalidity, infringement
or misappropriation from any third party with respect to any such Proprietary
Rights; (iii) to its knowledge neither the Seller nor any of its Subsidiaries
has interfered with, infringed upon, misappropriated or otherwise come into
conflict with any Proprietary Rights of any third parties; and (iv) to the
knowledge of the Seller, no third party has interfered with, infringed upon,
misappropriated, or otherwise come into conflict with any Proprietary Rights of
the Seller or its Subsidiaries.
5.14 Litigation; Proceedings. Except as set forth on the attached
-----------------------
"Litigation Schedule," there are no actions, suits, complaints, charges,
-------------------
proceedings, orders, investigations or claims pending or, to the knowledge of
the Seller, threatened against or affecting the Seller or any of its
Subsidiaries (or to the knowledge of the Seller, pending or threatened against
or affecting any of the officers, directors or key employees of the Seller or
any of its Subsidiaries with respect to its businesses or proposed business
activities) at law or in equity, or before or by any governmental department,
commission, board, bureau, agency or instrumentality (including, without
limitation, any actions, suits, complaints, charges, proceedings or
investigations with respect to the transactions contemplated by this Agreement);
nor have there been any such actions, suits, proceedings, orders, investigations
or claims pending against or affecting the Seller or any of its Subsidiaries
during the past three (3) years; and neither the Seller nor any of its
Subsidiaries is subject to any grievance arbitration proceedings under
collective bargaining agreements or otherwise or, to the knowledge of the
Seller, any governmental investigations or inquiries. Neither the Seller nor
any of its Subsidiaries is subject to any judgment, order or decree of any court
or other governmental agency.
5.15 Brokerage. Except as set forth on the "Brokerage Schedule"
--------- ------------------
attached hereto, there are no claims for brokerage commissions, finders' fees or
similar compensation in connection with the transactions contemplated by this
Agreement based on any arrangement or agreement made by or on behalf of the
Seller, any of its Subsidiaries or any Stockholder.
5.16 Governmental Licenses and Permits. The "Permits Schedule"
--------------------------------- ----------------
attached hereto contains a complete listing and summary description of all
permits, licenses, certificates,
-34-
<PAGE>
approvals and other authorizations of any governmental entity or any department,
agency or political subdivision thereof, or other similar rights (collectively,
the "Licenses") owned or possessed by the Seller or any of its Subsidiaries or
--------
used by it in the conduct of its businesses. Except as indicated on the Permits
-------
Schedule, the Seller and each of its Subsidiaries own or possess all right,
- --------
title and interest in and to all of the Licenses that are necessary to conduct
their businesses as presently conducted, including, without limitation, all such
Licenses required under any federal, state or local law relating to public
health and safety, employee health and safety, pollution or protection of the
environment. To its knowledge the Seller and each of its Subsidiaries are in
compliance with the terms and conditions of such Licenses and have received no
notices that they are in violation of any of the terms or conditions of such
Licenses. The Seller and each of its Subsidiaries have taken all action
necessary to maintain such Licenses. No loss or expiration of any such License
is threatened, pending or reasonably foreseeable other than expiration in
accordance with the terms thereof. Except as indicated on the Permits Schedule,
----------------
all of the Licenses shall survive the transactions contemplated hereby.
5.17 Employees. Except as set forth on the "Employees Schedule"
--------- ------------------
attached hereto, to the knowledge of the Seller at the time of execution hereof,
no key executive employee and no group of employees or independent contractors
of the Seller or any of its Subsidiaries planned to terminate his, her or its
employment or relationship as an independent contractor with the Seller or any
of its Subsidiaries. To its knowledge the Seller and each of its Subsidiaries
have complied and remain in compliance with all applicable laws relating to the
employment of personnel and labor. Neither the Seller nor any of its
Subsidiaries is a party to or bound by any collective bargaining agreement, nor
has such party experienced any strikes, grievances, unfair labor practices
claims or other material employee or labor disputes. To its knowledge neither
the Seller nor any of its Subsidiaries has engaged in any unfair labor practice
at any time within the past two years. The Seller has no knowledge of any
organizational effort presently being made or threatened by or on behalf of any
labor union with respect to employees of the Seller or any of its Subsidiaries.
Neither the Seller nor any of its Subsidiaries has implemented any plant closing
or mass layoff of employees as those terms are defined in the Worker Adjustment
Retraining and Notification Act of 1988, as amended ("WARN"), or any similar
----
state or local law or regulation, and no layoffs that could implicate such laws
or regulations will have been implemented before Closing without advance
notification to the Purchaser.
5.18 Employee Benefit Matters.
------------------------
(a) Except as set forth on the "Benefit Plans Schedule" attached
----------------------
hereto, with respect to current or former employees of the Seller and each of
its Subsidiaries, neither the Seller nor any of its Subsidiaries maintains or
contributes to or has any actual or, to the knowledge of the Seller, any
potential liability with respect to any (i) deferred compensation or bonus or
retirement plans or arrangements, (ii) qualified or nonqualified defined
contribution or defined benefit plans or arrangements which are employee pension
benefit plans (as defined in Section 3(2) of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA")), or (iii) employee welfare benefit
-----
plans, (as defined in Section 3(1) of ERISA), stock option or stock purchase
plans, or material fringe benefit plans or programs whether in writing or oral
and whether or not terminated. Neither the Seller nor any of its Subsidiaries
has ever contributed to any multiemployer pension plan (as defined in Section
3(37) of ERISA), and neither the Seller nor any of its Subsidiaries has ever
-35-
<PAGE>
maintained or contributed to any defined benefit plan (as defined in Section
3(35) of ERISA). The plans, arrangements, programs and agreements referred to
the preceding two sentences are referred to collectively as the "Plans."
-----
Neither the Seller nor any of its Subsidiaries maintains or contributes to any
Plan which provides health, accident or life insurance benefits to former
employees, their spouses or dependents, other than in accordance with Section
4980B of the Code ("COBRA").
-----
(b) To the knowledge of the Seller, (i) the Plans (and related trusts
and insurance contracts) set forth on the Benefit Plans Schedule comply in form
----------------------
and in operation with the requirements of applicable laws and regulations,
including ERISA and the Code and the nondiscrimination rules thereof; (ii) all
contributions, premiums or payments which are due on or before the Closing Date
under each Plan have been paid; (iii) each Plan which is intended to be
qualified under section 401(a) of the Code has received from the Internal
Revenue Service a favorable determination letter which considers the terms of
such Plan as amended; and (iv) the Seller and each of its Subsidiaries have
complied with the requirements of COBRA.
(c) With respect to each Plan set forth on the Benefit Plans Schedule,
----------------------
no actions, investigations, suits or claims with respect to the assets thereof
(other than routine claims for benefits) are pending or threatened, and neither
the Seller nor any Stockholder has knowledge of any facts which would give rise
to or could reasonably be expected to give rise to any such actions, suits or
claims.
(d) With respect to each of the Plans listed on the Benefit Plans
-------------
Schedule, the Stockholders have furnished to the Purchaser true and complete
- --------
copies of the plan documents, and all related trust agreements, insurance
contracts or other funding agreements which implement such plans.
(e) The Seller and each of its Subsidiaries has not incurred and has
no reason to expect that it will incur, any liability to the Pension Benefit
Guaranty Corporation (other than routine premium payments ) or otherwise under
Title IV of ERISA (including any withdrawal liability) or under the Code with
respect to any employee pension benefit plan (as defined in Section 3(2) of
ERISA) that the Seller or any member of its "controlled group" (within the
meaning of Code Section 414) maintains or ever has maintained or to which any of
them contributes, ever has contributed, or ever has been required to contribute.
5.19 Insurance. The "Insurance Schedule" attached hereto lists
--------- ------------------
and briefly describes each insurance policy currently maintained by the Seller
and each of its Subsidiaries with respect to its properties, assets and
business. All of such insurance policies are in full force and effect, and
neither the Seller nor any of its Subsidiaries is in default with respect to its
obligations under any such insurance policies and neither the Seller nor any of
its Subsidiaries has been denied insurance coverage. Except as set forth on the
Insurance Schedule, neither the Seller nor any of its Subsidiaries has any self-
- ------------------
insurance or co-insurance programs, and the reserves set forth on the Latest
Balance Sheet are adequate to cover all anticipated liabilities with respect to
self-insurance or co-insurance programs.
5.20 Affiliate Transactions. Except as disclosed on the
----------------------
"Affiliated Transactions Schedule" attached hereto, no Insider is a party to any
- ---------------------------------
agreement, contract, commitment or
-36-
<PAGE>
transaction with the Seller or any of its Subsidiaries or which is pertaining to
the business of the Seller or any of its Subsidiaries or has any interest in any
property, real or personal or mixed, tangible or intangible, used in or
pertaining to the business of the Seller or any of its Subsidiaries.
5.21 Compliance with Laws. To its knowledge the Seller and each
--------------------
of its Subsidiaries are in compliance with all applicable laws, regulations and
ordinances of foreign, federal, state and local governments and all agencies
thereof which are applicable to the business, business practices (including, but
not limited to, the Seller's and its Subsidiaries' marketing and sales of its
products and services) or any owned or leased properties of the Seller or any of
its Subsidiaries and to which the Seller or any of its Subsidiaries may be
subject, and to its knowledge neither the Seller nor any of its Subsidiaries has
received notice alleging any violations of such laws and regulations.
5.22 Environmental Matters. Except as set forth on the
---------------------
"Environmental Schedule" attached hereto:
- -----------------------
(a) To its knowledge, the Seller and each of its Subsidiaries are
currently in compliance with all Environmental and Safety Requirements, and
during the past three years neither the Seller nor any of its Subsidiaries has
received any oral or written notice or claim alleging any violation of, or
demanding any corrective, investigatory or remedial obligations under,
Environmental and Safety Requirements which relate to the Seller or any of its
Subsidiaries or any of its properties or facilities.
(b) Without limiting the generality of the foregoing, the Seller and
each of its Subsidiaries have obtained and complied with, and are currently in
compliance with, all permits, licenses and other authorizations that may be
required pursuant to any Environmental and Safety Requirements for the occupancy
of their properties or facilities or the operation of their business. A list of
all such permits, licenses and other authorizations which are material to the
Seller or any of its Subsidiaries is set forth on the Environmental Schedule.
----------------------
(c) To the Seller's knowledge neither this Agreement or the other
Transaction Documents nor the consummation of the transactions contemplated
hereby and thereby shall impose any obligations on the Seller or its
Subsidiaries or otherwise for site investigation or cleanup, or notification to
or consent of any government agencies or third parties under any Environmental
and Safety Requirements (including, without limitation, any so called
"transaction-triggered" or "responsible property transfer" laws and
regulations).
(d) To the Seller's knowledge none of the following exists at any
property or facility owned, occupied or operated by the Seller or any of its
Subsidiaries: (i) underground storage tanks or surface impoundments; (ii)
asbestos-containing material in any form or condition that under present law is
required to be removed or further encapsulated; (iii) materials or equipment
containing significant concentrations of polychlorinated biphenyls; or (iv)
landfills.
(e) Neither the Seller nor any of its Subsidiaries has treated,
stored, disposed of, arranged for or permitted the disposal of, transported,
handled or Released any substance (including, without limitation, any hazardous
substance) or owned, occupied or operated any facility or property,
-37-
<PAGE>
in a manner so as to give rise to liabilities of the Seller or any of its
Subsidiaries for response costs, natural resource damages or attorneys' fees
pursuant to CERCLA or any other Environmental and Safety Requirements.
(f) Without limiting the generality of the foregoing, to the Seller's
knowledge no facts, events or conditions relating to the past or present
properties, facilities or operations of the Seller or any of its Subsidiaries
will prevent, hinder or limit continued compliance with Environmental and Safety
Requirements, give rise to any corrective, investigatory or remedial obligations
pursuant to Environmental and Safety Requirements or give rise to any
liabilities (whether accrued, absolute, contingent, unliquidated or otherwise)
pursuant to Environmental and Safety Requirements, including, without
limitation, those liabilities relating to onsite or offsite Releases or
threatened Releases of hazardous materials, substances or wastes, personal
injury, property damage or natural resources damage.
(g) Neither the Seller nor any of its Subsidiaries has, either
expressly or (to its knowledge) by operation of law, assumed or undertaken any
liability or corrective investigatory or remedial obligation of any other Person
relating to any Environmental and Safety Requirements.
(h) To the knowledge of the Seller (without investigating title), no
Environmental Lien has attached to any property owned, leased or operated by the
Seller or any of its Subsidiaries.
5.23 Disclosure. To its knowledge, no representation by the
----------
Seller in this Agreement, the other Transaction Documents, or any of the
schedules, attachments or Exhibits hereto, contains any untrue statement of a
material fact or omits a material fact necessary to make each statement
contained herein or therein, not misleading.
5.24 Closing Date. All of the representations and warranties
------------
contained in this Article V are true and correct on the date of this Agreement
and shall be true and correct on the Closing Date, except to the extent that the
Seller or any Stockholder has advised the Purchaser otherwise in writing prior
to the Closing.
ARTICLE VI
REPRESENTATIONS AND WARRANTIES CONCERNING THE PURCHASER
-------------------------------------------------------
As a material inducement to the Seller to enter into this Agreement,
the Purchaser hereby represents and warrants to the Seller that:
6.1 Organization and Corporate Power. The Purchaser is a
--------------------------------
corporation duly organized, validly existing and in good standing under the laws
of the State of Delaware, with full corporate power and authority to enter into
this Agreement and the other agreements contemplated hereby to which the
Purchaser is a party and perform its obligations hereunder and thereunder.
6.2 Authorization of Transaction. The execution, delivery and
----------------------------
performance of this Agreement and the other agreements contemplated hereby to
which the Purchaser is a party have been duly and validly authorized by all
requisite corporate action on the part of the Purchaser, and
-38-
<PAGE>
no other corporate proceedings on its part are necessary to authorize the
execution, delivery or performance of this Agreement. This Agreement
constitutes, and each of the other agreements contemplated hereby to which the
Purchaser is a party shall when executed constitute, a valid and binding
obligation of the Purchaser, enforceable in accordance with their terms.
6.3 No Violation. The Purchaser is not subject to or obligated
------------
under its certificate of incorporation, its by-laws, any applicable law, or rule
or regulation of any governmental authority, or any agreement or instrument, or
any license, franchise or permit, or subject to any order, writ, injunction or
decree, which would be breached or violated by its execution, delivery or
performance of this Agreement and the other agreements contemplated hereby to
which the Purchaser is a party.
6.4 Governmental Authorities and Consents. The Purchaser is not
-------------------------------------
required to submit any notice, report or other filing with any governmental
authority in connection with the execution or delivery by it of this Agreement
and the other agreements contemplated hereby to which the Purchaser is a party
or the consummation of the transactions contemplated hereby or thereby. No
consent, approval or authorization of any governmental or regulatory authority
or any other party or person is required to be obtained by the Purchaser in
connection with its execution, delivery and performance of this Agreement and
the other agreements contemplated hereby to which the Purchaser is a party or
the transactions contemplated hereby or thereby.
6.5 Litigation. There are no actions, suits, proceedings or
----------
orders pending or, to the Purchaser's knowledge, threatened against or affecting
the Purchaser at law or in equity, or before or by any federal, state, municipal
or other governmental department, commission, board, bureau, agency or
instrumentality, domestic or foreign, which would adversely affect the
Purchaser's performance under this Agreement and the other agreements
contemplated hereby to which the Purchaser is a party or the consummation of the
transactions contemplated hereby or thereby.
6.6 Available Funds. The Purchaser has, or will have on the
---------------
Closing Date, sufficient funds available to pay the Cash Portion of the Purchase
Price on the Closing Date.
6.7 Brokerage. Except for fees owed to James L. Monroe and/or
---------
Monroe & Company, there are no claims for brokerage commissions, finders' fees
or similar compensation in connection with the transactions contemplated by this
Agreement based on any arrangement or agreement made by or on behalf of the
Purchaser.
6.8 Closing Date. All of the representations and warranties
------------
contained in this Article VI are true and correct on the date of this Agreement
and shall be true and correct on the Closing Date, except to the extent that the
Purchaser has advised the Seller otherwise in writing prior to the Closing.
ARTICLE VII
TERMINATION
-----------
7.1 Termination. This Agreement may be terminated at any time
-----------
prior to the Closing:
-39-
<PAGE>
(a) by mutual written consent of the Seller and the Purchaser;
(b) by the Seller or the Purchaser (the "terminating party") if there
-----------------
has been a material misrepresentation or breach on the part of the other Party
(the "breaching party") of the representations, warranties or covenants of the
---------------
breaching party set forth in this Agreement; provided that if (i) such
misrepresentation or breach has not been caused by willful or knowing conduct by
the breaching party and (ii) the facts or circumstances underlying such
misrepresentation or breach are capable of cure by the breaching party within 10
Business Days of the date on which the breaching party becomes aware of such
breach, then the terminating party may not terminate this Agreement pursuant to
this Section 7.1(b) unless such breach has not been cured by the breaching party
on or before the tenth Business Day after the date on which the breaching party
became aware of the breach;
(c) by the Seller or the Purchaser if events have occurred which have
made it impossible to satisfy a condition precedent to the terminating party's
obligations to consummate the transactions contemplated hereby unless such
terminating party's willful or knowing breach of this Agreement has caused the
condition to be unsatisfied; or
(d) by the Seller or the Purchaser if the Closing has not occurred on
or prior to March 31, 1998; provided, however, that neither the Purchaser nor
the Seller shall be entitled to terminate this Agreement pursuant to this
Section 7.1(d) if such Party's willful or knowing breach of this Agreement has
prevented the consummation of the transactions contemplated hereby at or prior
to such time.
7.2 Effect of Termination. In the event of termination of this
---------------------
Agreement by either the Seller or the Purchaser as provided in Section 7.1, this
Agreement shall forthwith become void and there shall be no liability on the
part of any Party to any other Party under this Agreement, except that the
provisions of Sections 4.1(m), 4.3(c), 9.7 and Article X shall continue in full
force and effect and except that nothing herein shall relieve any Party from
liability for any breach of this Agreement prior to such termination.
ARTICLE VII
INDEMNIFICATION AND RELATED MATTERS
-----------------------------------
8.1 Survival. Except as expressly set forth in Article V, all
--------
representations, warranties, covenants and agreements set forth in this
Agreement or in any writing or certificate delivered in connection with this
Agreement shall survive the Closing Date and the consummation of the
transactions contemplated hereby and shall not be affected by any examination
made for or on behalf of any Party, the knowledge of any of such Party's
officers, directors, stockholders, employees or agents, or the acceptance of any
certificate or opinion. Notwithstanding the foregoing, no Party shall be
entitled to recover for any Loss pursuant to Section 8.2(a)(i) or Section
8.2(c)(i) unless written notice of a claim thereof is delivered to the other
Party prior to the Applicable Limitation Date. For purposes of this Agreement,
the term "Applicable Limitation Date" shall mean the second anniversary of the
--------------------------
Closing Date; provided that the Applicable Limitation Date with respect to the
following Losses shall be as follows: (i) with respect to any Loss arising from
or
-40-
<PAGE>
related to a breach of the representations and warranties of the Seller set
forth in Sections 5.11 (Taxes) and 5.18 (Employee Benefits Matters), the
Applicable Limitation Date shall be the 60th day after expiration of the statute
of limitations (including any extensions thereto to the extent that such statute
of limitations may be tolled) applicable to the Tax or ERISA statute, regulation
or other authority which gave rise to such Loss, (ii) with respect to any Loss
arising from or related to a breach of the representations and warranties of the
Seller set forth in Section 5.23 (Environmental), the Applicable Limitation Date
shall be the fifth anniversary of the Closing Date, and (iii) with respect to
any Loss arising from or related to a breach of the representations and
warranties of the Seller set forth in Section 5.1 (Organization and Corporate
Power), Section 5.2 (Authorization of Transactions), Section 5.3
(Capitalization), Section 5.5 (Absence of Conflicts), or Section 5.15
(Brokerage) and with respect to any Loss arising from or related to a breach of
the representations and warranties of the Purchaser set forth in Section 6.1
(Organization and Corporate Power), 6.2 (Authorization of Transactions), 6.3 (No
Violation) or 6.6 (Brokerage), there shall be no Applicable Limitation Date
(i.e., such representations and warranties shall survive forever).
8.2 Indemnification. In order to induce the Purchaser to enter
---------------
into this Agreement and consummate the transactions contemplated herein, and for
good and valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the Seller and the Stockholders hereby agree to the covenants and
agreements set forth in this Section 8.2:
(a) The Seller and the Stockholders shall jointly and severally
indemnify the Purchaser and each of its successors and assigns (collectively,
the "Purchaser Parties") and hold each of them harmless from and against and pay
-----------------
on behalf of or reimburse such Purchaser Parties in respect of the entirety of
any Losses the Purchaser Parties suffer, sustain or become subject to, through
and after the date of the claim for indemnification resulting from, or arising
out of:
(i) the breach of any representation or warranty made by the Seller
contained in this Agreement or any certificate delivered by the Seller to
the Purchaser with respect thereto in connection with the Closing;
(ii) the breach of any covenant or agreement made by the Seller or
any Stockholder contained in this Agreement or any certificate delivered by
the Seller or any Stockholder to the Purchaser with respect thereto in
connection with the Closing; or
(iii) any Excluded Liabilities.
The Purchaser's remedy for any indemnification of Losses hereunder may be
satisfied by proceeding against the Seller or one or more Stockholders
individually for all or any portion of any such Loss, provided that no
Stockholder shall be liable hereunder for more than twice his or her pro rata
share (based on such Stockholder's proportionate ownership set forth on the
Schedule of Stockholders) of such Loss.
(b) The indemnification provided for in Section 8.2(a)(i) above is
subject to the following limitations:
-41-
<PAGE>
(i) The Seller and the Stockholders will be liable to the Purchaser
Parties with respect to claims referred to in Section 8.2(a)(i) only if the
Purchaser gives the Seller written notice thereof within the Applicable
Limitation Date;
(ii) The Seller and the Stockholders will be liable to the Purchaser
Parties for Losses arising with respect to claims referred to in Section
8.2(a)(i) only if and to the extent that the aggregate Losses resulting to
the Purchaser Parties exceed the Basket. The "Basket" shall be equal to
------
$250,000; and
(iii) The aggregate amount of all payments made by the Seller and the
Stockholders in satisfaction of claims for indemnification pursuant to
Section 8.2(a)(i) shall not exceed the Cap. The "Cap" shall be (i)
---
$27,500,000 for claims made within 120 days after the Closing Date, (ii)
$20,000,000 for claims made after 120 days after the Closing Date and on or
before March 30, 1999, (iii) $12,000,000 for claims made after March 30,
1999 on or before March 30, 2000, and (iv) $4,000,000 for claims made after
March 30, 2000. A claim shall be deemed made on the date the Indemnified
Party gives written notice thereof to the Indemnifying Party in accordance
with this Section 8.2.
Notwithstanding any implication to the contrary contained in this Agreement, so
long as the Purchaser delivers written notice of a claim to the Seller no later
than the Applicable Limitation Date, the Seller and the Stockholders shall be
required to indemnify the Purchaser Parties for all Losses (subject to the
Basket and the Cap) which the Purchaser Parties incur in respect of the matters
which are the subject of such claim, regardless of when incurred.
(c) The Purchaser shall indemnify the Seller and the Stockholders and
hold each Stockholder, the Seller and their successors and assigns
(collectively, the "Seller Parties") and hold each of them harmless from and
--------------
against and pay on behalf of or reimburse such Seller Parties in respect of the
entirety of any Losses the Seller Parties suffer, sustain or become subject to,
through and after the date of the claim for indemnification resulting from, or
arising out of:
(i) the breach of any representation or warranty made by the Purchaser
contained in this Agreement or any certificate delivered by the Purchaser
to the Seller with respect thereto in connection with the Closing;
(ii) the breach of any covenant or agreement made by the Purchaser
contained in this Agreement or any certificate delivered by the Purchaser
to the Seller or any Stockholder with respect thereto in connection with
the Closing; or
(iii) any Assumed Liabilities.
(d) The indemnification provided for in Section 8.2(c)(i) above is
subject to the following limitations:
(i) The Purchaser will be liable to the Seller Parties with respect to
claims referred to in Section 8.2(c)(i) only if the Seller gives the
Purchaser written notice thereof within the Applicable Limitation Date;
-42-
<PAGE>
(ii) The Purchaser will be liable to the Seller Parties for Losses
arising with respect to claims referred to in Section 8.2(c)(i) only if and
to the extent the aggregate Losses resulting to the Seller Parties from all
such claims exceed the Basket; and
(iii) The aggregate amount of all payments made by the Purchaser in
satisfaction of claims for indemnification pursuant to Section 8.2(c)(i)
shall not exceed the Cap.
Notwithstanding any implication to the contrary contained in this Agreement, so
long as the Seller delivers written notice of a claim to the Purchaser no later
than the Applicable Limitation Date, the Purchaser shall be required to
indemnify the Seller Parties for all Losses (subject to the Basket and the Cap)
which the Seller Parties incur in respect of the matters which are the subject
of such claim, regardless of when incurred.
(e) If a party hereto seeks indemnification under this Article VIII,
such party (the "Indemnified Party") shall promptly give written notice to the
-----------------
other party (the "Indemnifying Party") after receiving written notice of any
------------------
action, lawsuit, proceeding, investigation or other claim against it (if by a
third party) or discovering the liability, obligation or facts giving rise to
such claim for indemnification, describing in reasonable detail the claim (given
the information then known by the Indemnified Party), the amount thereof (if
known and quantifiable), and the basis thereof; provided that the failure to so
notify the Indemnifying Party shall not relieve the Indemnifying Party of its or
his obligations hereunder except to the extent such failure shall have
prejudiced the Indemnifying Party. In that regard, if any action, lawsuit,
proceeding, investigation or other claim shall be brought or asserted by any
third party which, if adversely determined, would entitle the Indemnified Party
to indemnity pursuant to this Article VIII, the Indemnified Party shall promptly
notify the Indemnifying Party of the same in writing, specifying in detail the
basis of such claim and the facts pertaining thereto and the Indemnifying Party
shall be entitled to participate in the defense of such action, lawsuit,
proceeding, investigation or other claim giving rise to the Indemnified Party's
claim for indemnification at its expense, and at its option (subject to the
limitations set forth below) shall be entitled to appoint lead counsel of such
defense with reputable counsel reasonably acceptable to the Indemnified Party;
provided that, as a condition precedent to the Indemnifying Party's right to
assume control of such defense, it must first:
(i) enter into an agreement with the Indemnified Party (in form and
substance reasonably satisfactory to the Indemnified Party) pursuant to
which the Indemnifying Party agrees to be fully responsible for all Losses
relating to such claims and that it will provide full indemnification to
the Indemnified Party for all Losses relating to such claim, and
(ii) unconditionally guarantees the payment and performance of any
liability or obligation which may arise with respect to such claim or the
facts giving rise to such claim for indemnification, and
(iii) furnish the Indemnified Party with reasonable evidence that the
Indemnifying Party is and will be able to satisfy any such liability;
and provided further that the Indemnifying Party shall not have the right to
assume control of such defense and shall pay the fees and expenses of counsel
retained by the Indemnified Party, if the claim
-43-
<PAGE>
which the Indemnifying Party seeks to assume control (i) seeks non-monetary
relief, (ii) involves criminal or quasi-criminal allegations, (iii) involves a
claim to which the Indemnified Party reasonably believes an adverse
determination would be detrimental to or injure the Indemnified Party's
reputation or future business prospects, or (iv) involves a claim which, upon
petition by the Indemnified Party, the appropriate court rules that the
Indemnifying Party failed or is failing to vigorously prosecute or defend.
If the Indemnifying Party is permitted to assume and control the defense
and elects to do so, the Indemnified Party shall have the right to employ
counsel separate from counsel employed by the Indemnifying Party in any such
action and to participate in the defense thereof, but the fees and expenses of
such counsel employed by the Indemnified Party shall be at the expense of the
Indemnified Party unless (i) the employment thereof has been specifically
authorized by the Indemnifying Party in writing, or (ii) a substantial conflict
of interest has arisen between the Indemnifying Party and the Indemnified Party
in the defense of such claim.
If the Indemnifying Party shall control the defense of any such claim, the
Indemnifying Party shall obtain the prior written consent of the Indemnified
Party (which shall not be unreasonably withheld) before entering into any
settlement of a claim or ceasing to defend such claim, if pursuant to or as a
result of such settlement or cessation, injunction or other equitable relief
will be imposed against the Indemnified Party or if such settlement does not
expressly unconditionally release the Indemnified Party from all liabilities and
obligations with respect to such claim, without prejudice.
(f) The Indemnifying Party shall pay the Indemnified Party in
immediately available funds promptly after the Indemnified Party provides the
Indemnifying Party with written notice of a claim hereunder and the Parties
reasonably agree that there is a reasonable basis for such claim.
(g) Amounts paid to or on behalf of the Seller or the Purchaser as
indemnification shall be treated as adjustments to the Purchase Price.
(h) Except for the rights and remedies set forth in Sections 9.5 and
9.10(e), the rights and remedies set forth in this Section 8.2 shall be the only
rights and remedies available to the Purchaser, the Seller or the Stockholders
with regard to any breach by the other party of any representation or warranty
contained in this Agreement or any certificate delivered by such other party
with respect thereto in connection with the closing.
ARTICLE IX
ADDITIONAL AGREEMENTS
---------------------
9.1 Continuing Assistance. Subsequent to the Closing, the
---------------------
Seller and the Purchaser (at their own cost) shall assist each other (including
making records available) in the preparation of their respective Tax Returns and
the filing and execution of Tax elections, if required, as well as any audits or
litigation that ensue as a result of the filing thereof, to the extent that such
assistance is reasonably requested.
-44-
<PAGE>
9.2 Tax Matters.
-----------
(a) All transfer, documentary, sales, use, stamp, registration and
other such Taxes and fees (including any penalties and interest thereon)
incurred in connection with this Agreement shall be paid when due by the Party
which is primarily liable for such Taxes in accordance with applicable law, and
such Party shall, at its own expense, file all necessary Tax Returns and other
documentation with respect to all such transfer, documentary, sales, use, stamp,
registration and other Taxes and fees, and if required by applicable law, the
other Party shall, and shall cause its affiliates to, join in the execution of
any such Tax Returns and other documentation.
(b) All real property taxes, personal property taxes, ad valorem
-- -------
obligations and similar taxes imposed on a periodic basis, in each case levied
with respect to the Acquired Assets, other than conveyance taxes provided for in
Section 9.2(a), for a taxable period which includes (but does not end on) the
Closing Date shall be apportioned between the Seller and the Purchaser as of the
Closing Date based on the number of days of such taxable period included in the
pre-Closing Tax period and the number of days of such taxable period included in
the post-Closing period. The Seller shall be liable for the proportionate
amount of such Taxes that is attributable to the pre-Closing Tax period. Within
90 days after the Closing, the Seller and the Purchaser shall present a
reimbursement to which each is entitled under this Section 9.2(b) together with
such supporting evidence as is reasonably necessary to calculate the proration
amount. The proration amount shall be paid by the party owing it to the other
within 10 days after delivery of such statement. Thereafter, the Seller shall
notify the Purchaser upon receipt of any bill for real or personal property
taxes relating to the Acquired Assets, part or all of which are attributable to
the post-Closing Tax period, and shall promptly deliver such bill to the
Purchaser who shall pay the same to the appropriate taxing authority, provided
that if such bill covers the pre-Closing Tax period, the Seller shall also remit
prior to the due date of assessment to the Purchaser payment for the
proportionate amount of such bill that is attributable to the pre-Closing Tax
period. In the event that either the Seller or the Purchaser shall thereafter
make a payment for which it is entitled to reimbursement under this Section
9.2(b), the other party shall make such reimbursement promptly but in no event
later than 30 days after the presentation of a statement setting forth the
amount of reimbursement to which the presenting party is entitled along with
such supporting evidence as is reasonably necessary to calculate the amount of
reimbursement. Any payment required under this Section 9.2(b) and not made
within 10 days of delivery of the statement shall bear interest at the rate per
annum determined, from time to time, under the provisions of Section 6621(a)(2)
of the Code for each day until paid.
9.3 Press Releases and Announcements. Prior to the Closing
--------------------------------
Date, no press releases related to this Agreement and the transactions
contemplated herein, or other announcements to the employees, customers or
suppliers of the Seller shall be issued without the mutual approval of all
Parties, except for any public disclosure which any Party in good faith believes
is required by law or regulation (in which case the disclosure shall be prepared
jointly by the Seller and the Purchaser). After the Closing Date, no press
releases related to this Agreement and the transactions contemplated herein, or
other announcements to the employees, customers or suppliers of the Business
shall be issued without the Purchaser's consent (which shall not be unreasonably
withheld), except for any public disclosure which the Seller in good faith
believes is required by law or regulation. Furthermore, after the Closing Date
no press releases related to this Agreement and the transactions contemplated
herein which discloses the Purchase Price shall be issued without the
-45-
<PAGE>
Seller's consent (which consent shall not be unreasonably withheld), except for
any public disclosure which the Purchaser in good faith believes is required by
law or regulation.
9.4 Further Transfers. The Seller shall execute and deliver
-----------------
such further instruments of conveyance and transfer and take such additional
action as the Purchaser may reasonably request to effect, consummate, confirm or
evidence the transfer to the Purchaser of the Acquired Assets and any other
transactions contemplated hereby.
9.5 Specific Performance. The Seller acknowledges that the
--------------------
Seller's Business is unique and recognizes and affirms that in the event of a
breach of this Agreement by the Seller, money damages may be inadequate and the
Purchaser may have no adequate remedy at law. Accordingly, the Seller agrees
that the Purchaser shall have the right, in addition to any other rights and
remedies existing in its favor, to enforce its rights and the Seller's
obligations hereunder not only by an action or actions for damages but also by
an action or actions for specific performance, injunctive and/or other equitable
relief.
9.6 Transition Assistance. The Seller shall not in any manner
---------------------
take any action which is designed, intended, or might be reasonably anticipated
to have the effect of discouraging customers, suppliers, lessors, licensors and
other business associates from maintaining the same business relationships with
the Purchaser after the date of this Agreement as were maintained with the
Seller prior to the date of this Agreement.
9.7 Expenses. Except as otherwise provided herein, the Seller
--------
and the Purchaser shall pay all of their own fees, costs and expenses
(including, without limitation, fees, costs and expenses of legal counsel,
investment bankers, brokers or other representatives and consultants and
appraisal fees, costs and expenses) incurred in connection with the negotiation
of the this Agreement and the other agreements contemplated hereby, the
performance of its obligations hereunder and thereunder, and the consummation of
the transactions contemplated hereby and thereby.
9.8 Exclusivity. Until this Agreement is terminated by its
-----------
terms, the Seller shall not (and the Seller shall not cause or permit any
Insider or agent or any other Person acting on behalf of any Stockholder, the
Seller, or its Affiliates to), (a) solicit, initiate or encourage the submission
of any proposal or offer from any Person (including any of them) relating to any
(i) liquidation, dissolution or recapitalization of, (ii) merger or
consolidation with or into, (iii) acquisition or purchase of assets of or any
equity interest in or (iv) similar transaction or business combination involving
the Seller or (b) participate in any discussions or negotiations regarding,
furnish any information with respect to, assist or participate in, or facilitate
in any other manner any effort or attempt by any other Person to do or seek any
of the foregoing. The Seller agrees that it will discontinue immediately any
negotiations or discussion with respect to any of the foregoing. Until this
Agreement is terminated by its terms, the Seller shall notify the Purchaser
immediately if any Person makes any proposal, offer, inquiry or contact with
respect to any of the foregoing.
9.9 Books and Records. Unless otherwise consented to in writing
-----------------
by the Seller or the Purchaser (as the case may be), the Purchaser and the
Seller will not, for a period of seven years following the date hereof, destroy,
alter or otherwise dispose of any of the books and records of the Seller
acquired by the Purchaser hereunder or retained by the Seller without first
offering to
-46-
<PAGE>
surrender to the Seller or the Purchaser such books and records or any portion
thereof of which the Seller or the Purchaser may intend to destroy, alter or
dispose. The Purchaser and the Seller will allow the other party's
representatives, attorneys and accountants access to such books and records,
upon reasonable request for during such party's normal business hours, for the
purpose of examining and copying the same in connection with any matter whether
or not related to or arising out of this Agreement or the transactions
contemplated hereby.
9.1 NONCOMPETITION, NONSOLICITATION AND CONFIDENTIALITY. In
---------------------------------------------------
order to induce the Purchaser to enter into this Agreement and consummate the
transactions contemplated herein, and for good and valuable consideration, the
receipt and sufficiency of which is hereby acknowledged, the Stockholders hereby
agree to the covenants and agreements set forth in this Section 9.10:
(a) Noncompetition. In consideration of the mutual covenants provided
--------------
for herein to the Seller at the Closing, during the period beginning on the
Closing Date and ending on the fifth anniversary of the Closing Date (the
"Noncompete Period"), except as set forth on the "Permitted Noncompete Exception
- ------------------ ------------------------------
Schedule" attached hereto, none of the Seller nor any of the Stockholders shall
- --------
engage (whether as an owner, operator, manager, employee, officer, director,
consultant, advisor, representative or otherwise) directly or indirectly in any
business that the Seller conducts as of the Closing Date in any geographic area
in which the Seller conducts its business as of the Closing Date, except as
expressly permitted under any employment agreement with the Purchaser executed
at the Closing as contemplated hereunder; provided that ownership of less than
2% of the outstanding stock of any publicly-traded corporation shall not be
deemed to be engaging solely by reason thereof in any of its businesses. The
Parties agree that the covenant set forth in this Section 9.10 is reasonable
with respect to its duration, geographical area and scope. If the final
judgment of a court of competent jurisdiction declares that any term or
provision of this Section 9.10(a) is invalid or unenforceable, the Parties agree
that the court making the determination of invalidity or unenforceability shall
have the power to reduce the scope, duration, or area of the term or provision,
to delete specific words or phrases, or to replace any invalid or unenforceable
term or provision with a term or provision that is valid and enforceable and
that comes closest to expressing the intention of the invalid or unenforceable
term or provision, and this Agreement shall be enforceable as so modified after
the expiration of the time within which the judgment may be appealed.
(b) Nonsolicitation. The Seller and each Stockholder agrees that,
---------------
during the Noncompete Period, the Seller or such Stockholder (i) shall not, and
shall use its or his best efforts, as applicable, not to permit the Seller's or
such Stockholder's affiliates to, directly or indirectly contact, approach or
solicit for the purpose of offering employment to or hiring (whether as an
employee, consultant, agent, independent contractor or otherwise) or actually
hire any person (A) employed by the Seller at any time prior to the Closing Date
or (B) employed by the Purchaser during the Noncompete Period, without the prior
written consent of the Purchaser and (ii) shall not induce or attempt to induce
any customer or other business relation of the Seller into any business
relationship which might materially harm the Purchaser or the Seller. The term
"indirectly" as used in this Section 9.10 is intended to mean any acts
----------
authorized or directed by or on behalf of the Seller, any Stockholder or any
person controlled by the Seller or any Stockholder.
-47-
<PAGE>
(c) Confidentiality. The Seller and each Stockholder shall treat and
---------------
hold as confidential all Confidential Information, refrain from using any of the
Confidential Information except in connection with this Agreement, and deliver
promptly to the Purchaser or destroy, at the request and option of the
Purchaser, all tangible embodiments (and all copies) of the Confidential
Information which are in its or his possession, as applicable, or under its or
his control, as applicable. In the event that the Seller or any Stockholder is
requested or required (by oral question or request for information or documents
in any legal proceeding, interrogatory, subpoena, civil investigative demand, or
similar process) to disclose any Confidential Information, the Seller or such
Stockholder shall notify the Purchaser promptly of the request or requirement so
that the Purchaser may seek an appropriate protective order or waive compliance
with the provisions of this Section 9.10(c). If, in the absence of a protective
order or the receipt of a waiver hereunder, the Seller or any Stockholder is, on
the advice of counsel, compelled to disclose any Confidential Information to any
tribunal or else stand liable for contempt, the Seller or such Stockholder may
disclose the Confidential Information to the tribunal; provided that such
disclosing Stockholder or the Seller shall use his or its best efforts, as
applicable, to obtain, at the request of the Purchaser, an order or other
assurance that confidential treatment shall be accorded to such portion of the
Confidential Information required to be disclosed as the Purchaser shall
designate.
(d) Trade Names. Neither the Seller nor any Stockholder shall use or
-----------
permit any of his or its affiliates to use the "Cormier Equipment Corporation"
name or any name confusingly similar thereto in any manner anywhere in the world
after Closing.
(e) Remedy for Breach. The Seller and each Stockholder acknowledge
-----------------
and agree that in the event of a breach by the Seller or any Stockholder of any
of the provisions of this Section 9.10, monetary damages shall not constitute a
sufficient remedy. Consequently, in the event of any such breach, the Purchaser
and/or its respective successors or assigns may, in addition to other rights and
remedies existing in its favor, apply to any court of law or equity of competent
jurisdiction at the Purchaser's own cost and expense for specific performance
and/or injunctive or other relief in order to enforce or prevent any violations
of the provisions hereof, in each case without the requirement of posting a bond
or proving actual damages.
9.11 EMPLOYEES.
---------
(a) The Seller has provided the Purchaser with a true, correct and
complete list of all of the Seller's employees indicating the rate of pay of
each such employee during the 12 months preceding the date hereof and the status
of each such employee as active, on leave, full-time, part-time or otherwise.
(b) Except for the employees set forth on the "Excluded Employees
------------------
Schedule" attached hereto (the "Excluded Employees"), the Purchaser will offer
- -------- ------------------
at-will employment to all active full-time employees of the Seller as of the
Closing Date (the "Continuing Employees") on terms and conditions which, in the
--------------------
aggregate, are substantially equivalent to those applicable to such persons'
terms and conditions of employment with the Seller immediately prior to the
Closing Date. The Purchaser will ensure that the Purchaser's employee benefit
plans treat employment with the Seller prior to the Closing Date the same as
employment with the Purchaser from and after the
-48-
<PAGE>
Closing Date for purposes of eligibility and vesting. Nothing in this Section
9.11 shall obligate the Purchaser to continue to employ any Continuing Employee
for any period of time.
(c) Except to the extent any of the following are Assumed Liabilities
taken into account as a deduction in calculating the Net Asset Value, the Seller
will be responsible for and shall pay to the Seller's employees or to respective
insurance companies (i) all amounts of wages, bonuses and other renumeration
(including, without limitation, discretionary benefits and bonuses) payable to
such employees with respect to the period ending on the day prior to the Closing
Date, (ii) any workers' compensation claims, amounts payable with respect to
Plans maintained by the Seller and other amounts payable on an ongoing basis to
such employees in connection with events or incidents occurring prior to the
Closing Date, except to the extent that such amounts are paid under insurance,
(iii) amounts equal to the vacation pay, sick leave pay and floating holiday pay
earned or accrued by such employees as of the close of business on the Closing
Date, whether or not such pay is vested or has been accrued on the books of the
Seller at such close of business, based upon the remuneration of such employees,
normally used in computing such vacation pay, sick leave pay and floating
holiday pay and (iv) all severance payments, if any, due to such employees as a
result of the termination of their employment with the Seller. The Seller shall
also be responsible for and shall pay any related payroll burden (including,
without limitation, FICA and other employment taxes) with respect to payments
made under this Section 9.11(c) except to the extent such payroll burden is an
Assumed Liability taken into account as a deduction in calculating the Net Asset
Value.
9.12 Seller's Name Change. As soon as practicable after the
--------------------
Closing, the Seller will change its corporate name to a name which is not (and
which is not confusingly similar to) "Cormier Equipment Corporation." it being
the intent of the Parties that from and after the Closing the Purchaser will
have the sole right as against the Seller and all other Persons to conduct
business under such name and that the Purchaser will commence doing so at the
time of the Closing.
9.13 Allocation of Purchase Price. The allocation ("Allocation")
---------------------------- ----------
of the Purchase Price among the Acquired Assets shall be made as set forth on
the "Purchase Price Allocation Schedule" attached hereto. The Allocation shall
----------------------------------
be determined jointly by the Purchaser and the Seller reasonably and in good
faith, and such Allocation shall be used by the Parties in preparing (a) Form
8594, Asset Acquisition Statement, for each of the Purchaser and the Seller, and
(b) all Tax Returns. Each of the Purchaser and the Seller shall file Form 8594,
prepared in accordance with this Section, with its federal income Tax Return for
its Tax period including the Closing Date.
9.14 Third Party Consents. Notwithstanding anything to the
--------------------
contrary contained in this Agreement, this Agreement shall not constitute an
agreement to transfer, sell or otherwise assign any instrument, contract, lease,
license, permit or other agreement or arrangement which is not permitted to be
assigned in connection with a transaction of the type contemplated by this
Agreement (collectively, the "Unassigned Contracts"). The beneficial interest
--------------------
in and to each Unassigned Contract shall in any event pass to the Purchaser at
the Closing; and the Seller covenants and agrees to cooperate with the Purchaser
in any lawful and economically feasible arrangement to provide the Purchaser
with the Seller's entire interest in the benefits under each of the Unassigned
Contracts. If and only if the Purchaser receives the economic benefits under an
Unassigned Contract, the Purchaser agrees to accept the burdens and perform the
obligations under such Unassigned Contract as subcontractor of the Seller.
Furthermore, if the other party(ies) to an Unassigned
-49-
<PAGE>
Contract subsequently consent to the assignment of such contract to the
Purchaser (without modification thereto which is adverse to the Purchaser), the
Purchaser shall thereupon agree to assume and perform all liabilities and
obligations arising thereunder after the date of such consent, at which time
such Unassigned Contract shall be deemed an Acquired Asset. The Seller agrees to
indemnify the Purchaser and hold it harmless against any Losses which the
Purchaser may suffer, sustain or become subject to, as a result of any claims by
any party to any of the Unassigned Contracts for breach of contract in
connection with the consummation of the transactions contemplated by this
Agreement.
9.15 Bulk Sales Law. Except as to any Assumed Liabilities, the
--------------
Seller will bear any loss, liability, obligation or cost suffered by the Seller
or the Purchaser as a result of the Parties' noncompliance with any provision of
any bulk sales law which is applicable to the transfer of the Acquired Assets
pursuant to this Agreement.
ARTICLE X
MISCELLANEOUS
-------------
10.1 Amendment and Waiver. This Agreement may be amended and any
--------------------
provision of this Agreement may be waived, provided that any such amendment or
waiver shall be binding upon a Party only if such amendment or waiver is set
forth in a writing executed by the Purchaser and the Seller. No course of
dealing between or among any persons having any interest in this Agreement shall
be deemed effective to modify, amend or discharge any part of this Agreement or
any rights or obligations of any Party under or by reason of this Agreement.
10.2 Notices. All notices, demands and other communications
-------
given or delivered under this Agreement shall be in writing and shall be deemed
to have been given when personally delivered, mailed by first class mail, return
receipt requested, or delivered by express courier service or telecopied (with
hard copy to follow). Notices, demands and communications to the Seller and the
Purchaser shall, unless another address is specified in writing, be sent to the
address or telecopy number indicated below:
Notices to the Seller: with a copy to:
- --------------------- --------------
Verrill & Dana
Cormier Equipment Corporation One Portland Square, P.O. Box 586
Kennedy Memorial Drive Portland, ME 04112-0586
Oakland, ME 0493 Attention: Peter B. Webster, Esq.
Attention: Joseph Y. Cormier Telecopy: (207) 774-7499
Telecopy: (207) 465-2351
-50-
<PAGE>
Notices to the Purchaser: with a copy to:
- ------------------------ --------------
NES Acquisition Corp. Kirkland & Ellis
c/o National Equipment Services, Inc. 200 East Randolph Drive
1800 Sherman Avenue, Suite 100 Chicago, IL 60601
Evanston, IL 60201 Attention: Sanford E. Perl, Esq.
Attention: Kevin Rodgers Telecopy: (312) 861-2200
Telecopy: (847) 733-1078
10.3 Binding Agreement; Assignment. This Agreement and all of
-----------------------------
the provisions hereof shall be binding upon and inure to the benefit of the
Parties and their respective successors and permitted assigns; provided that
neither this Agreement nor any of the rights, interests or obligations hereunder
may be assigned by the Seller without the prior written consent of the Purchaser
or by the Purchaser (except as otherwise provided in this Agreement) without the
prior written consent of the Seller; provided further that:
(a) the Purchaser may at any time prior to the Closing, at its sole
discretion, assign, in whole or in part, its rights and obligations pursuant to
this Agreement to one or more of its Affiliates;
(b) the Purchaser may assign its rights under this Agreement for
collateral security purposes to any lender providing financing to the Purchaser
or any of its Affiliates and any such lender may exercise all of the rights and
remedies of the Purchaser hereunder; and
(c) the Purchaser may assign its rights under this Agreement, in whole
or in part, to any subsequent purchaser of the Purchaser or any material portion
of its assets (whether such sale is structured as a sale of stock, a sale of
assets, a merger or otherwise).
In the event of any assignment by the Purchaser pursuant to this Section 10.3,
the Purchaser shall nonetheless remain primarily liable to the Seller with
respect to its obligations hereunder.
10.4 Severability. Whenever possible, each provision of this
------------
Agreement shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement is held to be prohibited
by or invalid under applicable law, such provision shall be ineffective only to
the extent of such prohibition or invalidity, without invalidating the remainder
of such provisions or the remaining provisions of this Agreement.
10.5 Construction. The language used in this Agreement shall be
------------
deemed to be the language chosen by the Parties to express their mutual intent,
and no rule of strict construction shall be applied against any person. Section
2.1(c) contains an exhaustive description of the liabilities and obligations of
the Seller being assumed by the Purchaser in connection with the transactions
contemplated by this Agreement, and therefore the qualification or modification
of any representation or warranty or the disclosure of any liability or
obligation by the Seller to the Purchaser (whether in any representation or
warranty, any schedule hereto or otherwise) in and of itself shall not
constitute an assumption of such liability or obligation by the Purchaser. The
parties hereto intend that each representation, warranty and covenant contained
herein shall have
-51-
<PAGE>
independent significance. Unless the content otherwise requires, if any party
hereto has breached any representation, warranty or covenant contained herein in
any respect, the fact that there exists another representation, warranty or
covenant relating to the same subject matter which the breaching party has not
also breached shall not detract from or mitigate the fact that such party is in
breach of the first representation, warranty or covenant.
10.6 Captions. The captions used in this Agreement are for
--------
convenience of reference only and do not constitute a part of this Agreement and
shall not be deemed to limit, characterize or in any way affect any provision of
this Agreement, and all provisions of this Agreement shall be enforced and
construed as if no caption had been used in this Agreement.
10.7 Entire Agreement. This Agreement and the documents referred
----------------
to herein contain the entire agreement between the Parties and supersede any
prior understandings, agreements or representations by or between the Parties,
written or oral, which may have related to the subject matter hereof in any way.
10.8 Counterparts. This Agreement may be executed in multiple
------------
counterparts, each of which shall be deemed an original but all of which taken
together shall constitute one and the same instrument.
10.9 Governing Law. All questions concerning the construction,
-------------
validity and interpretation of this Agreement shall be governed by and construed
in accordance with the domestic laws of the State of Illinois, without giving
effect to any choice of law or conflict of law provision (whether of the State
of Illinois or any other jurisdiction) that would cause the application of the
laws of any jurisdiction other than the State of Illinois.
10.10 Parties in Interest. Nothing in this Agreement, express or
-------------------
implied, is intended to confer on any person other than the Parties and their
respective successors and assigns any rights or remedies under or by virtue of
this Agreement.
* * * * *
-52-
<PAGE>
IN WITNESS WHEREOF, the Parties have executed this Asset Purchase Agreement as
of the date first written above.
NES ACQUISITION CORP.
By: /s/ Paul Ingersoll
-----------------------------------------
Name: Paul Ingersoll
-----------------------------------------
Its: Vice President
-----------------------------------------
CORMIER EQUIPMENT CORPORATION
By: /s/ Joseph Y. Cormier
-----------------------------------------
Name: Joseph Y. Cormier
-----------------------------------------
Its: President
-----------------------------------------
For purposes of Sections 8.2 and 9.10 only,
intending to be legally bound:
/s/ Joseph Y. Cormier /s/ Darrell W. Whittemore
- --------------------------------- ---------------------------------
Name: Name:
/s/ Roger E. Jarvais /s/ Phillip G. James
- --------------------------------- ---------------------------------
Name: Name:
/s/ Paul E. DeLorme /s/ J. Scott Searway
- --------------------------------- ---------------------------------
Name: Name:
/s/ Robert W. Poland /s/ Jay L. Conway
- --------------------------------- ---------------------------------
Name: Name:
/s/ Terrance Berdis
- --------------------------------- ---------------------------------
Name: Name:
<PAGE>
Exhibit 10.27
ASSIGNMENT AND ASSUMPTION AGREEMENT
-----------------------------------
THIS ASSIGNMENT AND ASSUMPTION AGREEMENT (this "Agreement"), dated as
of March 4, 1998, is made by and among NES Acquisition Corp., a Delaware
corporation (the "Assignor"), and NES East Acquisition Corp., a Delaware
corporation (the "Assignee").
WHEREAS, the Assignor desires to assign all of its rights and
obligations (the "Purchase Obligation") in connection with the Asset Purchase
Agreement, dated as of February 9, 1998, by and between the Assignor and Cormier
Equipment Corporation, and the Assignee desires to assume the Purchase
Obligation;
WHEREAS, the Assignor desires to assign all of its rights and
obligations (the "Equipment Obligation") in connection with the Equipment
Purchase Agreement, dated as of the date hereof, by and between the Assignor and
The Walton Company, and the Assignee desires to assume the Equipment Obligation;
WHEREAS, the Assignor desires to assign all of its rights and
obligations (the "Employment Obligation") in connection with the Employment
Agreements, each dated as of the date hereof, by and between the Assignor and
each of Joseph Y. Cormier, Roger Jarvais and Phillip G. James, and the Assignee
desires to assume the Employment Obligation;
WHEREAS, the Assignor desires to assign all of its rights and
obligations (the "WASCOD I Obligation") in connection with the Agreement for the
Purchase of Real Property, dated as of the date hereof, by and between Assignor
and WASCOD Partners I, and the Assignee desires to assume the WASCOD I
Obligation; and
WHEREAS, the Assignor desires to assign all of its rights and
obligations (the "WASCOD IX Obligation") in connection with the Agreement for
the Purchase of Real Property, dated as of the date hereof, by and between
Assignor and WASCOD Partners IX, and the Assignee desires to assume the WASCOD
IX Obligation.
NOW, THEREFORE, in consideration of the foregoing and other good and
valuable consideration, the receipt of which is hereby acknowledged, the parties
hereto agree as follows:
1. The Assignor hereby assigns, transfers and conveys the Purchase
Obligation, the Equipment Obligation, the Employment Obligation, the WASCOD I
Obligation and the WASCOD IX Obligation to the Assignee.
2. The Assignee hereby accepts the assignment, transfer and
conveyance and assumes the Purchase Obligation, the Equipment Obligation, the
Employment Obligation, the WASCOD I Obligation and the WASCOD IX Obligation.
3. This Agreement may be executed in separate counterparts, each of
which is deemed to be an original and all of which taken together constitute one
and the same agreement.
4. All issues and questions concerning the construction, validity,
enforcement and interpretation of this Agreement shall be governed by, and
construed in accordance with, the laws of the State of Delaware, without giving
effect to any choice of law or conflict of law rules or
<PAGE>
provisions (whether of the State of Delaware or any other jurisdiction) that
would cause the application of the laws of any jurisdiction other than the State
of Delaware.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Assignment and
Assumption Agreement to be executed as of the date written above.
NES ACQUISITION CORP.
By: /s/ Paul R. Ingersoll
--------------------------------
Name: Paul R. Ingersoll
--------------------------------
Its: Vice President
--------------------------------
NES EAST ACQUISITION CORP.
By: /s/ Paul R. Ingersoll
--------------------------------
Name: Paul R. Ingersoll
--------------------------------
Its: Vice President
--------------------------------
<PAGE>
Exhibit 10.33
STOCK PURCHASE AGREEMENT
------------------------
Stock Purchase Agreement, dated as of March 9, 1998, among ALBANY LADDER
COMPANY, INC., a New York corporation (the "Company"); the Company's
-------
stockholders, being the ESTATE OF LESTER J. HEATH, III (the "Estate"), ELLEN H.
------
KANUCK, SUSAN H. MINCHER and PEGGY H. DIPAOLA; PENELOPE D. HEATH, as Seller's
representative, and NATIONAL EQUIPMENT SERVICES, INC., a Delaware corporation
("Buyer").
- -------
RECITALS
--------
A. The Estate owns all of the issued and outstanding Class A (voting)
common capital stock of the Company.
B. The Estate and the other stockholders (each hereinafter called a
"Seller" and collectively called the "Sellers") collectively own all of the
- ------- -------
issued and outstanding Class B (non-voting) common capital stock of the Company.
C. Buyer desires to purchase from Sellers, and Sellers desire to sell to
Buyer, all the issued and outstanding shares of Class A and Class B Common Stock
of the Company (the "Shares").
------
Accordingly, the Company, Sellers and Buyer hereby agree as follows:
SECTION 1. DEFINITIONS & INDEX OF DEFINITIONS.
----------------------------------
1.01 Definitions. For purposes of this Agreement:
-----------
"Affiliate" means all persons and entities controlling, controlled by or
---------
under common control with any person or entity, and with respect to any entity,
includes all partners, directors and officers of such entity.
"Agreement" refers to this entire Agreement, including all exhibits,
---------
schedules and certificates referred to herein.
"including" means including, without limitation.
---------
"Inventory" means all inventories of the Company, including without
---------
limitation, raw materials, finished goods, merchandise, machinery and equipment
held for rental or for resale to customers, spare parts, containers and office
operating and other supplies. For purposes of this Agreement, the term
"Inventory" includes property and equipment held for rental to customers, even
- ----------
though such items are and have been historically included within the
classification of "property and equipment" and not within the classification of
"inventory" on the Company's balance sheet.
<PAGE>
"knowledge of the Company" means the knowledge after due inquiry of any
------------------------
director, executive officer or supervisory employee of the Company
"knowledge of Buyer" means the knowledge after due inquiry of any general
------------------
partner, executive officer or director of Buyer.
"material" means, when used in connection with the Company, Sellers or
--------
Buyer, material to the business, financial condition, prospects, or results of
operations of such party and any of its subsidiaries taken as a whole, and the
term "materially" has a correlative meaning.
----------
"person" means any individual, firm, corporation, partnership, limited
------
liability company, trust, joint venture, Governmental Entity or other entity.
"prospects" when used with reference to the Company means facts or
---------
circumstances which are specific or unique to the Company, and do not include
more generalized facts or circumstances affecting the Company's prospects less
directly, such as the state of the economy of the United States or the
Northeastern region thereof, or factors affecting the scaffolding or aerial lift
industries in general.
1.02 Index of Definitions. Other definitions are set forth in the
--------------------
various sections or subsections to which they apply. Set forth below is a list
or index of those definitions which are used generally throughout this
Agreement, with a reference to the section or subsection in which such terms are
defined:
Buyer Material Adverse Affect - (S)9.02
Claims - (S)18.01
Closing - (S)3.01
Closing Date - (S)3.01
Code - (S)6.08(b)
Company Material Adverse Affect - (S)6.02
Contracts - (S)6.12(j)
Corporate Level Taxes - (S)6.08(a)
Elections - (S)3.03(b)
Escrow Agent - (S)3.03(d)
Financial Statements - (S)6.07
GAAP - (S)3.04(e)
Governmental Entity - (S)5.01(d)
Intellectual Property - (S)6.11
"Leased Property" and "Leased Properties" - (S)6.10
Lien - (S)6.02
Most Recent Balance Sheet - (S)6.07
Most Recent Financial Statements - (S)6.07
Permitted Liens - (S)6.09
Purchase Price - (S)3.03(a)
2
<PAGE>
Shares - Recital C
"Tax" and "Taxes" - (S)6.08(a)(i)
Tax Calculation - (S)3.03(b)
SECTION 2. PURCHASE AND SALE OF THE SHARES.
2.01 On the terms and subject to the conditions of this Agreement,
each Seller, severally, shall sell, transfer and deliver to Buyer free and clear
of all Liens, and Buyer shall purchase from such Seller, the Shares owned by
such Seller. The basic provisions concerning the purchase price, adjustments
thereto and payment terms are set forth in Section 3 hereof.
2.02 If any Seller shall fail or refuse to deliver any of the Shares
to be sold hereunder, such failure or refusal shall not relieve the other
Sellers of any obligation under this Agreement, and the Buyer, at its option and
without prejudice to its rights against the defaulting Seller, may either (i)
terminate its obligations under this Agreement, or (ii) purchase the remaining
Shares which it is entitled to purchase hereunder, with an appropriate pro-rata
adjustment of the purchase price.
SECTION 3. PURCHASE PRICE; ADJUSTMENT; CLOSING.
3.01 Closing. The closing of the purchase and sale of the Shares (the
-------
"Closing") shall be held at the offices of Harris Beach & Wilcox, LLP, 20
- --------
Corporate Woods Boulevard, Albany, New York within thirty (30) days after this
Agreement is signed or, if the conditions to the Closing set forth in Section 5
shall not have been satisfied by such date, as soon as practicable after such
conditions shall have been satisfied. The date on which the Closing shall occur
is referred to herein as the "Closing Date."
------------
3.02 Instruments of Transfer.
-----------------------
(a) Delivery of Certificates. Each Seller shall deliver or cause
------------------------
to be delivered to Buyer certificates representing the Shares to be sold by such
Seller hereunder, duly endorsed in blank or accompanied by stock powers duly
endorsed in blank in proper form for transfer, with appropriate transfer stamps,
if any, affixed.
(b) Further Assurances. At any time after the Closing, at the
------------------
Buyer's request and without further consideration, the Sellers shall forthwith
execute and deliver such other and further instruments of sale, transfer,
conveyance and assignment, and take such actions as in the Buyer's reasonable
opinion may be necessary to complete, perfect or more effectively assign,
transfer and deliver to the Buyer, and to confirm the Buyer's title to, the
Shares, or to otherwise put the Buyer in actual possession and operating control
of the business and assets of the Company, and to assist the Buyer in exercising
all rights with respect thereto.
3.03 Purchase Price and Payment Procedures.
-------------------------------------
3
<PAGE>
(a) Calculation of Purchase Price. The price to be paid for the
-----------------------------
Shares (the "Purchase Price") shall be the sum of Twenty Eight Million, Eight
--------------
Hundred Eleven Thousand, Three Hundred Ninety-Three Dollars ($28,811,393),
adjusted as provided in subsection 3.03(b).
The base consideration of $28,811,393 is to be allocated among the Shares
being purchased in the following manner:
. Class A Voting Common Shares $ 9,147,616
. Class B Non-Voting Common Shares $19,663,777
The foregoing allocation of consideration does not include any sums paid in
the event of an Election under subsection 3.03(b). If such an Election is made,
the additional amount payable as a result of the Tax Calculation shall be
allocated and divided among the respective Sellers in accordance with their
individual differentials in tax burden between taxes that each such Seller would
have paid had the transaction been structured as a sale of stock without such
Elections, and the federal and state income taxes actually payable by such
Seller by reason of the making of such Elections.
(b) Adjustments for Certain Tax Differentials. The Buyer and
-----------------------------------------
Sellers have mutually agreed that Buyer has the right or option to make an
election under Section 338(h)(10) of the Code, and under any applicable
corresponding or similar provisions of state or local law, to have the Company
recognize gain or loss on a deemed sale of its assets (the "Elections"). If
Buyer makes such Elections, then, subject to the provisions set forth in
subparagraph 3.03(d) below regarding the time when payment of the tax adjustment
is due, Sellers will also make such Elections with respect to their Tax Returns
and the Company's Tax Returns. In order to induce the Sellers to agree upon and
to make such Elections, the Buyer has agreed that, if Buyer makes such
Elections, Buyer shall pay to Sellers, as an adjustment to the Purchase Price,
the difference between the federal and state income taxes that Sellers would
have collectively incurred had the transaction been structured as a sale of
stock without such Elections, and the federal and state income taxes actually
incurred by such Sellers by reason of the making of such Elections. Accordingly,
the parties will negotiate a mutually agreeable manner in which to allocate the
modified aggregate deemed sales price among the Company's assets, and such
mutually agreed upon allocation shall be signed or initialled by Heath and Buyer
and shall become a part of this Agreement although not physically attached
hereto. Within thirty (30) days after the date Heath receives all of (i) notice
that Buyer has opted to make such Elections, (ii) the financial statements of
the Company dated as of the Closing Date, and (iii) the mutually agreed upon
allocation of the modified aggregate deemed sale price, Heath shall deliver to
Buyer the calculation of the actual tax differential and Purchase Price
adjustment called for by this section (the "Tax Calculation"). The Tax
---------------
Calculation shall be made using effective combined (federal and New York State)
tax rates of 43.9% for ordinary income and 24.2% for capital gains. Attached
hereto as Schedule 3.03(b) is an example, illustrating the parties' agreed upon
medthodology for making the Tax Calculation. The additional Purchase Price shall
then be paid by Buyer to Heath on behalf of Sellers within
4
<PAGE>
20 days after receipt of such Tax Calculation, unless Buyer contests the same.
If Buyer contests the same, Buyer shall send Heath a written notice that Buyer
disagrees with the Tax Calculation (a "Notice of Disagreement") prior to the
----------------------
expiration of such 20 days. Any Notice of Disagreement shall specify in
reasonable detail the nature of the disagreement so asserted. If a Notice of
Disagreement is received in a timely manner, then the Tax Calculation shall
become final and binding upon Sellers and Buyer on the earlier of (A) the date
Heath and Buyer resolve in writing any differences they have with respect to the
matters specified in each Notice of Disagreement or (B) the date any disputed
matters are finally resolved by reference to the independent Accounting Firm (as
defined below). Final payment of the amount of the tax-related adjustment shall
be made within three (3) days after the dispute has been resolved by agreement
of the parties or by reference to the independent Accounting Firm (as defined
below).
(c) Dispute Resolution Mechanism. During the 10-day period
----------------------------
following the delivery of the Notice of Disagreement, Heath and Buyer shall seek
in good faith to resolve in writing any differences that they may have with
respect to the matters specified in such Notice of Disagreement. During such
period each party shall have access to the working papers of each other party's
independent auditors prepared in connection with their work done in preparing or
reviewing the Tax Calculation. At the end of such 10-day period, Heath and Buyer
shall submit to an independent accounting firm (the "Accounting Firm") for
---------------
review and resolution any and all matters that remain in dispute and that were
properly included in such Notice of Disagreement, in the form of a written
brief. The Accounting Firm shall be KPMG Peat Marwick, LLP or, if such firm is
unable or unwilling to act, such other nationally recognized independent public
accounting firm as shall be agreed upon by Heath and Buyer in writing. Heath and
Buyer shall use reasonable efforts to cause the Accounting Firm to render a
decision resolving the matters submitted to the Accounting Firm within 30 days
of the receipt of such submission. Judgment may be entered upon the
determination of the Accounting Firm in any court having jurisdiction. The cost
of any proceedings (including the fees and expenses of the Accounting Firm and
reasonable attorneys' fees and expenses of the parties) pursuant to this
subsection 3.03(c) shall be borne by Buyer and Sellers in inverse proportion as
they may prevail on matters resolved by the Accounting Firm, which proportionate
allocations shall also be determined by the Accounting Firm at the time the
determination of the Accounting Firm is rendered on the merits of the matters
submitted. The fees and disbursements of Bollam Sheedy Torani & Co., LLP
(hereafter, "BST") incurred in connection with their review of the Tax
---
Calculation and representing Sellers regarding any Notice of Disagreement shall
be borne by Sellers, and the fees and disbursements of Buyer's independent
auditors incurred in connection with their review of the Tax Calculation and
representing Buyer regarding any Notice of Disagreement shall be borne by Buyer.
(d) Payment of Tax Differentials; Signature on Election Forms.
---------------------------------------------------------
After the Tax Calculation has become final in accordance with the foregoing
procedures, Buyer shall pay Heath on behalf of Sellers, within the time limits
referenced in subsections 3.03(b) and 3.03(c) above, the additional Purchase
Price payable by reason of the Tax Calculation adjustment. Notwithstanding
anything to the contrary contained in this
5
<PAGE>
Agreement, in no event shall any of the Sellers be required to sign and deliver
IRS Form 8023 or any other document signifying their consent to the Election,
until such time as they have received full payment of the Purchase Price
adjustment required by virtue of subsection 3.03(b). If the time within which
the Elections may be made is about to expire, and if the parties still have not
agreed upon the amount of the Tax Calculation (and such disagreement has not yet
been resolved by the Accounting Firm), then the Sellers shall nevertheless sign
Form 8023 and such other documents as may be necessary, provided that the Buyer
delivers a check drawn upon good and sufficient funds for the amount that
Sellers reasonably specify as due under the Tax Calculation with an Escrow Agent
mutually agreeable to the parties, such amount to be held in escrow until the
Tax Calculation has become final, as provided in subsection 3.03(c) hereof.
(e) Post Closing Tax Audit. If the Returns of Buyer, any one or
----------------------
more Sellers or the Company are audited by the Internal Revenue Service or any
state taxing authority, and if such audit results in any assessment of
additional Taxes upon Sellers or the Company, as a result of a reallocation of
the Purchase Price or for other reasons related to such Code Section 338(h)(10)
Elections, then Buyer shall pay, as a further adjustment to the Purchase Price,
all such sums as may be due as a result of such audit, including all Taxes, and
any interest and/or penalties due thereon. On the other hand, if such audit
results in any reduction in Taxes for the Sellers or the Company, as a result of
a reallocation of the Purchase Price or for other reasons related to such Code
Section 338(h)(10) Elections, then the Sellers shall pay, as a further
adjustment to the Purchase Price, all such sums as may be received by the
Sellers as a result of such audit. Buyer may request that Seller's contest any
such assessment or proposed assessment on Sellers or the Company, in which case
Buyer shall be entitled to control the defense of such assessment proceeding,
provided Buyer pays all expenses incidental thereto. In such case, Sellers
- --------
shall not consent to any assessment or otherwise settle such tax audit
proceedings without Buyer's express written consent. Final payment of the amount
of the tax-related adjustment shall be made within three (3) days after the
assessment proceedings and any proceedings supplementary thereto have been
finally resolved.
(f) Wire Transfer at Closing; the Reserve. At the Closing,
-------------------------------------
Buyer shall deliver to Penelope D. Heath ("Heath") on behalf of Sellers, by wire
-----
transfer to a bank account designated by Heath in writing (such account to be
designated at least one business day prior to the Closing Date), immediately
available funds in an amount equal to the Purchase Price (before the potential
Tax Calculation adjustment provided in subsection 3.03(b)), subject however to
the following adjustment: There shall be subtracted from the amount paid at
----------
Closing on account of the Purchase Price the sum of Two Million Dollars
($2,000,000) to secure the Sellers' warranties and representations and the
Sellers' indemnifications based thereon, as set forth in this Agreement. Such
$2 Million shall be placed in an interest-bearing escrow account in the name of
Bollam Sheedy Torani & Co., LLP (the "Escrow Agent") and administered pursuant
------------
to the provisions of Section 18 hereof. The Two Million Dollars, plus all
interest accrued thereon, is hereafter called the "Reserve."
-------
6
<PAGE>
3.04 Loan by Shareholder. The Company is indebted to the Estate in
-------------------
the principal amount of $370,300 for monies previously loaned to the Company.
Such loan shall be repaid by the Company to the Estate at or prior to the
Closing, without deduction from the Purchase Price for the Shares.
3.05 Resignations. At Closing, Sellers shall deliver the written
------------
resignations of all of the Company's officers and directors, except such
officer(s) and/or director(s) as: (i) Buyer shall specify in writing are to
remain in such capacity, and (ii) agree to remain as officer(s) and/or
director(s).
3.06 Secured Lenders.
---------------
(a) Key Credit Facility. The Company's line of credit facility
-------------------
with Key Bank (the "Key Credit Facility") is secured by one or more security
-------------------
interests or liens upon substantially all of the Company's assets. Buyer may, at
its option, elect to leave the Key Credit Facility in place at Closing. However,
Sellers acknowledge that the Key Credit Facility may need to be paid at closing
in order to enable Buyer's lender to obtain a first lien position with respect
to the Company's assets. Accordingly, Buyer may choose to pay off the Key Credit
Facility at closing, and/or to refinance such amount with one or more lenders.
In such event, the Company shall cooperate with Buyer in obtaining one or more
pay-out letters from Key Bank, as well as UCC-3 termination statements and any
other documents needed to satisfy of record all security interests and other
liens held by Key Bank.
(b) Other Secured Lenders. If any of the Company's assets are
---------------------
subject to a security interest in favor of any secured lender other than Key
Bank, then Sellers shall obtain payout letters from each of such secured
lenders, as well as UCC-3 termination statements and any other documents needed
to satisfy of record all security interests and other liens held by such secured
lenders.
(c) Payment by Buyer. Any funds necessary to satisfy the Key
----------------
Credit Facility and to payout any other secured lenders shall be provided by
Buyer or the Company, and such funds shall be in addition to, and not a
deduction from, the Purchase Price.
SECTION 4. SELLERS' REPRESENTATIVE; ATTORNEY-IN-FACT.
-----------------------------------------
4.01 Heath to Act as Sellers' Representative. Each Seller hereby
---------------------------------------
appoints Heath as the sole representative of such Seller to act as the agent and
on behalf of such Seller for all purposes under this Agreement, including for
the purposes of: (A) acceptance of the Purchase Price and delivery of wire
instructions to Buyer in connection therewith, as provided in Section 3.03; (B)
determining the potential adjustment to the Purchase Price under Section 3.04;
(C) preparation of the Most Recent Financial Statements, and resolving all
matters relating thereto or to BST's Report thereon; (D) determining whether the
conditions to Closing have been satisfied and supervising the Closing, including
7
<PAGE>
waiving any such condition if, in her sole discretion, Heath determines that
such waiver is appropriate; (E) taking any action that may be necessary or
desirable, as determined by Heath in her sole discretion, in connection with the
termination of this Agreement in accordance with Section 16; (F) taking any and
all actions that may be necessary or desirable, as determined by Heath in her
sole discretion, in connection with the amendment of this Agreement in
accordance with Section 20; (G) accepting notices on behalf of such Seller in
accordance with Section 21; (H) taking any and all actions that may be necessary
or desirable, as determined by Heath in her sole discretion, in connection with
the payment of the costs and expenses incurred with respect to the Company or
such Seller in accordance with Section 19; (I) delivering or causing to be
delivered to Buyer at the Closing certificates representing the Shares to be
sold by such Seller hereunder; (J) executing and delivering, in her capacity as
the representative of such Seller, any and all notices, documents or
certificates to be executed by Heath, on behalf of such Seller, in connection
with this Agreement and the transactions contemplated hereby; and (K) taking any
and all other actions and doing any and all other things provided in or
contemplated by this Agreement to be performed by Heath on behalf of Sellers. As
the representative of Sellers, Heath shall act as the agent for all such
persons, shall have authority to bind each such person in accordance with this
Agreement, and Buyer may rely on such appointment and authority until the
receipt of notice of the appointment of a successor.
4.02 Attorney in Fact. Each Seller hereby appoints Heath as such
----------------
Seller's true and lawful Attorney-in-Fact and agent ("Attorney-in-Fact"), with
----------------
full power of substitution and resubstitution, in such Seller's name, place and
stead, in any and all capacities, in connection with the transactions
contemplated by this Agreement, granting unto said Attorney-in-Fact and agent,
full power and authority to do and perform each and every act and thing
requisite and necessary to be done in connection with the sale of such Seller's
Shares as fully to all intents and purposes as such Seller might or could do in
person. Unless Heath designates a different substitute Attorney-in-Fact and
agent by written instrument signed and acknowledged after the signing of this
Agreement, Heath, the Estate and the other Sellers hereby appoint A. Arthur
Davis 3rd as substitute agent and Attorney-in-Fact, to act upon Heath's death,
disability or judicially declared incompetence. In the event any such
appointment of a successor takes effect, all references in this Agreement to
"Heath" shall be deemed to refer to such successor agent and Attorney-in-Fact.
- ------
4.03 Limitation on Liability. Heath or her successor shall incur no
-----------------------
liability to any Seller as the representative or Attorney-in-Fact of such
Seller, except for liability arising from gross negligence or actions taken in
bad faith by Heath on behalf of, or in the name of, such Seller.
4.04 No Liability to Buyer. Heath or her successor shall have no
---------------------
liability to Buyer for any default under Section 7 of this Agreement by any
Seller.
SECTION 5. CONDITIONS TO CLOSING.
----------------------
8
<PAGE>
5.01 Buyer's Obligation. The obligation of Buyer to purchase and pay
-------------------
for the Shares is subject to the satisfaction (or waiver by Buyer) as of the
Closing of the following conditions:
(a) Warranties Still True. The representations and warranties
---------------------
of the Sellers made in this Agreement shall be true and correct in all material
respects, as of the date hereof and as of the time of the Closing as though made
as of such time, except to the extent such representations and warranties
expressly relate to an earlier date (in which case such representations and
warranties shall be true and correct in all material respects, on and as of such
earlier date).
(b) Performance of Obligations. The Company and each Seller
--------------------------
shall have performed or complied in all material respects with all obligations
and covenants required by this Agreement to be performed or complied with by
them at or prior to the Closing.
(c) Closing Certificates. The Company and Heath (on behalf of
--------------------
all Sellers) shall have delivered to Buyer, certificates dated the Closing Date
and signed by an officer of the Company and by Heath confirming the foregoing.
(d) No Restraints. No statute, rule, regulation or executive
-------------
order ("Law") or decree, temporary restraining order, preliminary or permanent
---
injunction or other order ("Order") enacted, entered, promulgated, enforced or
-----
issued by any Federal, state or local government or any court of competent
jurisdiction, administrative agency or commission or other governmental
authority or instrumentality (a "Governmental Entity"), or other legal restraint
-------------------
or prohibition preventing the purchase and sale of the Shares shall be in
effect.
(e) Government Filings. The waiting period under the Hart-
------------------
Scott Rodino Antitrust Improvements Act of 1976 (the "HSR Act"), if applicable
to the purchase and sale of the Shares, shall have expired or been terminated,
and all other filings with any Government Entities which are required by Law
have been made, and with respect to each such filing, either (i) the requisite
consents have been obtained or (ii) the period within which such Government
Entity may take action to oppose the transaction has expired or been terminated.
(f) Good Standing Certificates. The Sellers shall have
--------------------------
delivered to the Buyer a certificate of good standing with respect to the
Company, issued by the New York State Department of State and the corresponding
agencies of the states of Pennsylvania and Vermont, such certificates to be
dated within thirty (30) days prior to the Closing.
(g) Legal Opinions. The Company shall have delivered to the
--------------
Buyer:
(i) an opinion of the Company's special counsel, Harris Beach &
Wilcox, LLP, opining (A) that the Company's corporate existence and good
standing are as stated in
9
<PAGE>
Section 6.04 of this Agreement, (B) that they do not know or have any reasonable
grounds to know of any litigation, proceeding or governmental investigation
pending or threatened against, or relating to, the Company, its properties or
its business which affects title to the Shares or the ability of Sellers to
transfer such Shares free of all claims and encumbrances, or which relates to
the validity and enforceability of this Agreement, or seeks to restrain the
closing of the transactions envisioned by this Agreement, and (C) that this
Agreement, and any closing certificates, other documents or instruments
delivered by the Sellers pursuant hereto, constitute the binding, legal
obligations of the Sellers, enforceable against them except as such
enforceability may be limited by bankruptcy laws or general principles of
equity.
(ii) an opinion of the Company's regular counsel, Rowley Forrest
O'Donnell & Beaumont, P.C., opining (A) that they do not know or have any
reasonable grounds to know of any litigation, proceeding or governmental
investigations pending or threatened against, or relating to, the Company, its
properties or business which could result in a Company Material Adverse Affect,
except as previously disclosed in the schedules to this Agreement, and (B) the
authorized capital stock of the Company consists of 1,200 shares of voting Class
A One Hundred Dollar ($100) par value common stock, and 2,000 shares of non-
voting Class B One Hundred Dollar ($100) par value common stock, of which 245.75
shares of Class A common stock and 940.67 shares of Class B common stock are
issued and outstanding. All of such outstanding shares are validly issued, fully
paid and nonassessable. Counsel is not aware, after due inquiry, of any existing
options, causes or commitments of any character whatsoever, or agreements to
grant the same, relating to authorized or issued shares of the Company's capital
stock, or any outstanding securities convertible into or exercisable for such
shares, or any options, calls or commitments of any character whatsoever, with
respect to the issuance or sale of any such convertible securities, and (C) Each
Seller is the record owner, and to the best knowledge of counsel based on
diligent inquiry (including a review of the stock books and minute books of the
Company), the beneficial owner of the stock to be transferred by such Seller,
has duly endorsed certificates or stock powers relating to such shares of stock,
and is delivering good and marketable title to such shares of stock to the
Purchaser, free and clear of all liens, claims and encumbrances.
(h) Third Party Consents. Heath shall have delivered to Buyer
--------------------
consents to the transaction from the Persons listed on Schedule 5.01(h) hereof,
each of whom has or may have the right or option to terminate one or more
material agreements, contracts or arrangements with the Company by reason of the
consummation of the transactions contemplated hereby. This condition is
expressly limited to only those Persons listed on Schedule 5.01(h).
(i) Share Certificates. The Sellers have delivered
------------------
certificates for all of the Shares, together with assignments (stock powers) for
such Shares, duly endorsed for transfer to Buyer, Buyer's nominee or endorsed in
blank, as Buyer shall specify.
10
<PAGE>
(j) No Material Adverse Change. The updated Schedules (including the
--------------------------
updated Accident Log), delivered to Buyer pursuant to the provisions of Section
22(b) shall not disclose any liability or obligation which (i) was not disclosed
in the original Schedules and Financial Statements delivered to Buyer upon
execution of this Agreement, and (ii) was incurred without obtaining Buyer's
consent or contrary to the provisions of this Agreement, and (iii) constitutes a
material adverse change in the condition of the Company's business, assets or
prospects from what was reflected in the original Schedules and the Most Recent
Financial Statements.
(k) Landlord's Consent to Assumptions. Sellers shall have delivered
---------------------------------
to Buyer, landlords' consents to the transactions contemplated by this
Agreement, for those parcels of Leased Property not owned by affiliates of the
Company, for which the leases require such consents.
(l) No Litigation. No legal action, suit or proceeding shall be
-------------
pending, nor shall have the Company received any written threat to commence any
such action, suit or proceeding, the effect of which would be to prevent
Sellers' performance of this Agreement, or effect Buyer's right to own the
Shares or operate the business of the Company.
(m) Releases from Secured Lenders. Seller shall have delivered to
-----------------------------
Buyer, the payout letters and UCC-3 termination statements, and any other
documents required to satisfy security interests held by Key Bank, and by any
other secured lenders, as required by subsection 3.06 of this Agreement.
5.02 Sellers' Obligation. The obligation of Sellers to sell and deliver
-------------------
the Shares to Buyer is subject to the satisfaction (or waiver by Sellers) as of
the Closing of the following conditions:
(a) Warranties Still True. The representations and warranties of Buyer
---------------------
made in this Agreement shall be true and correct in all material respects, as
of the date hereof and as of the time of the Closing as though made as of such
time, except to the extent such representations and warranties expressly relate
to an earlier date (in which case such representations and warranties shall be
true and correct in all material respects, on and as of such earlier date), in
each case except for breaches as to matters that, individually or in the
aggregate, are not reasonably likely to have a Buyer Materially Adverse Affect.
(b) Performance of Obligations. Buyer shall have performed or complied in
--------------------------
all material respects with all obligations and covenants required by this
Agreement to be performed or complied with by Buyer by the time of the Closing.
(c) Closing Certificate. Buyer shall have delivered to Sellers a
-------------------
certificate dated the Closing Date and signed by an authorized officer of Buyer
confirming the foregoing.
11
<PAGE>
(d) No Restraints. No applicable Law or Order enacted, entered,
-------------
promulgated, enforced or issued by any Governmental Entity or other legal
restraint or prohibition preventing the purchase and sale of the Shares shall be
in effect.
(e) HSR. The waiting period under the HSR Act, if applicable to the
---
purchase and sale of the Shares, shall have expired or been terminated.
(f) Legal Opinion. Buyer shall have delivered to Sellers the written
-------------
opinion of Buyer's counsel, Kirkland & Ellis, opining to the effect that the
Buyer's corporate existence and good standing are as set forth in Section 9.01
of this Agreement, and that they do not know or have any reasonable grounds to
know of any litigation, proceeding or governmental investigation pending or
threatened against the Buyer, which seeks to enjoin the closing of the
transactions envisioned by this Agreement.
5.03 Waiver of Closing Conditions. The parties acknowledge and agree that
----------------------------
if Buyer knows of a failure of any condition set forth in subsection 5.01 or if
Sellers know of a failure of any condition set forth in subsection 5.02, and if
such party proceeds with the Closing, such party shall be deemed to have waived
such condition and such party and its successors, assigns and Affiliates shall
not be entitled to sue for damages or to assert any other right on remedy for
any losses arising from any matters relating to such condition, notwithstanding
anything to the contrary contained herein or in any certificate delivered
pursuant hereto. The party seeking to establish that a waiver has occurred
shall bear the burden of proof that the party alleged to have waived such
condition in fact knew of the failure of such condition to have been satisfied
as of Closing.
5.04 Frustration of Closing Conditions. Neither Buyer nor any Seller may
-----------------------------------
rely on the failure of any condition set forth in Sections 5.01 or 5.02,
respectively, to be satisfied if such failure was caused by such party's failure
to act in good faith or to use reasonable efforts to cause the Closing to occur,
as required by Section 11.04.
5.05 Affiliated Real Estate Properties.
---------------------------------
(a) The Company leases several parcels of real estate, from
corporations which are owned in part by the Sellers. Buyer or Buyer's affiliate
shall enter into binding written purchase agreements for such parcels, and also
for property owned by Bradcam, Inc., located near Rochester, New York, which is
not leased to the Company. Such real estate purchase agreements shall be
executed simultaneously with the execution of this Agreement. With the exception
of the Albany parcel, the Closing under this Agreement and the Closings under
the various real estate agreements occur simultaneously. However, if Buyer or
Buyer's Affiliate is unable or unwilling to close on any one or more parcels,
due to the failure to meet any condition set forth in such agreements, then
Buyer or Buyer's Affiliate may refuse to close on such parcel(s) in accordance
with procedures set forth in the various real estate contracts. In such event,
the Closing under this Agreement shall be delayed for a period not to exceed
thirty (30) days, and the parties shall negotiate in good faith towards lease
agreements for any such parcel(s) upon which
12
<PAGE>
the Buyer or Buyer's affiliate is unwilling to close. If the parties are not
able to reach agreement, then the Closing under this Agreement shall nonetheless
proceed, and the parties shall be deemed to have agreed to a lease for a term of
one (1) year from the Closing with respect to any such parcel(s) under the
following terms and conditions: (i) the annual base rent, if not agreed upon by
the parties, shall be established by reference to a broker who is a member of
the multiple listing service for the area in which such parcel is located, and
who is mutually agreeable to the parties or, if the parties cannot reach
agreement, who is elected by such multiple listing service; (ii) such annual
base rent shall be payable in monthly installments due on the first day of each
month and shall be a "net" rental, with Buyer to be responsible for all real
estate taxes, insurance and all utilities and other operating expenses incurred
in connection with the occupancy of the property, all of such sums to be pro-
rated per customary practice for the one (1) year rental period; (iii) Buyer
shall be responsible for all non-structural repairs and replacements and the
owner shall be responsible for all structural repairs and replacements unless
the same are necessitated by any act or omission of Buyer; and (iv) the leasing
shall otherwise be upon such terms and conditions as are set forth in the
standard form lease agreement attached hereto as Schedule 5.05.
(b) Title to the Albany parcel cannot be transferred until such time
as the owners of such parcel receive subdivision approval, as is more
particularly set forth in the real estate purchase agreement applicable to the
Albany parcel. Accordingly, the Albany parcel shall be leased to Buyer during
the interim period between the Closing under this Agreement and the closing
under the real estate purchase agreement for the Albany parcel, upon terms and
conditions set forth in subsection 5.05(a) above.
SECTION 6. REPRESENTATIONS AND WARRANTIES OF SELLERS. Sellers hereby
-----------------------------------------
jointly and severally represent and warrant to Buyer as follows:
6.01 Authority. The Company has all requisite corporate power and
---------
authority to enter into this Agreement, to perform its obligations hereunder and
to consummate the transactions contemplated hereby. All acts and other
proceedings required to be taken by the Company to authorize the execution,
delivery and performance of this Agreement and the consummation of the
transactions contemplated hereby have been duly and properly taken. This
Agreement has been duly authorized, executed and delivered by the Company and,
assuming due authorization, execution and delivery by the other parties hereto,
constitutes a legal, valid and binding obligation of the Company, enforceable
against the Company in accordance with its terms.
6.02 No Conflicts. Except as set forth in Schedule 6.02, the
------------
execution and delivery of this Agreement by the Company does not, and the
consummation of the transactions contemplated hereby and compliance with terms
hereof by the Company will not, conflict with, or result in any violation of or
default (with or without notice or lapse of time, or both) under, or give rise
to a right of termination, cancellation or acceleration of any obligation or to
loss of a material benefit under, or result in the creation of any lien, claim,
encumbrance, security interest, option, charge or restriction of any kind
("Lien") upon any
----
13
<PAGE>
of the properties or assets of the Company under any provision of (i) the
Restated Certificate of Incorporation or By-laws of the Company, (ii) any
material note, bond, mortgage, indenture, deed of trust, license, lease,
contract, commitment, agreement or arrangement to which the Company is a party
or by which any of its properties or assets are bound or (iii) any Order or Law
applicable to the Company or its properties or assets, other than, in the case
----------
of clauses (ii) and (iii) above, any such items that, individually or in the
aggregate, would not have a material adverse effect on the business, assets,
financial condition, results of operations or prospects of the Company, or on
the ability of the Company to consummate the transactions contemplated hereby (a
"Company Material Adverse Effect").
-------------------------------
6.03 Consents. No consent, approval, license, permit, order or
--------
authorization of, or registration, declaration or filing with, any Governmental
Entity is required to be obtained or made by or with respect to the Company or
any Subsidiary in connection with the execution, delivery and performance of
this Agreement or the consummation of the transactions contemplated hereby,
other than (i) compliance with and filings under the HSR Act, if applicable,
(ii) those that may be required solely by reason of Buyer's (as opposed to any
other party's) participation in the transactions contemplated hereby and (iii)
such consents, approvals, licenses, permits, orders, authorizations,
registrations, declarations and filings the absence of which, or the failure to
make which, individually or in the aggregate, would not have a Company Material
Adverse Effect.
6.04 Organization and Standing: Books and Records. The Company is a
--------------------------------------------
corporation validly existing and in good standing under the laws of the State of
New York. The Company has full corporate power and authority and possesses all
governmental franchises, licenses, permits, authorizations and approvals
necessary to enable it to own, lease or otherwise hold its properties and assets
and to carry on its business as presently conducted, other than such franchises,
licenses, permits, authorizations and approvals the lack of which, individually
or in the aggregate, would not have a Company Material Adverse Effect. Nothing
in the foregoing sentence shall be construed as creating a condition precedent
requiring the consent of any manufacturer or supplier to the transfer of any
dealer or distributorship agreements now held by the Company, except those
consents set forth in Schedule 5.01(h). The Company is duly qualified and in
good standing to do business as a foreign corporation in each jurisdiction in
which the conduct or nature of its business or the ownership, leasing or holding
of its properties makes such qualification necessary, except such jurisdictions
where the failure to be so qualified or in good standing, individually or in the
aggregate, would not have a Company Material Adverse Effect. Correct and
complete copies of the Company's articles of incorporation and by-laws have been
or will be furnished to the Buyer, which documents reflect all amendments made
thereto at any time prior to the date of this Agreement. Correct and complete
copies of the minute books containing the records of meetings of the
stockholders and board of directors, the stock certificate books and the stock
record books of the Company have been made available for inspection by the
Buyer.
14
<PAGE>
6.05 Capital Stock of the Company and the Subsidiaries. The
-------------------------------------------------
authorized capital stock of the Company consists of (i) twelve hundred (1,200)
shares of voting Class A - $100 par value common stock, (ii) two thousand
(2,000) shares of non-voting Class B $100 par value common stock. The Estate
owns 245.756 shares of the Class A-$100 par value common stock. The Estate and
the other stockholders collectively own 940.659 shares of the Class B common
stock. All of such issued stock, constituting the Shares, are duly authorized
and validly issued and outstanding, fully paid and nonassessable. A table
showing the stockholdings of all Sellers is attached hereto as Schedule 6.05 and
made a part hereof. Schedule 6.05 sets forth all of the issued and outstanding
capital stock and equity securities of the Company, and there are no other
shares of capital stock or other equity securities of the Company outstanding.
Except as set forth in Schedule 6.05, the Shares have not been issued in
violation of, and none of the Shares are subject to, any purchase option, call,
right of first refusal, preemptive, subscription or similar rights under any
applicable Law, the Restated Certificate of Incorporation or By-laws of the
Company, any contract, agreement or instrument to which the Company is subject,
bound or a party or otherwise. Except as otherwise set forth in Schedule 6.05,
there are not any outstanding warrants, options, rights, "phantom" stock rights,
agreements, convertible or exchangeable securities or other commitments (other
than this Agreement) pursuant to which any of the Sellers or the Company is or
may become obligated to issue, sell, purchase, return or redeem any shares of
capital stock or other securities of the Company. Except as set forth in
Schedule 6.05, there are no equity securities of the Company reserved for
issuance for any purpose. Except for the note held by Ruth Heath Mong (to be
satisfied by Sellers at Closing), or except as set forth in Schedule 6.05, there
are not any outstanding bonds, debentures, notes or other indebtedness having
the right to vote on any matters on which stockholders of the Company may vote.
6.06 Equity Interests. Except as set forth in Schedule 6.06 or in
----------------
the Most Recent Financial Statements, the Company does not directly or
indirectly own any capital stock of or other equity interests in any
corporation, partnership or other person and neither the Company nor any of the
Subsidiaries is a member of or participant in any partnership, joint venture or
similar person.
6.07 Financial Statements and Related Matters.
----------------------------------------
(a) The Company has furnished the Buyer with copies of (i) the balance
sheets of the Company as of December 31, 1995 and December 31, 1996; (ii) the
Balance Sheet of the Company as of December 31, 1997, prepared by the Company
(the "Most Recent Balance Sheet"), and (iii) the statements of income and cash
-------------------------
flows of the Company for the calendar years ended December 31, 1995, 1996 and
1997, together with the notes to such financial statements for 1995 and 1996.
The financial statements as of and for the years ended December 31, 1995, 1996
and 1997 are collectively called the "Financial Statements." The balance sheet,
--------------------
income statements and statements of cash flow and all other components of the
statements for the year ended December 31, 1997 are herein referred to as the
"Most Recent Financial Statements." The Most Recent Financial Statements will
- ---------------------------------
be audited by Price Waterhouse, and copies of the audited version will be
15
<PAGE>
delivered to Buyer as soon as they become available. All warranties,
representations and covenants made by Sellers herein which relate to the Most
Recent Financial Statements shall be deemed to relate to the unaudited version
---------
of the Most Recent Financial Statements. A copy of the unaudited version of the
Most Recent Financial Statements is included as Schedule 6.07 to this Agreement.
(b) GAAP; Fair Presentation. The Financial Statements and the Interim
-----------------------
Financial Statements have been prepared in conformity with generally accepted
accounting principles consistently applied (except in each case as described in
the notes thereto). The Financial Statements and the Interim Financial
Statements present fairly in all material respects the financial position and
results of operations of the Company as of the respective dates thereof and for
the respective periods indicated. The Balance Sheet dated as of 12/31/96 has
been audited by BST, and the Most Recent Financial Statements are in the process
of being audited by BST, and will be made available to Buyer when such audit is
complete. The Financial Statements for the year ended 12/31/95 have been
reviewed by BST.
(c) Accounts Receivable. The accounts receivable reflected on the
-------------------
Financial Statements (including the Most Recent Financial Statements) and the
Closing Financial Statements represent and will represent bona fide transactions
with customers in the ordinary course of business. The reserves for receivables
on the Closing Financial Statements will be made in a manner consistent with
computation of reserves for the Financial Statements.
(d) Inventories. The Inventories shown on the Most Recent Financial
-----------
Statements and the Closing Financial Statements consist and will consist of
items of a quantity and quality useable or saleable in the ordinary course of
business of the Company and the value of all items of Inventory, including
obsolete materials or materials of below-standard quality, have been written
down to the lower of cost or realizable market value, or adequate provisions
have been made therefor, and such valuations reflect the normal inventory
valuation policies of the Company.
(e) Interim Financials. After the last day of each calendar month,
------------------
commencing January 31, 1998, the Company will furnish the Buyer, as soon as the
same are available, with copies of (i) the balance sheet of the Company as of
such month end, prepared by the Company, and (ii) the statements of income and
cash flows of the Company for the month then ended (the "Interim Financial
-----------------
Statements"). The warranties and representations set forth in this Section 6.07
- ----------
apply to the Interim Financial Statements, except that Buyer acknowledges that
the Interim Financial Statements are internally prepared, have not been
compiled, reviewed or audited by BST, do not contain explanatory notes with
respect to matters typically set forth in the notes to the other Financial
Statements, and are subject to adjustment upon review or audit by BST.
6.08 Taxes.
-----
16
<PAGE>
(a) For purposes of this Agreement, the following definitions
shall apply:
(i) The terms "Tax" or "Taxes" shall mean all taxes, however
--- -----
denominated, including any interest, penalties or other additions to tax that
may become payable in respect thereof, (A) imposed by any federal, territorial,
state, local or foreign government or any agency or political subdivision of any
such government, which taxes shall include, without limiting the generality of
the foregoing, all income or profit taxes (including but not limited to, federal
income taxes and state income taxes), payroll and employee withholding taxes,
unemployment insurance, social security taxes, sales and use taxes, ad valorem
taxes, excise taxes, franchise taxes, gross receipts taxes, business license
taxes, occupation taxes, real and personal property taxes, stamp taxes, transfer
taxes, workers' compensation and other governmental charges, and other
obligations of the same or of a similar nature to any of the foregoing, which
are required to be paid, withheld or collected, (B) any liability for the
payment of amounts referred to in clause (A) as a result of being a member of
any affiliated, consolidated, combined or unitary group, or (C) any liability
for amounts referred to in (A) or (B) as a result of any obligations to
indemnify another Person.
(ii) The terms "Return" or "Returns" shall mean all reports,
------ -------
estimates, declarations of estimated tax, information statements and returns
relating to, or required to be filed in connection with, any Taxes, including
information returns or reports with respect to backup withholding and other
payments to third parties.
(iii) The term "Corporate Level Taxes" means Taxes imposed upon the
---------------------
Company at the corporate level, and includes (A) sales taxes, payroll taxes and
other taxes incurred in connection with operation of the business in the
ordinary course, (B) franchise taxes and/or income taxes imposed by any state or
municipality in which the Company conducts business at a level subject to
taxation (including without limitation, taxes imposed at the corporate level
notwithstanding that the Company has made an "S" election under applicable state
tax law), (C) any Taxes imposed upon the Company by any federal, state or local
tax law with respect to the sale of the Shares, except any built-in gains tax
------
levied under the Code or any comparable provision of state tax laws.
(b) Except as set forth in Schedule 6.08, and except as could
not, either individually or in the aggregate, reasonably be expected to have a
Company Material Adverse Effect:
(i) all Returns required to be filed by or on behalf of the Company and
each of its subsidiaries have been duly filed on a timely basis (giving account
to any extensions obtained) and such Returns are true, complete and correct;
(ii) all Taxes shown to be payable on such Returns or on subsequent
assessments with respect thereto, and all payments of estimated Taxes required
to be made by or on behalf of the Company and each of its subsidiaries under
Section 6655 of the Internal Revenue Code of 1986, as amended (the "Code") or
----
comparable provisions of state, local
17
<PAGE>
or foreign law, have been paid in full on a timely basis or have been accrued on
the Financial Statements, and no other Taxes are payable by the Company or any
of its subsidiaries with respect to items or periods covered by such Returns
(whether or not shown on or reportable on such Returns) or with respect to any
completed tax fiscal year prior to the date of this Agreement;
(iii) the Company and each of its subsidiaries has withheld and paid over
all Taxes required to have been withheld and paid over, and complied with all
information reporting and backup withholding requirements, including maintenance
of required records with respect thereto, in connection with amounts paid or
owing to any employee, creditor, independent contractor, or other third party;
(iv) there are no liens on any of the assets of the Company or any of its
subsidiaries with respect to Taxes, other than liens for Taxes not yet due and
payable or for Taxes that the Company or such subsidiary is contesting in good
faith through appropriate proceedings and for which appropriate reserves have
been established;
(v) the amount of the Company's and its subsidiaries' liability for
unpaid Taxes (whether actual or contingent) for all periods through the date of
the Most Recent Financial Statements does not, in the aggregate, exceed the
amount of the liability accruals for Taxes reflected on the Most Recent
Financial Statements, except for Corporate Level Taxes imposed upon the Company
by virtue of income earned in 1997 from operations in the ordinary course of
business;
(vi) each of the Financial Statements properly accrues in accordance with
generally accepted accounting principles all liabilities for Taxes payable after
the date of such Financial Statement attributable to transactions and events
occurring prior to such date, except that the Most Recent Balance Sheet does not
accrue certain Corporate Level Taxes imposed upon the Company by virtue of
income earned in 1997 from operations in the ordinary course of business.
(vii) except for liabilities for Corporate Level Taxes arising from the
sale of the Shares which are imposed upon the Company by virtue of the Code
Section 338(h)(10) Elections, no liability for Taxes of the Company or any of
its subsidiaries has been incurred (or prior to Closing will be incurred) since
December 31, 1997 other than in the ordinary course of business; and
(viii) all Taxes arising in or attributable to the period from January 1,
1998 until the Closing Date will be paid for by Sellers, except that Corporate
------ ----
Level Taxes imposed upon the Company as a result of (A) operations from January
1, 1998 through the Closing Date, and (B) the sale of the Shares (including
Taxes due by reason of the Elections) shall be paid by the Company, and are not
a deduction from the Purchase Price for the Shares.
(c) Except as set forth in Schedule 6.08, the Company has made
or will make available to Buyer true, correct and complete copies of (i)
relevant portions of
18
<PAGE>
income tax audit reports, statements of deficiencies, closing or other
agreements received by or on behalf of the Company or any of its subsidiaries
relating to Taxes which have not been fully paid and satisfied by the Company,
and (ii) all federal and state income or franchise tax Returns and state and
local sales and use Tax Returns for or including the Company or any of its
subsidiaries for the periods ended on and after December 31, 1994, 1995 and
1996, excluding from the foregoing such Returns with respect to Taxes the
nonpayment of which, individually or in the aggregate, could not reasonably be
expected to cause a Company Material Adverse Effect. Neither the Company nor any
of its subsidiaries derives income from any state which is taxable by such
state, other than states for which Returns have been duly filed and made
available to Buyer.
(d) Except as disclosed in Schedule 6.08, (i) the Returns of or
including the Company and its subsidiaries for the years ending on or after
December 31, 1992, 1993, 1994, and 1996 have not been audited by a government or
taxing authority, nor is any such audit in process, pending or, to the Company's
knowledge, threatened, (ii) no deficiencies exist or have been asserted (either
in writing or verbally) or are expected to be asserted, with respect to Taxes of
the Company or any of its subsidiaries, and neither the Company nor any such
subsidiary has received written notice nor expects to receive notice that it has
not filed a Return or paid Taxes required to be filed or paid, (iii) neither the
Company nor any of its subsidiaries is a party to any action or proceeding for
assessment or collection of Taxes, nor has such event been asserted or
threatened (either in writing or verbally) against the Company, any of its
subsidiaries, or any of their assets, and (iv) no waiver or extension of any
statute of limitations is in effect with respect to Taxes or Returns of the
Company or its subsidiaries. The Company's 1995 federal income tax return is
currently being audited by the Internal Revenue Service, and such audit is in
process. Sellers are not presently aware of any facts which would result in an
assessment of Taxes with respect to the audit of such 1995 return.
(e) Neither the Company nor any of its subsidiaries has entered
into any compensatory agreements with respect to the performance of services
which payment thereunder would result in a nondeductible expense to the Company
or such subsidiary pursuant to Section 280G of the Code or an excise tax to the
recipient of such payment pursuant to Section 4999 of the Code.
(f) Neither the Company nor any of its subsidiaries has made an
election under Section 341(f) of the Code.
(g) Schedule 6.08 sets forth the following information with
respect to the Company as of the most recent practicable date: (A) the basis of
the Company in its assets; and (B) the basis of each Seller in his or her
Shares.
(h) A valid election to be an S Corporation, as defined in
Section 1361 of the Code and the corresponding provision of New York State Tax
Law, has been in effect with respect to the Company at all times since December
29, 1986. Elections of
19
<PAGE>
"S" corporation status for other states in which the Company conducts business
have been in effect with respect to the first tax return filed for each of such
states after 1986.
6.09 Assets Other than Real Property Interests. Schedule 6.09
-----------------------------------------
contains a listing as of the date of the Most Recent Financial Statements, of
all major items of (i) the equipment comprising the rental fleet, (ii) equipment
held for sale to customers, (iii) other fixed assets, and (iv) any liens upon
such assets. Such list includes (to the extent available) the year, make, model
number, equipment number, serial number and any other information reasonably
required to identify each item of equipment. An updated Schedule 6.09 will be
delivered with the Closing Financial Statements, such updated schedule to list
the items set forth above, determined as of the close of business on the day
immediately preceding the Closing Date. The changes reflected in the Closing
Financial Statements when compared to the Most Recent Financial Statement will
have only those changes which have occurred in the ordinary course of business,
except as may otherwise be permitted under this Agreement. The Company has and
shall have good and valid title to all assets reflected on the Most Recent
Financial Statements and Schedule 6.09, except those assets sold or otherwise
disposed of since the date of the Most Recent Financial Statements in the
ordinary course of business. Such assets will, at Closing, be free and clear of
all Liens except (i) mechanics', carriers', workmen's, repairmen's or other like
liens arising or incurred in the ordinary course of business which are not yet
due and payable, (ii) Liens for taxes that are not due and payable, and (iii)
Liens that secure debt owed to Key Bank or its Affiliates, but only if Buyer
elects to leave the Key Bank Credit Facility in place as provided in Section
3.06 hereof, and (iv) liens disclosed on Schedule 6.09. The Liens described in
clauses (i) - (iv) above are hereinafter referred to collectively as "Permitted
---------
Liens." This Section 6.09 does not relate to real property or interests in real
- -----
property, such items being the subject of Section 6.10, or to interests in
intellectual property, such items being the subject of Section 6.11; however,
the defined term "Permitted Liens" shall be applicable to Sections 6.10 and
---------------
6.11. The Company owns, or leases under valid leases, or licenses under valid
licenses, all tangible and intangible assets, properties and rights which are
necessary for the conduct of its business as currently conducted.
6.10 Real Property; Leased Property. The Company does not hold fee
------------------------------
ownership or a ground lease in any real property. Schedule 6.10 sets forth a
complete list of all real property and interests in real property leased by the
Company (individually, a "Leased Property" and collectively, the "Leased
--------------- ------
Properties"). The Company has good and valid title to the leasehold estates in
- ----------
the Leased Properties in each case free and clear of all Liens' except (i)
Permitted Liens, and (ii) easements, covenants, rights-of-way and other similar
encumbrances or restrictions of record which neither prevent or impair the
Company's conduct of its business, nor render title unmarketable. The Company
shall use its best efforts to obtain estoppel certificates from the landlords of
all parcels of Leased Property which are leased from owners not affiliated with
the Sellers.
6.11 Intellectual Property.
---------------------
20
<PAGE>
(a) Schedule 6.11 sets forth a true and complete list of all material
patents, trademarks (registered or unregistered), copyrights and applications
therefor (collectively, "Scheduled Intellectual Property"), owned, used, filed
-------------------------------
by or licensed to the Company, except for (i) agreements relating to "off-the-
----------
shelf" computer software licensed to the Company for its use, and (ii) dealer
and distributorship agreements made in the ordinary course of business, pursuant
to which the Company has the right or license, in connection with its activities
as a dealer or distributor, to use the trade marks and trade names of such
dealers. With respect to registered trademarks, Schedule 6.11 sets forth a list
of all jurisdictions in which such trademarks are registered or applied for and
all registration and application numbers. Except as set forth in Schedule 6.11,
the Company owns or the Company has the legal right to use, execute, reproduce,
display, perform, modify, enhance, distribute, prepare derivative works of and
sublicense, without payment to any other person, all Intellectual Property used
in its business and the consummation of the transactions contemplated hereby
will not conflict with, alter or impair any such rights. "Intellectual Property"
---------------------
means the Scheduled Intellectual Property and all other patents, patent
applications, trademarks, service marks, trademark or service mark applications
and registrations, trade and corporate names, copyrights, copyright applications
and registrations, trade secrets, know-how, technology, computer software and
software systems, business and marketing plans, customer and supplier lists,
confidential information and all other proprietary property, rights and
interests.
(b) Except as set forth in Section 6.11 or 6.12, the Company has not
granted any material options, licenses or agreements of any kind relating to its
Intellectual Property or the marketing or distribution thereof, except
nonexclusive licenses to distributors and end-users in the ordinary course of
business. Subject to the rights of third parties set forth in Schedule 6.11 and
except for Permitted Liens, all Intellectual Property is free and clear of all
Liens. The Company is not bound by or a party to any material options, licenses
or agreements of any kind relating to the intellectual property of any other
person, except for: (i) such agreements or other instruments as may be set
forth in Schedule 6.11; (ii) agreements relating to computer software licensed
to the Company for its use; and (iii) dealer and distributorship agreements made
in the ordinary course of business, pursuant to which the Company has the right
or license, in connection with its activities as a dealer or distributor, to use
the trade marks, trade names and other intellectual property of others. Except
as set forth in Schedule 6.11, the conduct of the business of the Company as
presently conducted does not violate, conflict with or infringe the intellectual
property of any other person.
(c) The Company licenses from Ebeling Associates, Inc., the various
application software programs comprising the Company's general ledger, accounts
payable, accounts receivable, purchasing, inventory control, rental inventory
management system, and other business applications. The Company has no
ownership rights in such software, except as to the potential royalty
arrangement described in Schedule 6.11. The programs licensed are set forth on
Schedule 6.11.
21
<PAGE>
(d) Except as set forth in Schedule 6.11, (i) no claims are pending as
of the date of this Agreement against the Company by any person with respect to
the ownership, validity, enforceability, effectiveness or use of any
Intellectual Property and (ii) since January 1, 1992, the Company has not
received any communications alleging that the Company has violated any rights
relating to intellectual property of any person.
6.12 Contracts. Except as set forth in Schedule 6.12, the Company is not a
---------
party to or bound by any:
(a) Employment Agreements. Employment agreement other than (i)
---------------------
agreements terminable at will by the Company, or (ii) agreements which terminate
by their own terms at or prior to the Closing.
(b) Covenants. Covenant of the Company not to compete other than
--------- ----- ----
territorial limitations contained in any dealer or distributorship agreement.
(c) Agreements with Affiliates. Agreement, contract or other
--------------------------
arrangement with (i) any Seller, (ii) any Affiliate of any Seller, or (iii) any
officer, director or employee of the Company, other than agreements that will
terminate at or prior to the Closing.
(d) Leases.
------
(i) Lease, sublease or similar agreement with any person under which the
Company is a lessor or sublessor of, or makes available for use to such person,
(i) any portion of any Leased Property occupied by the Company; (ii) any other
property of the Company, except for agreements providing for the sale or rental
------
of Inventory to customers in the ordinary course of business.
(ii) Lease or similar agreement with any person under which the Company is
lessee of, or holds or uses, any machinery, equipment, vehicle or other tangible
personal property owned by any person, with a remaining unpaid obligation in
excess of $10,000 for the balance of the term to which the Company is firmly
bound.
(e) Loans.
-----
(i) Agreement, contract or other instrument under which the Company has
borrowed any money from, or issued any note, bond, debenture or other evidence
of indebtedness to, any person or any other note, bond, debenture or other
evidence of indebtedness issued to any person in any such case which,
individually, is in excess of $100,000.
(ii) Agreement, contract or other instrument under which the Company has
loaned or invested funds of the Company, other than investments disclosed on
other schedules to this Agreement.
22
<PAGE>
(f) Guaranties. Agreement, contract or other instrument under which
----------
the Company has directly or indirectly guaranteed indebtedness, liabilities or
obligations of any person (other than endorsements for the purpose of collection
in the ordinary course of business), in any such case which, individually, is in
excess of $10,000.
(g) Liens. Agreement, contract or other instrument granting a
-----
security interest, Lien or other Encumbrance upon any asset of the Company other
than Permitted Liens.
(h) Indemnities. Agreement, contract or other instrument providing
-----------
for indemnification of any person with respect to material liabilities relating
to any current or former business of the Company or any predecessor person,
other than provisions in the Company's certificate of incorporation, by-laws or
corporate resolutions relating to indemnification by the Company of its officers
and directors to the extent permitted by the New York Business Corporation Law.
(i) Confidentiality Agreements. Any confidentiality agreements,
--------------------------
pursuant to which the Company is obligated not to divulge, disclose or use any
confidential information, trade secrets or other proprietary information
belonging to third parties.
(j) Other Agreements. Other agreement or instrument (or group of
----------------
agreements or instruments with the same party) to which the Company is a party
or by or to which it or any of its assets or business is bound or subject to
that has a future liability to any person in excess of $100,000 (computed
individually as to each agreement or group of agreements with any one third
party) and is not terminable by the Company at will or by notice of not more
than 60 days for a cost of less than $100,000. Except as set forth in Schedule
6.12, to the knowledge of the Company, all agreements, contracts, leases,
licenses, commitments or instruments of the Company required to be set forth in
the Schedules (collectively, the "Contracts") are valid, binding and in full
---------
force and effect and are enforceable by the Company in accordance with its
terms. Except as set forth in the Schedules, the Company has performed all
material obligations required to be performed by it to date under the Contracts
and the Company is not (with or without the lapse of time or the giving of
notice, or both) in breach or default in any material respect thereunder and, to
the knowledge of the Company, no other party to any of the Contracts is (with or
without the lapse of time or the giving of notice, or both) in breach or default
in any material respect thereunder.
The Company has not set forth in Schedule 6.12 or any other schedule the
various rental agreements, leases, purchase orders or other agreements made with
customers or suppliers in the ordinary course of business which involve the
purchase, sale, lease or rental of Inventory, and the provisions of this section
do not apply to such agreements. The Company has made available and will
continue to make available to the Buyer true and correct copies of all written
contracts which are required to be disclosed on Schedule 6.12.
23
<PAGE>
6.13 Litigation. Schedule 6.13 sets forth a list as of the date this
----------
Agreement is signed, of all pending, or to the Seller's knowledge threatened,
lawsuits, actions, suits, proceedings, orders, judgments, decrees,
investigations or claims against the Company and shall also include the Accident
Log referenced below. Schedule 6.13 includes, as to each lawsuit, the following
information: (i) the names and designations of all parties to the claim or
action (ii) the court in which such action is pending and index number or other
court file number (iii) a brief description of the nature of the case and nature
of the alleged injury (iv) the amount claimed by the plaintiff in the pleadings
and (v) the current status of any settlement negotiations, including the latest
offer made by each party. Except as set forth in Schedule 6.13, the Company is
not a party or subject to or in default under any material Order. Except as set
forth in Schedule 6.13, to the knowledge of the Company, there are no pending or
threatened investigations of the Company by any Governmental Entity which, if
resulting in entry of any Order, would have a Company Material Adverse Effect.
The Company has also provided the Buyer with a true copy of the Accident Log,
which lists all occurrences of which the Company is aware, and which might give
rise to a claim against the Company, and includes incidents as to which the
Company has conducted an investigation and notified its insurance carriers, even
though such incidents have not (and may not) generated a pending or threatened
lawsuit which is includable on Schedule 6.13. An updated copy of the Accident
Log shall be provided to Buyer at the Closing.
6.14 Insurance. The insurance policies owned and maintained by the
---------
Company, that are material to the Company are in full force and effect, all
premiums due and payable thereon have been paid (other than retroactive or
retrospective premium adjustments or other payments that may be required under
worker's compensation, disability or general liability policies that are not
yet, but may be, required to be paid) and no notice of cancellation or
termination has been received with respect to any such policy that has not been
replaced on substantially similar terms prior to the date of such cancellation.
Workers compensation and general liability premiums are audited after completion
of each policy year. The Company has not been notified in writing or otherwise
by any insurance carrier that such carrier denies coverage for any claim which
has been made by the Company with respect to such carrier.
6.15 Benefit Plans.
-------------
(a) Schedule 6.15 identifies each material employee pension,
retirement, profit sharing, stock bonus, stock option, stock purchase, bonus,
incentive, deferred compensation, hospitalization, medical, dental, vision,
vacation, insurance, sick pay, disability, severance, or other plan, fund,
program, policy, contract or arrangement providing employee pensions or benefits
maintained or contributed to by the Company in which any employees or former
employees of the Company participates or under which any of them has accrued and
remains entitled to any benefits (all such plans, funds, programs, policies,
contracts and arrangements, other than any such plan that is a "multiemployer
plan" as described in Section 4001(a) (3) of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA"), being referred to as the "Plans").
----- -----
The
24
<PAGE>
Company has made available to Buyer copies of all written Plans, and all summary
plan descriptions for such plans.
(b) The Company has not been involved in any transaction that is
likely to cause the Company to be subject to liability with respect to a plan
subject to Title IV of ERISA (a "Title IV Plan") to which the Company
-------------
contributed or was obligated to contribute during the six year period ending on
the Closing Date under Section 4062 or 4069 of ERISA. The Company has not
incurred any material liability under Title IV of ERISA that is likely to become
or remain a liability of the Company or Buyer after the Closing Date.
(c) Except as set forth in Schedule 6.15, (A) all contributions and
deposits of employee' elective deferrals to the Plans that may have been
required to be made in accordance with ERISA or the Code have been timely made,
(B) there has been no application for or waiver of the minimum funding standards
imposed by Section 412 of the Code with respect to any Plan and (C) no Plan
maintained solely by the Company has an "accumulated funding deficiency" within
the meaning of Section 412 (a) of the Code as of the most recent plan year.
(d) Except for union-sponsored multi-employer plans, the only
retirement plan maintained by the Company is a 401-K plan which was created by
adoption of a Merrill Lynch prototype plan. Previously, the Company maintained
a defined contribution retirement plan based upon a Fleet Bank (or Fleet Bank
Affiliate) prototype plan. To the best knowledge of the Company, the Merrill
Lynch prototype plan and the Fleet Bank prototype plan have each been the
subject of a determination letter from the Internal Revenue Service to the
effect that such Plan is qualified and exempt from Federal income taxes under
Sections 401 and 501, respectively, of the Code, and such determination letters
have not been revoked nor, to the knowledge of the Company, has revocation been
threatened.
(e) The representations set forth in this subsection 6.15(e) apply
only to those Plans maintained exclusively by the Company, and do not apply to
any multi-employer plans to which the Company contributes. To the best
knowledge of Sellers, neither the Company, nor any of the Plans, any trust
created thereunder or any trustee or administrator thereof, has knowingly
engaged in a transaction in connection with which the Company is likely to be
subject to either a material liability or a material civil penalty assessed
pursuant to Sections 409 or 502(i) or (1) of ERISA, or a material tax imposed
pursuant to Section 4975 of the Code. Each of the Plans has been operated and
administered in all material respects in accordance with applicable laws,
including but not limited to ERISA and the Code. Except as disclosed on Schedule
6.15, there are no material pending or, to the knowledge of the Company,
threatened claims against any of the Plans, by any employee or beneficiary
covered under any such Plan, or otherwise involving any such Plan (other than
routine claims for benefits). The Company has complied with and is in
compliance with all reporting and disclosure obligations imposed by ERISA and
the Code with respect to all of its Plans. The Company is not aware of any
25
<PAGE>
fact or circumstance that would afford a basis for the Internal Revenue Service
to disqualify any Plan which is a pension benefit plan, as defined in ERISA.
(f) The Company has not received any notice that any multiemployer
plan is insolvent or in reorganization within the meaning of Section 4241 of
ERISA. Schedule 6.15 identifies all multi-employer plans to which the Company
currently makes contributions on behalf of any current or former employee. The
Sellers are not aware of any claims that the Company has failed to make any
required contributions to a multi-employer plan. Notwithstanding anything to the
contrary contained in this Agreement, the Sellers make no warranty or
representation as to the size or existence of any funding deficiency for any
multi-employer plans, nor do Sellers' warrant or represent as to any potential
withdrawal liability that the Company may incur by reason of any act or omission
to act occurring after the Closing.
6.16 Absence of Changes or Events. Except as set forth in Schedule
----------------------------
6.16, since the date of the Most Recent Balance Sheet, there has not been any
material adverse change in the business, assets, financial condition, results of
operations or prospects of the Company, other than changes relating to United
States or foreign economies in general or the Company's industries in general
and not specifically relating to the Company. Buyer acknowledges that there may
have been disruption to the Company's business as a result of the marketing of
the Company by Sellers to potential buyers and that there may be disruption to
the Company's business as a result of the execution of this Agreement and the
consummation of the transactions contemplated hereby, and Buyer agrees that such
disruptions do not and shall not constitute a breach of this Section 6.16.
Without limiting the generality of the foregoing, except as set forth in
Schedule 6.16, since the date of the Most Recent Balance Sheet, the Company has
not:
(a) redeemed or repurchased, directly or indirectly, any shares of
capital stock or other equity security or (with the further exception of
payments allowed under subsections 8.02(n) and 19(a)) declared, set aside or
paid any dividends or made any other distributions, whether in cash or in kind,
with respect to any shares of its capital stock or other equity security;
(b) issued, sold or transferred any equity securities, any securities
convertible, exchangeable or exercisable into shares of its capital stock or
other equity securities, or warrants, options or other rights to acquire shares
of its capital stock or other equity securities of the Company;
(c) incurred or become subject to any liabilities, except liabilities
incurred in the ordinary course of business (for purposes of this provision,
potential liabilities related to routine personal injury litigation or claims
made, which are both (i) fully covered by the Company's insurance and (ii)
disclosed in the updated Schedule 6.13 to be delivered at Closing shall be
deemed to have been incurred in the ordinary course of business).
26
<PAGE>
(d) subjected any portion of its properties or assets to any Lien
(except (i) Permitted Liens, and (ii) Liens for the purchase price/lease cost of
assets acquired since the date of the Most Recent Balance Sheet in the ordinary
course of business);
(e) sold, leased, assigned or transferred (including, without
limitation, transfers to Sellers or any of their Affiliates) a portion of its
tangible assets, except for sales and rentals of inventory in the ordinary
course of business, or canceled without fair consideration any material debts or
claims owing to or held by it;
(f) sold, assigned, licensed or transferred (including, without
limitation, transfers to Sellers or any of their Affiliates) any Intellectual
Property owned by, issued to or licensed to the Company or disclosed any
confidential information (other than pursuant to agreements requiring the
disclosure to maintain the confidentiality of and preserving all rights of the
Company in such confidential information) or received any confidential
information of any third party in violation of any obligation of
confidentiality;
(g) suffered any extraordinary losses or waived any rights of
material value;
(h) entered into, amended or terminated any material lease, contract,
agreement or commitment (other than sale and rental agreements with customers in
the ordinary course), or taken any other action or entered into any other
transaction other than in the ordinary course of business;
(i) made or granted any bonus or any wage, salary or compensation
increase to any director, officer, employee or sales representative, group of
employees or consultant or (other than increases to non-officer employees made
per customary practices or to meet a competing offer) made or granted any
increase in any employee benefit plan or arrangement, or amended or terminated
any existing employee benefit plan or arrangement or adopted any new employee
benefit plan or arrangement;
(j) made any other change in employment terms for any of its
directors, officers, and employees outside the ordinary course of business;
(k) conducted its cash management customs and practices other than in
the ordinary course of business (including, without limitation, with respect to
collection of accounts receivable, purchases of inventory and supplies, repairs
and maintenance, and payment of accounts payable and accrued expenses);
(l) made any capital expenditures or commitments for capital
expenditures that aggregate in excess of $100,000 other than the purchase of
Inventory in the ordinary course of business; or
(m) made any loans or advances to, or guarantees for the benefit of,
any persons.
27
<PAGE>
6.17 Compliance with Applicable Laws.
-------------------------------
(a) General Laws. Except as set forth in Schedule 6.17(a), the Company
------------
has complied with, and is in compliance with, all applicable Laws, including
those relating to occupational health and safety, except for instances of
noncompliance that, individually or in the aggregate, would not have a Company
Material Adverse Effect. The Company has not received any written communication
since January 1, 1992 from a Governmental Entity that alleges that the Company
was or is not in compliance in any material respect with any Law except where
such noncompliance would not have a Company Material Adverse Effect. This
Section 6.17(a) does not relate to environmental matters, which are the subject
of Section 6.17(b), Benefit Plans, which are the subject of Section 6.15,
employee and labor matters, which are the subject of Section 6.18, or taxes,
which are the subject of Section 6.08.
(b) Environmental Laws.
------------------
(i) Definitions. For purposes of this Agreement:
(A) "Environmental Laws" collectively means and includes any present
------------------
local, state and federal statutes, regulations, ordinances and similar
provisions having the force or effect of law, all judicial and administrative
orders and determinations, and all common law relating to the environment,
environmental conditions, pollution or protection of the environment and public
health and safety, including all such standards of conduct and bases of
obligations relating to the presence, use, production, generation, handling,
transport, treatment, storage, disposal, distribution, labeling, testing,
processing, discharge, release, threatened release, control, or cleanup of any
hazardous materials, substances or wastes, chemical substances or mixtures,
pesticides, pollutants, contaminants, toxic chemicals, petroleum products or by-
products, asbestos, polychlorinated biphenyls (or PCBs), noise or radiation,
including without limitation, the Resource Conservation and Recovery Act of 1986
("RCRA"), 42 U.S.C. 6901 et seq., the Comprehensive Environmental Response,
---- -- ---
Compensation and Liability Act of 1980 ("CERCLA"), 42 U.S.C. 9601-9657, as
------
amended by the Superfund Amendments and Reauthorization Act of 1986 ("SARA"),
----
the Hazardous Materials Transportation Act, 49 U.S.C. 6901, et seq., the Federal
-- ---
Water Pollution Control Act, 33 U.S.C. 1251 et seq., the Clean Air Act, 42
-- ---
U.S.C. 741 et seq., the Clean Water Act, 33 U.S.C. 401 et seq., the Clean Water
-- --- -- ---
Act, 33 U.S.C. 1251 et seq. The New York Environmental Conservation Law, the
-- ---
New York Navigation Law, and any regulations promulgated under any of the
foregoing statutes.
(B) "Hazardous Substance" means and includes those substances or wastes
-------------------
deemed hazardous, toxic or a pollutant under any Environmental Law, including
without limitation, asbestos or any substance containing asbestos in friable
condition, the group of organic compounds known as polychlorinated biphenyls,
gasolene, kerosene, diesel fuel, lubricating oils, petroleum, any petroleum-
based product, gasolene-based product, any product containing constituents of
gasolene or petroleum, flammable explosives, radioactive materials, chemicals
known or believed to cause cancer or reproductive toxicity,
28
<PAGE>
pollutants, effluents, contaminants, emissions or related substances and any
items included in the definition of hazardous or toxic waste, materials or
substances under any Environmental Law.
(C) "Environmental Contamination" shall mean the presence of any
---------------------------
Hazardous Substances in quantities or concentrations that would violate any
Environmental Laws, or which requires remediation under and/or constitutes a
violation of the terms of any lease agreement for any of the Leased Properties.
(ii) Seller has conducted recent Phase I environmental surveys (done by
Geraghty & Miller, Inc.) of all of the Leased Properties, and has delivered true
copies of the written reports of such surveys (the "Environmental Reports") to
---------------------
Buyer. Buyer acknowledges receipt of the Environmental Reports and agrees that
Buyer has had sufficient time to review such Environmental Reports, and to
obtain such information with respect thereto as Buyer deems necessary. Sellers
are not aware of the presence of any Environmental Contamination with respect to
any of the Leased Properties, other than as disclosed in such Environmental
Reports.
(iii) Except as set forth in Schedule 6.17(b), since January 1, 1991, the
Company has not received any communication from a Governmental Entity that
alleges that the Company is not or was not in compliance, in any material
respect, with Environmental Laws, except where such noncompliance would not have
a Company Material Adverse Effect;
(iv) the Company has obtained all permits, licenses and governmental
authorizations that are required for the Company to conduct its businesses under
Environmental Laws ("Environmental Permits"). Since January 1, 1991, the
---------------------
Company has been, and presently is, in compliance with Environmental Laws and
the terms of any Environmental Permits, except for any noncompliance with
Environmental Laws and/or Environmental Permits that would not have a Company
Material Adverse Effect;
(v) Except as disclosed on the Environmental Reports, Hazardous Substances
have not been transported, generated, stored or disposed of from, at, on or
under any Leased Property during the period of time such Leased Property was
occupied by the Company, in a manner or in quantities or concentrations that
would violate any Environmental Law or Environmental Permit, except to the
extent that such violations would not have a Company Material Adverse Effect;
(vi) the Company has received no notice of any currently pending or currently
threatened environmental claims made by any Governmental Entity or other third
party against the Leased Property or the Company that would have a Company
Material Adverse Effect or which alleges that the Company is responsible or
potentially responsible to clean up or pay the costs of cleanup of any Hazardous
Substances;
29
<PAGE>
(vii) the Company has not entered into any agreement obligating the Company
to pay any cleanup costs, nor has the Company entered into any agreement in
connection with its business that may now, or in the future, require it to pay,
reimburse, guaranty, indemnify or hold harmless any person for or against
environmental liabilities and costs, except to the extent that any of the
foregoing may be contained in existing lease agreements relating to the Leased
Properties;
(viii) the Company has given Buyer access to all records and files in its
possession concerning environmental compliance, including, without limitation,
all environmental audits and/or environmental assessment reports pertaining to
the Leased Property and Company operations at or on the Leased Property;
(ix) the Company shall provide to Buyer full access to the Leased Property
for the purpose of providing Buyer the opportunity to perform such additional
inspections and investigations with respect to environmental compliance as
deemed necessary and appropriate by Buyer. Buyer shall be solely responsible for
all costs and expenses incurred to perform any additional investigations. Buyer
shall provide to the Company a description of all investigations and inspections
which Buyer seeks to undertake and Buyer shall provide to the Company prior
notice of the date and time at which Buyer seeks to perform such inspection or
investigation, which notice shall in no case be less than forty-eight (48) hours
prior thereto. Buyer shall provide the results of all such inspections and
investigations to the Company. Buyer shall not provide the results of any such
inspections and investigations to any Governmental Entity unless Buyer is
required to do so by applicable Environmental Law, or by contract, and in such
event, will provide prior or simultaneous notice to the Company. Buyer agrees to
indemnify and hold harmless the Company from all loss, costs, damages, including
personal injury, resulting from the negligence or willful misconduct of Buyer or
its agents or representatives in connection with their physical presence on the
Leased Property pursuant to this subparagraph.
(x) The Environmental Report with respect to the Albany/Central Avenue
Leased Property and the Syracuse Leased Property disclose the presence of
petroleum based products in the soil. The Environmental Report for the Albany
Leased Property does not indicate that the presence of such petroleum-based
substance is the result of a spill, and therefore Sellers have not reported
such matter to the New York State Department of Environmental Conservation
("DEC"), as Sellers believe the Company is not obligated to do so. If a claim is
---
made by the DEC or any other Governmental Entity or other third party pertaining
to such petroleum-based substance, then the Sellers agree to undertake and
complete any necessary remediation work. Subject to the limitations of Section
17, costs of remediation shall be paid for by Sellers.
Sellers further warrant and represent that the DEC has advised the
Company that no cleanup is presently required at the Syracuse site, due to the
relatively low levels of petroleum product, and the relatively high levels of
petroleum in the surrounding area. If required by the DEC, the Sellers shall
also clean up the petroleum- contaminated soil at the Syracuse site to the
satisfaction of the DEC. The obligation to clean up the petroleum
30
<PAGE>
contamination disclosed in the Environmental Reports for the Albany and Syracuse
sites shall survive the closing and is included within the indemnification
obligation of Sellers' as provided in Section 18 hereof, subject to the
limitations set forth in section 17 hereof; and
(xi) The Environmental Report for the Syracuse site also discloses the
presence of Environmental Contamination by metals contained within an ash layer
of fill located from approximately 6'-10' below the surface. Such Environmental
Report indicates that the source of such ash fill contamination predates the
Company's involvement with the Syracuse site. The Buyer acknowledges and agrees
that, if the DEC or any other Governmental Entity having jurisdiction to enforce
Environmental Laws, or any private third party having a claim relating to the
ash fill, files an action or otherwise makes a claim against the Company
relating to the ash fill contamination, then such claim shall not be included
within the Sellers' obligations of indemnity under section 18 of this Agreement,
and the Buyer (and Buyer's Affiliates) shall be limited to the indemnification
provided under the separate real property contract pursuant to which Buyer's
Affiliate is purchasing the Syracuse parcel of Leased Property.
(xii) Except as set forth on Schedule 6.17(b) or disclosed in the
Environmental Reports, Seller is not aware that any of the following exists at
any property or facility owned, occupied or operated by the Company: (i)
underground storage tanks; (ii) asbestos-containing material in any form or
condition; (iii) materials or equipment containing polychlorinated biphenyls; or
(iv) landfills.
6.18 Employee and Labor Matters. Except as set forth in Schedule 6.18:
--------------------------
(i) there is not now pending, nor since January 1, 1992, has there been, any
labor strike, work stoppage or lockout pending against the Company; (ii) there
is no unfair labor practice charge or complaint against the Company pending, or,
to the knowledge of the Company, threatened, before the National Labor Relations
Board; (iii) there are no pending, or, to the knowledge of the Company,
threatened, union grievances against the Company as to which there is a
reasonable probability of adverse determination and that, if so determined,
individually or in the aggregate, would have a Company Material Adverse Effect;
(iv) to the knowledge of the Sellers, no key executive employee and no group of
employees of the Company has any plans to terminate his, her or its employment
with the Company; and (v) to the knowledge of the Sellers, there is no
organizational effort presently being made or threatened by or on behalf of any
labor union with respect to employees of the Company who do not already belong
to a labor union.
6.19 No Undisclosed Liabilities. Except for (i) liabilities set forth
--------------------------
in the various schedules to this Agreement, (ii) liabilities disclosed on the
Most Recent Balance Sheet, (iii) trade payables, accrued expenses, and
performance obligations under contracts incurred in the ordinary course of
business after the date of the Most Recent Balance Sheet, (iv) Corporate Level
Taxes imposed upon the Company as a result of the sale of the Shares, or imposed
upon earnings of the Company in the ordinary course of business, the Company
does not now, and as of the Closing Date will not have, any liabilities or
obligations, whether known, unknown, fixed, accrued, contingent, assumed or
otherwise,
31
<PAGE>
and whether due or to become due. Increases in the amount due under the Key
Credit Facility arising after December 31, 1997 in the ordinary course, or
arising in connection with the payment of any items permitted by this Agreement
shall not be deemed to constitute a violation of the representation made in this
Section 6.19.
6.20 Brokerage. Except for Brown Brothers Harriman & Co., there are no
---------
claims for brokerage commissions, finders' fees or similar compensation in
connection with the transactions contemplated by this Agreement based on any
arrangement or agreement made by or on behalf of the Company or any Seller.
6.21 Officers and Directors; Bank Accounts. Schedule 6.21 attached
---------------------------------------
hereto lists all officers and directors of the Company, and all bank accounts,
safety deposit boxes and lock boxes (designating each authorized signatory with
respect thereto) for the Company.
6.22 Disclosure. Neither this Agreement, nor any of the schedules,
----------
attachments or Exhibits hereto, contain any untrue statement of a material fact
or omit a material fact necessary to make each statement contained herein or
therein, not misleading. There is no fact which has not been disclosed to the
Buyer of which the Company has knowledge which has a Company Material Adverse
Effect or could reasonably be anticipated to have a Company Material Adverse
Effect.
6.23 Closing Date. All of the representations and warranties contained
------------
in this Section 6 and elsewhere in this Agreement and all information delivered
in any schedule, attachment or Exhibit hereto are true and correct on the date
of this Agreement and shall be true and correct on the Closing Date, except to
the extent that any Seller has advised the Buyer otherwise in writing prior to
the Closing.
SECTION 7. REPRESENTATIONS AND WARRANTIES OF SELLERS. Each Seller
-----------------------------------------
severally hereby represents and warrants to Buyer (as to such Seller only) as
- ---------
follows:
7.01 Execution. This Agreement has been duly authorized executed and
---------
delivered by such Seller and, assuming due authorization, execution and delivery
by the other parties hereto, constitutes a legal, valid and binding obligation
of such Seller, enforceable against such Seller in accordance with its terms.
7.02 No Conflicts. The execution and delivery of this Agreement by
------------
such Seller does not, and the consummation of the transactions contemplated
hereby and compliance with the terms hereof by such Seller will not, conflict
with, or result in any violation of or default (with or without notice or lapse
of time, or both) under, or give rise to a right of termination, cancellation or
acceleration of any obligation or to loss of a material benefit under, or result
in the creation of any Lien upon any of the properties or assets of such Seller
under any provision of (i) the governing instruments (if any) of such Seller,
(ii) except as set forth in Schedule 7.02, any material note, bond, mortgage,
indenture, deed of trust, license, lease, contract, commitment, agreement or
arrangement to which such Seller is
32
<PAGE>
a party or (iii) any Order or Law applicable to such Seller, other than, in the
case of clauses (ii) and (iii) above, any such items that, individually or in
the aggregate, would not have a material adverse effect on the ability of such
Seller to consummate the transactions contemplated hereby.
7.03 The Shares. Such Seller, directly or indirectly, has good and
----------
valid title to the Shares to be sold by such Seller hereunder, free and clear of
any Liens, except the lien of a security interest held by Ruth Heath Mong, which
will be removed at or prior to the Closing. Assuming Buyer has the requisite
power and authority to be the lawful owner of the Shares, upon delivery to Buyer
at the Closing of certificates representing such Shares, duly endorsed by such
Seller for transfer to Buyer, and upon such Seller's receipt of the
consideration to be received pursuant to this Agreement, good and valid title to
such Shares will pass to Buyer, free and clear of any Liens other than those
arising from acts of Buyer or its Affiliates.
SECTION 8. COVENANTS OF THE COMPANY.
------------------------
8.01 Affirmative Covenants of the Company and the Sellers. Prior to
----------------------------------------------------
the Closing, unless the Buyer otherwise agrees in writing, the Sellers shall
cause the Company to, and in the case of Sections 8.01(g), (h) and (i) the
Sellers also shall:
(a) conduct its business and operations only in the ordinary course of
business;
(b) keep in full force and effect its corporate existence and all rights,
franchises and Intellectual Property relating or pertaining to its business and
use its best efforts to cause its current insurance (or reinsurance) policies
not to be canceled or terminated or any of the coverage thereunder to lapse;
(c) use its best efforts to carry on the business of the Company in the same
manner as presently conducted and to keep the Company's business organization
and properties intact, including its present business operations, physical
facilities, working conditions and employees and its present relationships with
lessors, licensors, suppliers and customers and others having business relations
with it;
(d) maintain the material assets of the Company in good repair, order and
condition (normal wear and tear excepted) consistent with current needs, replace
in accordance with prudent practices its inoperable, worn out or obsolete assets
with assets of good quality consistent with prudent practices and current needs
and, in the event of a casualty, loss or damage to any of such assets or
properties prior to the Closing Date, whether or not the Company is insured,
either repair or replace such damaged property or use the proceeds of such
insurance in such other manner as mutually agreed upon by Sellers and the Buyer;
(e) maintain the books, accounts and records of the Company in accordance
with past custom and practice as used in the preparation of the Financial
Statements;
33
<PAGE>
(f) encourage employees to continue their employment with the Company after
the Closing;
(g) promptly (once the Company or the Sellers obtain knowledge thereof)
inform Buyer in writing of any variances from the representations and warranties
contained in Article 6 or Article 7 hereof or any breach of any covenant
hereunder by the Company or the Sellers;
(h) cooperate with the Buyer and use best efforts to cause the conditions to
the Buyer's obligation to close to be satisfied (including, without limitation,
the execution and delivery of all agreements contemplated hereunder to be so
executed and delivered and the making and obtaining of all third party and
governmental notices, filings, authorizations, approvals, consents, releases and
terminations); and
(i) cooperate with the Buyer in the Buyer's investigation of the business and
properties of the Company, to permit the Buyer and its employees, agents,
accounting, legal and other authorized representatives to (i) have full access
to the premises, books and records of the Company at reasonable hours, (ii)
visit and inspect any of the properties of the Company, and (iii) discuss the
affairs, finances and accounts of the Company with the directors, president,
comptroller and independent accountants of the Company; provided, however, that
-------- -------
such access does not unreasonably disrupt the normal operations of the Company.
Nothing set forth in this Section 8.01 shall require any employee of the
Company to provide any information regarding the Company in any other format or
otherwise to manipulate or reconfigure any data regarding the Company's
business, business prospects, assets, financial performance or condition or
operations. Nothing set forth in this Agreement shall require the Company or the
Sellers to provide Buyer with access to or copies of any information that must
be maintained as confidential in accordance with the terms of a written
agreement with a third party.
8.02 Negative Covenants of the Company and the Sellers. With such
-------------------------------------------------
exceptions as are (i) set forth in Schedule 8.02, (ii) otherwise expressly
permitted by the terms of this Agreement, or (iii) approved by the Buyer, from
the date hereof to the Closing, the Company shall not do any of the following:
(a) amend its Restated Certificate of Incorporation or By-laws, or
comparable governing instruments.
(b) redeem or otherwise acquire any shares of its capital stock or issue any
capital stock or any option, warrant or right relating thereto or any securities
convertible into or exchangeable for any shares of capital stock.
(c) adopt or amend in any material respect any Plan or collective bargaining
agreement, nor, except as required by law, contract, or in accordance with past
practice,
34
<PAGE>
contribute to any pension, retirement, profit sharing or stock bonus Plan
covering the employees of the Company.
(d) grant to any executive officer or employee any bonus or any increase in
compensation or benefits which will become payable by the Company after the
Closing, except for (i) raises granted under existing collectively bargained
----------
agreements, (ii) individual raises granted to non-officer employees in the
ordinary course or to meet competitive conditions relating to employee
retention, and (iii) the so-called "special bonuses" to be paid to certain key
employees of the Company to induce them to continue their employment with the
Company through the Closing Date.
(e) incur or assume any liabilities, obligations or indebtedness for borrowed
money or guarantee any such liabilities, obligations or indebtedness, other than
in the ordinary course of business consistent with past practice.
(f) permit, allow or suffer any of its assets to become subjected to any Lien
of any nature whatsoever which would have been required to be set forth in
Schedule 6.09 if existing on the date of this Agreement.
(g) loan or advance any amount to, or sell, transfer or lease any of its
assets to any Seller or any of their Affiliates.
(h) make any change in any method of accounting or accounting practice or
policy other than those required by GAAP.
(i) acquire by merging or consolidating with, or by purchasing a substantial
portion of the assets of, or by any other manner, any business or any
corporation, partnership, association or other business organization or division
thereof or otherwise acquire any assets (other than Inventory held for sale or
rental) that are material, individually or in the aggregate, to the Company,
taken as a whole.
(j) make or incur capital expenditures that exceed $25,000 for any one item,
or in the aggregate (net of proceeds from sales of assets) exceed One Hundred
Thousand Dollars ($100,000), except for purchases of Inventory in the ordinary
course of business.
(k) sell, lease or otherwise dispose of any of its assets other than Inventory
that are material, individually or in the aggregate, to the Company except in
the ordinary course of business.
(l) enter into or renew, extend or modify any lease of real property.
(m) except as specifically contemplated by this Agreement, enter into any
contract, agreement or transaction, other than in the ordinary course of
business and at arm's length with unaffiliated persons.
35
<PAGE>
(n) declare, pay, make or otherwise effectuate any dividends, distributions,
redemptions, equity repurchases or other transactions involving the Company's
capital stock or equity securities, except:
(A) the Company is authorized to pay, as a dividend to Sellers, an
amount necessary to pay taxes on the form K-1 income allocable to Sellers with
respect to the Company's net income for calendar year 1997, less all amounts
previously paid during 1997 as estimated payments towards such taxes. Such
payments shall be calculated and paid in accordance with past practices, and
shall not constitute a violation of this Section 8.02, nor shall payments result
in a deduction from the Purchase Price of the Shares;
(B) payments of Transaction Expenses after January 1, 1998, which are
---
to be deducted from the Purchase Price of the Shares.
(o) agree, whether in writing or otherwise, to do any of the foregoing.
8.03 Final Tax Returns; Audit of Prior Year Returns.
----------------------------------------------
(a) The parties mutually acknowledge that the Company has had in effect an
"S" election for the past several years for purposes of federal income taxes,
and also with respect to income taxes in any state in which the Company is
required to file and which allows such an election. Neither the Company nor the
Sellers shall take any action or fail to take any action which results in the
Company's loss of its status as an "S" corporation.
(b) Subject to subsection 8.03(c), if any audit of any tax returns filed by
the Company with respect to tax years ending prior to the Closing Date, or for
the year including the Closing Date (but only with respect to transactions
incurred on or before the Closing Date) results in the assessment of any Taxes
against the Company or if any Tax becomes owing under Code (S)1374 and any
corresponding provisions of state tax laws as a result of the Section 338(h)(10)
Elections, then the Sellers shall pay such Taxes (or, as to the year including
the Closing Date, the Taxes attributable to Sellers) and shall jointly and
severally indemnify and hold the Company and the Buyer harmless therefrom, with
the Sellers to have liability among themselves in accordance with their share
ownership ratios as of the time period to which such tax assessment relates. If
the audit of any return filed before the Closing Date results in a refund of
Taxes, then such refund shall likewise be the sole and exclusive property of the
Sellers and shall not accrue to the benefit of the Company or the Buyer. Such
refund shall likewise be distributed among the Sellers in accordance with their
respective share ownership percentages as of the time period to which such tax
refund relates.
(c) The income tax returns for the period including the Closing Date shall
be prepared by BST subject to review and approval by Buyer's accountants. The
parties mutually acknowledge that in all items of income, deduction, credit and
other tax attributes accruing from the first day of the calendar year in which
the Closing occurs until the Closing Date shall be allocated to Sellers, and
such items accruing from the Closing Date
36
<PAGE>
to the end of such calendar year shall be allocated to Buyer. In the event of
any conflict between the provisions of this subsection 8.03(c) and subsection
8.03(b), the provisions of this subsection 8.03(c) shall control. If any audit
of tax Returns filed by the Company with respect to the tax year including the
Closing Date results in the assessment of any Taxes against the Company by
reason of transactions occurring prior to the Closing Date, then the Sellers
will pay such Taxes attributable to Sellers' period of ownership and shall
indemnify and hold the Company and Buyer harmless therefrom, and the Buyer or
Buyer's shareholders shall pay such Taxes attributable to the period of Buyer's
ownership of the Company and shall indemnify and hold the Sellers harmless
therefrom.
(d) Nothing contained in this section shall be construed so as to relieve
Buyer from its obligation to reimburse Sellers for all incremental Taxes imposed
upon Sellers by any federal, state or local tax laws as a result of the Code
Section 338(h)(10) Elections, as provided in subsection 3.03 above.
SECTION 9. REPRESENTATIONS AND WARRANTIES OF BUYER. Buyer hereby represents
---------------------------------------
and warrants to Sellers as follows:
9.01 Authority. Buyer is a corporation validly existing and in good
---------
standing under the laws of the State of Delaware. Buyer has all requisite
corporate power and authority to enter into this Agreement, to perform its
obligations hereunder and to consummate the transactions contemplated hereby.
All acts and other proceedings required to be taken by Buyer to authorize the
execution, delivery and performance of this Agreement and the consummation of
the transactions contemplated hereby have been duly and properly taken. This
Agreement has been duly authorized, executed and delivered by Buyer and,
assuming due authorization, execution and delivery by the other parties hereto,
constitutes a legal, valid and binding obligation of Buyer, enforceable against
Buyer in accordance with its terms.
9.02 No Conflicts; Consents. The execution and delivery of this
----------------------
Agreement by the Buyer does not, and the consummation of the transactions
contemplated hereby and compliance with the terms hereof by the Buyer will not
conflict with, or result in any violation of or default (with or without notice
or lapse of time, or both) under, or give rise to a right of termination,
cancellation or acceleration of any obligation or to loss of a material benefit
under, or result in the creation of any Lien upon any of the properties or
assets of Buyer or any subsidiary of Buyer under, any provision of (i) the
Certificate of Incorporation or By-laws of Buyer or the comparable governing
instruments of any subsidiary of Buyer, (ii) any material note, bond, mortgage,
indenture, deed of trust, license, lease, contract, commitment, agreement or
arrangement to which Buyer or any subsidiary of Buyer is a party or by which any
of their respective properties or assets are bound, or (iii) any Order
applicable to Buyer or any subsidiary of Buyer or their respective properties or
assets, other than, in the case of clauses (ii) and (iii) above, any such items
that, individually or in the aggregate, would not have a material adverse effect
on the ability of Buyer to consummate the transactions contemplated hereby and
perform all its obligations hereunder (a "Buyer Material Adverse Effect"). No
-----------------------------
consent, approval, license, permit, order
37
<PAGE>
or authorization of, or registration, declaration or filing with, any
Governmental Entity is required to be obtained or made by or with respect to
Buyer or any of its subsidiaries or their respective Affiliates in connection
with the execution, delivery and performance of this Agreement or the
consummation of the transactions contemplated hereby, other than (i) compliance
with and filings under the HSR Act, if applicable, (ii) compliance with and
filings under Section 13(a) of the Securities Exchange Act of 1934, if
applicable, (iii) those that may be required solely by reason of Seller's (as
opposed to any other third party's) participation in the transactions
contemplated hereby and (iv) such consents, approvals, licenses, permits,
orders, authorizations, registrations, declarations and filings the absence of
which, or the failure to make which, individually or in the aggregate, would not
have a Buyer Material Adverse Effect.
9.03 Securities Act. The Shares purchased by Buyer pursuant to this
--------------
Agreement are being acquired for investment only and not with a view to any
public distribution thereof, and Buyer shall not offer to sell or otherwise
dispose of the Shares so acquired by it in violation of any of the registration
requirements of the Securities Act of 1933.
9.04 Actions and Proceedings, etc. There are no (i) outstanding Orders
----------------------------
against Buyer or any of its Affiliates, (ii) lawsuits, actions or proceedings
pending or, to the knowledge of Buyer, threatened against Buyer or any of its
Affiliates or (iii) investigations by any Governmental Entity that are, to the
knowledge of Buyer, pending or threatened against Buyer or any of its
Affiliates, and which, in the case of each of clauses (i), (ii) and (iii), have
or could have a material adverse effect on the ability of Buyer to consummate
the transactions contemplated hereby and perform all its obligations hereunder.
SECTION 10. COVENANTS OF BUYER. Buyer covenants and agrees as follows:
------------------
10.01 Confidentiality. Buyer acknowledges that the information being
---------------
provided to it in connection with the purchase and sale of the Shares and the
consummation of the other transactions contemplated hereby is subject to the
terms of a confidentiality agreement between Buyer and the Company (the
"Confidentiality Agreement"), the terms of which are incorporated herein by
- --------------------------
reference. Buyer also acknowledges that Sellers have no obligation or liability
of any kind whatsoever to Buyer or any other person by virtue of the
Confidentiality Agreement. Effective upon, and only upon, the Closing, the
Confidentiality Agreement shall terminate with respect to information relating
solely to the Company; provided, however, that Buyer acknowledges that any and
-------- -------
all other information provided to it by the Company or Sellers, or the Company's
or Sellers' representatives concerning Sellers shall remain subject to the terms
and conditions of the Confidentiality Agreement after the Closing Date.
10.02 No Additional Representations. Buyer acknowledges that, to its
-----------------------------
knowledge, it and its representatives have been permitted full and complete
access to the books and records, facilities, equipment, tax returns, contracts,
insurance policies (or summaries thereof) and other properties and assets of the
Company that it and its
38
<PAGE>
representatives have desired or requested to see and/or review, and that it and
its representatives have had a full opportunity to meet with the officers and
employees of the Company to discuss the businesses and assets of the Company.
Buyer acknowledges that none of Sellers, the Company, or any other person has
made any representation or warranty, expressed or implied, as to the accuracy or
completeness of any information regarding the Company furnished or made
available to Buyer and its representatives, except as expressly set forth in
this Agreement, the Schedules thereto and the Financial Statements, and there
are no other representations or warranties made by Sellers, the Company, or any
other person with respect to the transactions contemplated by this Agreement,
and none of Sellers, the Company, or any other person shall have or be subject
to any liability to Buyer or any other person resulting from the distribution to
Buyer, or Buyer's use of, any such information, including the Confidential
Memorandum prepared by Brown Brothers Harriman & Co. dated June 4, 1997, and any
information, documents or material made available to Buyer by Sellers, the
Company, Brown Brothers Harriman & Co. or their partners, directors, officers,
employees, agents or advisors in a certain data room, management presentations
or in any other form in expectation of the transactions contemplated by this
Agreement.
10.03 Payment of Certain Taxes.
------------------------
(a) Sellers shall pay all transfer, documentary, stamp and other
such taxes and fees (including any penalties, interest and additions to such
taxes) incurred in connection with the transfer of Shares pursuant to this
Agreement.
(b) If the making of the Election results in any Taxes other than
income taxes (such as, for example, sales taxes upon the deemed sale of assets)
being imposed by any Governmental Entity upon the transaction, then Buyer or the
Company shall be responsible to pay such Taxes, and the amount thereof shall not
constitute a deduction from the Purchase Price for the Shares.
SECTION 11. MUTUAL COVENANTS. Each of the parties covenants and agrees as
----------------
follows:
11.01 Consents. The parties mutually acknowledge that the consent of
--------
certain specific private third persons listed on Schedules 5.01(h) and (k)
hereof to the assignment of any dealer or distributorship agreement, or any
leases for the Leased Properties are conditions to the obligation of Buyer to
close hereunder. The Company and Heath, on behalf of Sellers, agree to use all
reasonable and diligent efforts to obtain all such required consents, provided,
--------
however, that such cooperation shall not include any requirement of Sellers or
- -------
any of their respective Affiliates (including the Company) to expend money,
commence or participate in any litigation or offer or grant any accommodation
(financial or otherwise) to any third party. Buyer agrees that neither the
Company nor Sellers shall have any liability whatsoever to Buyer arising out of
or relating to the failure to obtain any consents or waivers that may be
required in connection with the transactions contemplated by this Agreement or
because of the termination of any Contract not listed in Schedule
39
<PAGE>
5.01(h) as a result of the change in control of the Company occurring at
Closing. Prior to the Closing, Buyer shall cooperate with the Company and
Sellers, upon the request of Heath, in any reasonable manner in connection with
Sellers obtaining any such consents or waivers, provided, however, that such
-------- -------
cooperation shall not include any requirement of Buyer, the Company or any of
their respective Affiliates to expend money, commence or participate in any
litigation or offer or grant any accommodation (financial or otherwise) to any
third party.
11.02 Cooperation. After the Closing, upon reasonable written notice,
-----------
Buyer on the one hand, and Sellers, on the other hand, shall furnish or cause to
be furnished to each other and their employees, counsel, auditors and
representatives access, during normal business hours, to such information and
assistance relating to the Company as is reasonably necessary for financial
reporting and accounting matters, the preparation and filing of any tax returns,
reports or forms or the defense of any tax claim or assessment. Each party shall
reimburse any other party for reasonable out-of-pocket costs and expenses
incurred in assisting such party pursuant to this Section 11.02. No party shall
be required by this Section 11.02 to take any action that would unreasonably
interfere with the conduct of its business, or, as to Sellers, their personal
affairs or unreasonably disrupt the normal operations of the Company or Buyer.
11.03 Publicity. The Company, Sellers and Buyer agree that, from the
---------
date hereof through the Closing Date, no public release or announcement
concerning the transactions contemplated hereby shall be issued by any party
without the prior consent of the other parties (which consent shall not be
unreasonably withheld), except as such release or announcement may be required
by law or the rules or regulations of any United States or foreign securities
exchange, in which case the party required to make the release or announcement
shall allow the other parties reasonable time to comment on such release or
announcement in advance of such issuance.
11.04 Reasonable Efforts. Subject to the terms and conditions of this
------------------
Agreement (including the provisions set forth in Section 11.01) each party shall
use its reasonable efforts to cause the Closing to occur within thirty (30) days
after this Agreement is signed. No party shall take any action that would, or
that could reasonably be expected to, result in any of the conditions to the
purchase and sale of the Shares set forth in Section 5.01 or 5.02 not being
satisfied.
11.05 Antitrust Notification. Heath and Buyer shall as promptly as
----------------------
practicable, but in no event later than five business days following the
execution and delivery of this Agreement, file with the United States Federal
Trade Commission (the "FTC") and the United States Department of Justice (the
---
"DOJ") the notification and report form, if any, required for the transactions
---
contemplated hereby and any supplemental information requested in connection
therewith pursuant to the HSR Act. Any such notification and report form and
supplemental information shall be in substantial compliance with the
requirements of the HSR Act. Each of Heath, the Company and Buyer shall furnish
to the other such necessary information and reasonable assistance as the other
may request in
40
<PAGE>
connection with its preparation of any filing or submission that is necessary
under the HSR Act. Seller and Buyer shall keep each other apprised of the status
of any communications with, and any inquiries or requests for additional
information from, the FTC and the DOJ and shall comply promptly with any such
inquiry or request. Each of the Sellers, the Company and Buyer shall use its
reasonable efforts to obtain any clearance required under the HSR Act for the
purchase and sale of the Shares; provided, however, that Buyer shall pay all
filing fees payable under the HSR Act.
SECTION 12. EMPLOYEE AND RELATED MATTERS.
----------------------------
12.01 Buyer's Rights and Obligations. For a period of at least six
------------------------------
(6) months after the Closing, Buyer shall maintain, or shall cause the Company
to maintain, compensation and employee benefit plans and arrangements (other
than any plans and arrangements based on equity securities or any equivalent
thereof) for employees of the Company that, in the aggregate, are substantially
comparable to those provided pursuant to the compensation and employee benefit
plans and arrangements in effect on the date hereof as set forth in Schedule
6.15. Notwithstanding the above, Buyer shall have the right (i) following the
Closing Date, to transfer, to one or more employee benefit plans maintained by
Buyer that are, in the aggregate, substantially comparable to the plans of the
Company, any employee of the Company who becomes an employee of Buyer or any of
its other Affiliates and (ii) in the good faith exercise of its managerial
discretion, to make changes or cause changes to be made in compensation,
benefits and other terms of employment of any employee. Nothing contained
herein shall be deemed to restrict the right of Buyer after the Closing to: (A)
terminate any employee represented by a collective bargaining agreement in
accordance with the terms and conditions of such collective bargaining
agreement, or (B) terminate any contract employee of the Company in accordance
with the terms and conditions of such contract, or (C) terminate any at-will
employee.
12.02 Collective Bargaining Agreements. The Company is a party to and
--------------------------------
bound by the collective bargaining agreements described in Schedule 6.12. Buyer
agrees to assume and will be bound by and comply with all of said agreements
together with all statutes, rules, regulations and orders of all Governmental
Entities applicable to the relationship between the Company and the bargaining
agents for the employees of the Company, and the Buyer shall indemnify Sellers
against any expense or liability arising out of any breach of said contracts,
statutes, rules, regulations and orders occurring after the Closing. This
provision does not create any third party beneficiary rights or expand any
rights of said bargaining agents under the aforesaid contracts, statutes, rules,
regulations and orders.
SECTION 13. FURTHER ASSURANCES. From time to time, as and when requested
------------------
by either party hereto, the other party shall use all reasonable efforts to
execute and deliver, or cause to be executed and delivered, all such documents
and instruments and shall take, or cause to be taken, all such further or other
actions, as may be reasonably necessary to consummate the transactions
contemplated by this Agreement.
41
<PAGE>
SECTION 14. ASSIGNMENT. This Agreement and the rights and obligations
----------
hereunder shall not be assignable or transferable by any party hereto (including
by operation of law in connection with a merger, or sale of substantially all
the assets, of any party hereto) without the prior written consent of the other
parties hereto. Any attempted assignment in violation of this Section 14 shall
be void. Nothing contained herein shall be deemed to restrict the transfer by
operation of law of the rights and liabilities of any of the respective Sellers
to any executor, administrator or other fiduciary appointed with respect to the
estate or property of such Seller. Notwithstanding the foregoing, Buyer may
assign its rights under this Agreement for collateral security purposes to any
lender providing financing to Buyer, the Company, or any of their Affiliates and
any such lender may exercise all of the rights and remedies of the Buyer
hereunder
SECTION 15. NO THIRD-PARTY BENEFICIARIES. This Agreement is for the sole
----------------------------
benefit of the parties hereto and their permitted assigns and nothing herein
expressed or implied shall give or be construed to give to any person, other
than the parties hereto and such assigns, any legal or equitable rights
hereunder.
SECTION 16. TERMINATION.
-----------
16.01 Right to Terminate. Anything contained herein to the contrary
------------------
notwithstanding, this Agreement may be terminated and the transactions
contemplated hereby abandoned at any time prior to the Closing Date:
(a) mutual consent - by mutual written consent of Heath and Buyer;
--------------
or
(b) by Heath - by Heath on behalf of Sellers if any of the
--------
conditions set forth in Section 5.02 shall have become incapable of fulfillment,
and shall not have been waived by Sellers; or
(c) by Buyer - by Buyer if any of the conditions set forth in
--------
Section 5.01 shall have become incapable of fulfillment, and shall not have been
waived by Buyer; or
(d) by either party - by Heath (on behalf of Sellers) or Buyer if
---------------
the Closing does not occur within sixty (60) days after this Agreement has been
executed by the Buyer and all Sellers.
(e) The right of any party to terminate pursuant to subsections
16.01(b) or (c) is dependent upon such party not being in breach in any material
respect of any of its material representations, warranties, covenants or
agreements contained in this Agreement, and with respect to subsection (d) not
having been a material cause of the delay of the Closing.
16.02 Notice of Termination; Return of Documents; Confidentiality. In
-----------------------------------------------------------
the event of termination by Heath or Buyer pursuant to this Section 16, written
notice thereof shall forthwith be given to the other and the transactions
contemplated by this Agreement shall
42
<PAGE>
be terminated, without further action by any party. If the transactions
contemplated by this Agreement are terminated as provided herein:
(a) Buyer shall return to Heath, all documents and other material
(including all copies thereof, whether maintained in hard copy, on computer disk
or on computer hard drive) received from the Company or Sellers relating to the
transactions contemplated hereby, whether so obtained before or after the
execution hereof; and
(b) all confidential information received by Buyer with respect to the
business of the Company shall be treated in accordance with the Confidentiality
Agreement, which shall remain in full force and effect notwithstanding the
termination of this Agreement.
16.03 Provisions Which Survive Termination. If this Agreement is
------------------------------------
terminated and the transactions contemplated hereby are abandoned as described
in this Section 16, this Agreement shall become void and of no further force or
effect, except that:
(i) the provisions of Section 10.01 relating to the obligation
of Buyer to keep confidential certain information and data obtained by it shall
survive termination of this Agreement for a period of three (3) years after
execution hereof; an d
(ii) Section 19 relating to certain expenses, Section 11.03
relating to publicity, Section 25 relating to finder's fees and broker's fees
and this Section 16 shall all survive the Closing.
Nothing in this Section 16 shall be deemed to release any party from any
liability for any breach by such party of the terms and provisions of this
Agreement or to impair the right of any party to compel specific performance by
the other party of its obligations under this Agreement.
SECTION 17. SURVIVAL OF REPRESENTATIONS, AND WARRANTIES; THRESHOLD;
--------------------------------------------------------
LIMITATION ON DAMAGES.
---------------------
17.01 Survival of Warranties, Representations and Covenants. The
-----------------------------------------------------
provisions of this subsection 17.01 govern the post-closing survival of the
various representations, warranties, covenants and indemnifications made by the
Sellers and the Buyer under this Agreement. In any case where a specific
representation, warranty or covenant of performance under this Agreement
survives for a specified period of time, the corresponding covenant or
obligation of indemnity (if any) shall survive for the identical period of time.
If a Claim for indemnity is timely instituted, then the obligation of indemnity
shall continue to survive until such time as the Claim for indemnity is finally
determined or settled as provided herein. The specific periods of limitation
for the warranties, representations and covenants of performance are as follows:
43
<PAGE>
(a) General Rule. Except as provided in subsections 16.03 and
------------
clauses (b), (c), (d), (e) and (f) of this subsection 17.01, the
representations, warranties, covenants and indemnifications made by the Sellers
and Buyer under this Agreement shall survive the Closing for a period of three
(3) years.
(b) Mutual Covenants. The mutual covenants set forth in Sections
----------------
11.01, 11.04 and 11.05 hereof shall not survive the Closing, nor shall they
survive any termination of this Agreement prior to the Closing. The covenants
in subsection 11.02 shall survive for a period of six (6) years.
(c) Taxes and Employee Benefits. The representations relating to tax
---------------------------
matters and employee benefits set forth in subsections 6.08 and 6.15 shall
survive for a period of sixty (60) days after expiration of the statutes of
limitation under which third parties may make Claims against the Company for any
act or occurrence happening prior to the Closing and constituting a breach of
such tax and/or employee benefits warranties and representations.
(d) Environmental Warranties. The warranties and representations
------------------------
relating to environmental matters set forth in subsection 6.17(b) shall survive
for a period of four (4) years after the Closing.
(e) Other Specific Exceptions. Claims made for alleged breach of the
-------------------------
following specific warranties, representations and covenants shall survive the
Closing for the period of limitations otherwise applicable to such Claims:
(A) The warranties and representations set forth in subsections 3.02(b),
6.01, 6.02, 6.04 and 6.05;
(B) the warranties and representations contained in Section 7 regarding
ownership of good and valid title to the Shares and transfer of such Shares free
and clear of Liens, the corresponding covenant under Section 2 to transfer the
Shares free and clear of Liens;
(C) the covenants of the Sellers under subsection 8.03;
(D) the covenants of both Buyer and Sellers under subsection 10.03; and
(E) the covenants of Buyer and Sellers under Section 13.
(f) Sellers' Representative. The Sellers covenant appointing Heath
-----------------------
as Seller's representative under Section 4 shall survive the Closing until such
time (if any) that Buyer is notified in writing that a new representative has
been appointed in accordance with the terms of subsection 4.02 of this
Agreement.
44
<PAGE>
(g) Statutes of Limitation. The time limitations set forth in
----------------------
this Section 17.01 are intended to constitute contractual statutes of
limitations, as permitted by New York Civil Practice Law and Rules (S)201.
Accordingly, any action or special proceeding based upon breach of any warranty,
representation or covenant that survives the Closing must be brought within the
specified time period, which time period shall commence on the Closing Date.
17.02 Deductible.
----------
(a) Except as provided in subsection 17.02(b), in no event shall
the Company, Heath or any other Seller have any liability for breach of any
representation, warranty or covenant set forth in this Agreement, unless and
until the total of sums due by reason of all breaches of warranty,
representation or covenant on the part of Heath, the Company and/or any of the
other Sellers exceeds Two Hundred Eighty Thousand Dollars ($280,000), it being
the intention of the parties that the Buyer shall assume the first $280,000 of
liabilities resulting from any facts or matters which would constitute a breach
of such representations, warranties or covenants. The deductible set forth
herein applies to amounts due for breaches of any representations, warranties or
covenants of this Agreement, but shall not apply to adjustments made to the
Purchase Price as provided in subsection 3.03(b).
(b) The $280,000 deductible shall not apply to: (i) Claims
relating to breach of the Sellers' warranties and representations of good and
valid title to the Shares and transfer of the Shares free of Liens as set forth
in Section 7 hereof, nor to the corresponding covenant under Section 2 hereof to
transfer title to the Shares free of such Liens; (ii) Claims against Sellers
relating to taxes payable pursuant to the final returns of the Company for the
year in which the Closing occurs under subsection 8.03(c); and (iii) Claim for
the intentional breach of any covenant, except that any Claim alledging breach
------
of the Seller's covenant to indemnify Buyer for breaches of any warranties
or representations herein shall be subject to such deductible.
17.03 Limit or "Cap."
---
(a) Except as provided in subsection 17.03(b), but otherwise
notwithstanding anything else to the contrary contained in this Agreement, in no
event shall all Sellers be responsible to Buyer for claims arising by reason of
one or more breaches of any warranty, representation or covenant contained in
Article Six (6) of this Agreement, or for any other Claims for indemnification
made under Section 18 hereof, beyond the following aggregate amounts:
(i) For Claims for indemnification made within eighteen (18) months after the
Closing Date, the sum of Seven Million Five Hundred Thousand Dollars
($7,500,000).
45
<PAGE>
(ii) For Claims for indemnification made more than eighteen (18) months after
the Closing Date, but within the remaining period for survival of warranties,
the sum of Three Million Five Hundred Thousand Dollars ($3,500,000).
Such $7.5 Million Dollar limit or $3.5 Million limit (as applicable) is
hereafter referred to as the "Cap." The Cap includes amounts paid from the
---
Reserve and is not in addition to the Reserve. Such Cap also includes all costs
and expenses included within the term "Claim" as defined in subsection 18.01(a),
-----
below.
(b) With respect to the several warranties contained in Article 7 of
this Agreement, each of the Sellers shall be severally responsible to Buyer for
claims arising by reason of one or more breaches of such Article 7 warranties,
with the limit of responsibility of each Seller to be the amount of
consideration received by such Seller for her or its shares.
SECTION 18. INDEMNIFICATION AND PROCEDURES RELATING TO THE RESERVE.
------------------------------------------------------
18.01 Indemnification by Sellers:
--------------------------
(a) Agreement to Indemnify. Subject to the conditions and limitations
----------------------
set forth herein (including the dollar limits set forth in Section 17), the
Sellers agree to indemnify, defend and hold harmless Buyer from and against all
demands, claims, actions or causes of action, assessments, losses, damages,
liabilities, costs, and reasonable expenses and including, without limitation,
interest, penalties and reasonable attorneys fees and disbursements
(collectively "Claims"), asserted against or imposed upon or incurred by Buyer
------
or the Company, and which result from or arise out of:
(i) Any facts constituting a breach of any representation, warranty, or
covenant of the Sellers or the Company contained in this Agreement;
(ii) Any tax audit or workers' compensation audit asserted against Buyer or
the Company with respect to any Taxes relating to the operation of the Company
through the Closing Date, but only to the extent that such Claim for Taxes
and/or workers' compensation premiums exceed reserves for such items set forth
on the Closing Financial Statements;
(iii) The existence of any Environmental Contamination upon a parcel of real
property leased by the Company, which was both (A) caused by some act or
omission of the Company and/or someone for whom the Company bears legal
responsibility, and (B) not disclosed in the Environmental Reports delivered to
Buyer pursuant to subsection 6.17(b)(ii) of this Agreement;
(iv) Litigation against the Company which both (A) arises from any act,
transaction or occurrence happening prior to the Closing Date, and (B) was not
disclosed on the version of Schedule 6.13 delivered as of the Closing Date; or
46
<PAGE>
(v) Any other liability of the Company not specifically dealt with above,
which arose or accrued prior to the Closing Date, except for (i) liabilities set
------ ---
forth in the various schedules to this Agreement, (ii) liabilities disclosed on
the Most Recent Balance Sheet, (iii) trade payables, accrued expenses, and
performance obligations under contracts incurred in the ordinary course of
business after the date of the Most Recent Balance Sheet, (iv) Corporate Level
Taxes imposed upon the Company as a result of the sale of the Shares, or imposed
upon earnings of the Company in the ordinary course of business.
Notwithstanding anything herein to the contrary, for purposes of determining
the existence of an indemnifiable Claim under this Section 18.01(a) or the
amount of any such Claim, the representations and warranties contained in this
Agreement will be read without regard to any qualifications contained therein to
the terms "materiality," "Company Material Adverse Effect," "knowledge" or terms
of similar import, it being the intent of the parties to utilize the $280,000
deductible in Section 17.02 in lieu of, rather than in addition to, such
qualifications.
(b) Limitation. With respect to all Claims, the liability of
----------
Sellers shall be computed based upon the net cost to Buyer after taking account
of any insurance proceeds paid to Buyer or the Company, but the amount of the
insurance proceeds shall not be credited against the Cap. Buyer covenants and
agrees that it shall use commercially reasonable efforts to cause the Company to
maintain all existing liability insurance at coverage levels not less than
coverage levels maintained by the Company as of the Closing Date. If Buyer
allows the Company to reduce the amount or scope of coverage after the Closing,
and if coverages comparable to the Company's pre-closing coverages were
available at reasonable rates, then Sellers shall only be liable for that
portion of any Claim for which Sellers would have been responsible, had there
been no decrease in the scope or amount of such insurance coverage.
(c) Nature of Liability. Sellers are jointly and severally liable
-------------------
for all representations, warranties, covenants and indemnification obligations
of the Sellers and the Company other than the representations and warranties set
forth in Section 7, for which each of the Sellers is severally liable. Nothing
contained in this Section 18 shall expand upon the limitations of liability
(Cap) set forth in subsection 17.03 hereof.
18.02 Indemnification by Buyer. The Buyer shall indemnify and hold
------------------------
harmless the Company and the Sellers against any Claims sustained or suffered by
the Company or the Sellers resulting from or arising out of a breach of any
representation, warranty or covenant of Buyer contained in this Agreement.
18.03 Claims Against the Reserve.
--------------------------
(a) Subject to the following provisions of this section, the
Reserve shall be held in escrow by the Escrow Agent for a period of eighteen
(18) months after the Closing. If Buyer seeks indemnification from Sellers for
any Claims subject to indemnification under Section 18.01 hereof arising within
eighteen (18) months after the
47
<PAGE>
Closing, Buyer shall notify Heath or the successor representative of Sellers and
the Escrow Agent in writing, the notice to comply with the provisions of Section
18.04 hereof. If the Seller(s) against whom such Claim relates agree that the
Claim is justly due, the amount thereof shall be deducted from the Reserve and
paid over to Buyer. If such Seller(s) disputes the Claim, the procedures of
Section 18.04 shall apply with respect to the defense and settlement of such
Claim. In such event, however, the amount of the Claim (or the entire Reserve,
if it is less than the amount of Claim), shall remain in escrow and shall not be
returned to Sellers at the expiration of the eighteen (18) months Escrow period.
(b) At such time as the indemnified Claim is finally resolved, the
amount so held shall be distributed between Buyer and Seller (i) in the case of
a settlement, in accordance with any mutual written direction given to the
Escrow Agent by the parties (ii) in the case of a judgment rendered in favor of
the third party claimant against Buyer, when such judgment becomes final and
non-appealable, the Escrow Agent shall pay the amount of the judgment and all
other indemnified costs related thereto (but not to exceed the Reserve) to
Buyer, or (iii) if the parties are successful in the defense of such claim, the
expenses of the defense shall be paid from the Reserve and any remainder shall
be returned to Sellers. In no event shall the references in this paragraph to
the Reserve be construed as limiting the Cap on Sellers' liability set forth in
Section 17.03 hereof to the amount of the Reserve.
(c) The Escrow Agent has agreed to serve without fees for services
rendered. All out-of-pocket costs and expenses incurred by the Escrow Agent in
administering the Reserve shall be borne by as follows: (i) to the extent
interest is available, interest on the Reserve shall be used to defray any out-
of-pocket expenses of the Escrow Agent; and (ii) any remaining balance shall be
borne equally between the Buyer and the Sellers.
(d) Any interest remaining (after the application of interest to
costs and expenses as provided above) shall be paid to the parties on a pro-rata
basis in the same ratio as the principal of the Reserve is paid. Thus, for
example, if $400,000 of the Reserve is applied to a Claim and the remaining
$1,600,000 is paid to Sellers, then 20% of the interest shall be paid to the
Buyer and the remaining 80% shall be paid to the Sellers.
18.04 Procedures for Defense and Settlement.
-------------------------------------
(a) Whenever any Claim shall arise for indemnification under this
Section 18, the party seeking indemnification (the "Indemnified Party") shall
-----------------
promptly notify the party from whom indemnification is sought (the "Indemnifying
------------
Party") and the Escrow Agent of the Claim. The notices shall be sent to the
- -----
addresses specified in Section 21. The notice shall (i) contain a brief
description of the facts constituting the Claim, (ii) set forth the amount of
the Claim (or an estimate thereof if the amount is not known or ascertainable
with reasonable certainty), and (iii) have attached thereto a copy of any
summons, complaint or other process that was served upon the Indemnified Party.
The Indemnified Party shall give the Indemnifying Party written notice of the
commencement of any legal
48
<PAGE>
action within fifteen (15) days after receipt of the summons or other legal
process commencing such action, but failure to notify the Indemnifying Party
within the above time limit shall discharge the Indemnifying Party from its
liabilities and obligations hereunder only if and to the extent that the
Indemnifying Party is prejudiced thereby.
(b) (i) Buyer Indemnifying Seller. Where the Buyer is the
-------------------------
Indemnifying Party, Buyer shall assume the defense of the Claim, at its own
expense and with counsel of its own choosing. Where such indemnified Claim
involves a third party, Buyer may settle such Claim without the necessity of
obtaining the consent of Heath (on behalf of the Sellers), provided that Buyer
obtains written releases from all holders of such Claim of all Sellers in
connection with such settlement, which releases are distributable to Sellers
upon the execution of the settlement documents, and are not to be held in escrow
pending installment payment or other future performance by Buyer. All other
settlements made with respect to any Claims in which any Sellers are defendants
shall require the consent of the affected Sellers.
(ii) Sellers Indemnifying Buyer. Where Sellers (or any Seller) is
--------------------------
the Indemnifying Party, then the following provisions shall apply:
(A) If the Claim is fully covered by applicable insurance, then, except
to the extent that the insurance carrier requires use of counsel of its
selection, Buyer may select counsel and shall assume control of the defense of
the Claim. Buyer may settle any such Claim without the necessity of obtaining
Heath's consent, so long as the settlement is within the applicable insurance
coverage and the Buyer obtains unconditional written releases of all Sellers
named as defendants from all holders of such Claim which are distributable upon
execution of the settlement documents, and are not to be held in escrow pending
installment payment or other future performance by Buyer. Where any Claim
involves, in whole or in part, relief other than money damages (such as, for
example, a request for injunctive relief against any Seller(s), then Buyer may
not settle any Claim for such non-monetary relief without the consent of such
Seller(s).
(B) Where there is no insurance coverage applicable to a Claim, or
where the Claim is above and beyond the limits of coverage, but the uninsured
amount is less than the Cap, then Buyer shall control the defense of such Claim
with counsel of its own choosing. However, Buyer may not settle such Claim
without obtaining Heath's consent, unless the settlement amount is less than the
remaining available insurance coverage, and Buyer obtains unconditional written
releases of all Sellers named as defendants from all holders of such Claim which
are distributable to such Seller(s) upon execution of the settlement documents,
and are not to be held in escrow pending installment payment or other future
performance by Buyer. Where any Claim involves, in whole or in part, relief
other than money damages (such as, for example, a request for injunctive relief
against Seller(s), then Buyer may not settle any Claim for such non-monetary
relief without the consent of such Seller(s).
49
<PAGE>
(C) Where the amount of the Claim is more than $7.5 Million or $3.5
Million (as applicable) above any insurance coverage, then Buyer shall assume
control of the defense of the Claim with counsel of its own choosing, such
counsel to be reasonably acceptable to Seller. Buyer may not settle any such
Claim without the express written consent of Seller, which will not be
unreasonably withheld.
(D) In all cases where Buyer is controlling the defense of any Claim
for which Buyer claims indemnification from Sellers, Buyer shall initially be
responsible to pay the costs of such defense. If, however, it is determined
that Sellers or any of them is responsible to indemnify Buyer for the amount of
any judgment, award (other than a nominal judgment or award), or a settlement
made in accordance with the procedures set forth above, then all expenses of
litigation which are included within the definition of the term "Claim" (in
-----
subsection 18.01(a) above) shall also be reimbursed to Buyer by Sellers.
(E) Nothing contained in this section shall be construed so as to
increase the Seller's absolute limit or Cap on liability and expenses.
(c) If the Indemnifying Party fails to assume the defense of any
Claim that has proceeded to legal action or other legal proceeding
("Litigation") within fifteen (15) days after the date such Litigation is
----------
commenced: (i) the Indemnified Party may defend against such Litigation in such
manner as it may deem appropriate, including, but not limited to, settling such
Litigation after giving notice of the same to the Indemnifying Party, on such
terms as the Indemnified Party may deem appropriate and at the expense of the
Indemnifying Party and (ii) at any time prior to settlement or judgment, the
Indemnifying Party shall be entitled to participate in (but not control) the
defense of such Litigation with its counsel at its own expense.
18.05 Survival of Indemnification Covenants. Limitations concerning
-------------------------------------
the times within which Claims may be made by an Indemnified Party against an
Indemnifying Party are set forth in subsection 17.01 hereof, and nothing
contained in this subsection 18.05 shall extend any such periods of limitation.
However, if a Claim for indemnification is timely made as provided in subsection
17.01, then the obligation of indemnification set forth in Section 18 shall
continue beyond such stated limitations until the time that such indemnification
obligation would cease to be enforceable under applicable statutes of
limitation.
SECTION 19. PAYMENT OF CERTAIN EXPENSES.
---------------------------
(a) Except as otherwise provided herein, each Seller and the Buyer
shall pay all of their own fees, costs and expenses (including, without
limitation, fees, costs and expenses of legal counsel, investment bankers,
brokers or other representatives and consultants and appraisal fees, costs and
expenses) incurred in connection with the negotiation of this Agreement and the
other agreements contemplated hereby, the performance of its obligations
hereunder and thereunder, and the consummation of the
50
<PAGE>
transactions contemplated hereby and thereby (collectively, the "Transaction
-----------
Expenses"). If the Company shall pay any Transaction Expenses of the Sellers or
- --------
the Company incurred after December 31, 1997, the amount of such Transaction
Expenses shall be deducted from the Purchase Price dollar-for-dollar.
(b) Buyer shall be responsible to order and pay for such searches of
the public records for UCC-1 financing statements, judgments, tax liens and
other liens as Buyer may deem appropriate. In the event that any search
discloses liens beyond (i) liens expressly stated herein to be satisfied at
Closing and (ii) Permitted Liens, then the expenses of filing or recording
documents necessary to satisfy such liens shall be borne by Sellers.
SECTION 20. AMENDMENTS AND WAIVERS. No amendment, modification or
----------------------
supplement to this Agreement shall be effective unless it shall be in writing
and signed by Heath, on behalf of Sellers, by the Company and by Buyer. Any
waiver of this Agreement shall not be effective unless made in a writing signed
by the party against whom the enforcement of such waiver is sought. A waiver
given in any case shall only apply to that particular act or omission, and shall
not be effective as to further acts or omissions, regardless of whether they be
of the same or similar nature.
SECTION 21. NOTICES. All notices or other communications required or
-------
permitted to be given hereunder shall be in writing and shall be (i) delivered
by hand; (ii) sent by prepaid telex, cable or facsimile confirmed by first class
mail; or (iii) sent, postage prepaid, by registered, certified or express mail
or reputable overnight courier service and shall be deemed given when so
delivered by hand, telexed, cabled or facsimiled, or if mailed, three days after
mailing (one business day in the case of express mail or overnight courier
service), as follows:
If to Buyer: with a copy to:
----------- --------------
National Equipment Services, Inc. Kirkland & Ellis
1800 Sherman Avenue - Suite 100 200 East Randolph Drive
Evanston, Illinois 60201 Chicago, Illinois 60601
Attention: Kevin P. Rodgers Attention: Sanford E. Perl, Esq.
If to the Company: with a copy to:
----------------- --------------
Albany Ladder Company, Inc. Roland M. Cavalier, Esq.
1586 Central Avenue Harris Beach & Wilcox, LLP
Albany, New York 12205 20 Corporate Woods Boulevard
Attention: Anthony Groat Albany, New York 12211
and a copy to:
-------------
Penelope D. Heath
300 Settles Hill Road
51
<PAGE>
Altamont, New York 12009
If to Any Seller: with a copy to:
---------------- --------------
[Name of Seller(s)] Roland M. Cavalier, Esq.
c/o Penelope D. Heath Harris Beach & Wilcox, LLP
300 Settles Hill Road 20 Corporate Woods Boulevard
Altamont, New York 12009 Albany, New York 12211-2391
and a copy to:
-------------
Richard Rowley, Esq.
Rowley Forrest O'Donnell
& Beaumont, P.C.
20 Corporate Woods Boulevard
Albany, New York 12211
Any party may change address for receipt of notice by written notice to the
other party.
SECTION 22. INTERPRETATION; EXHIBITS AND SCHEDULES.
--------------------------------------
(a) The headings contained in this Agreement, in any Exhibit or Schedule
hereto and in the table of contents to this Agreement are for reference purposes
only and shall not affect in any way the meaning or interpretation of this
Agreement. Any capitalized terms used in any Schedule or Exhibit but not
otherwise defined therein, shall have the meaning as defined in this Agreement.
(b) Various disclosures made by the Company or Sellers are set forth on
the schedules to this Agreement. Schedules may either be annexed to this
Agreement or separately bound in a booklet of Schedules. In either case, all
information set forth on any schedule, whether such schedule is attached hereto
or separately bound, shall be deemed incorporated in and made a part of this
Agreement, as if set forth fully in the body of this Agreement. Unless
otherwise specifically stated in the text of the section to which such schedule
relates, and until updated Schedules are delivered at Closing, the various
Schedules are intended to speak as of the date this Agreement is signed. In
addition, all such schedules shall be amended as of the Closing, so that they
shall include all intervening information and shall continue to be true and
correct as of the closing date. The amended schedules may likewise be attached
hereto or set forth in a separately bound disclosure booklet, but shall for all
purposes be deemed to be a part of this Agreement. If any agreement, document
or other item of disclosure would be properly set forth on more than one
schedule, the inclusion of such information on any one schedule shall be deemed
to be sufficient disclosure with respect to such other schedule so long as such
information is reasonably apparent on its face as being applicable to such other
schedule, and it shall not be necessary to repeat such disclosure on any other
schedules
52
<PAGE>
which also pertain to the same subject matter. Reference is made to subsection
5.01(j) which allows Buyer to terminate this Agreement if the updated schedules
delivered at Closing disclose certain material adverse changes.
SECTION 23. COUNTERPARTS. This Agreement may be executed in one or more
------------
counterparts, all of which shall be considered one and the same agreement, and
shall become effective when one or more such counterparts have been signed by
each of the parties and delivered to Buyer, the Company and Heath as
representative for Sellers. Any counterpart which has been signed by all
parties may be introduced into evidence in any action or proceeding without
having to produce or account for the others. Likewise, the existence of this
Agreement may be proved by the introduction into evidence of separately signed
counterparts, so long as substantially identical copies have been signed by all
parties.
SECTION 24. ENTIRE AGREEMENT. This Agreement (including the schedules
----------------
hereto) and the Confidentiality Agreement contain the entire agreement and
understanding between the parties with respect to the subject matter hereof.
This Agreement supersedes all prior agreements and understandings relating to
such subject matter, except that: (i) the Confidentiality Agreement continues
------ ----
in full force and effect; and (ii) certain agreements among the Sellers relating
to their respective rights, obligations and relationships continue in full force
and effect. Buyer shall not be liable or bound to Sellers or to the Company, nor
shall Sellers or the Company be bound to Buyer in any manner by any
representations, warranties or covenants relating to such subject matter except
as specifically set forth herein or in the Confidentiality Agreement.
SECTION 25. BROKERS. Sellers shall be solely responsible for all fees
-------
payable to Brown Brothers Harriman & Co. Buyer shall be responsible for any and
all fees, expenses and other costs payable to, or incurred by, any investment
bankers, brokers or finders that have represented Buyer in connection with this
Agreement or the transactions contemplated hereby.
SECTION 26. SEVERABILITY. If any provision of this Agreement (or any
------------
portion thereof) or the application of any such provision (or any portion
thereof) to any person or circumstance shall be held invalid, illegal or
unenforceable in any respect by a court of competent jurisdiction, such
invalidity, illegality or unenforceability shall not affect any other provision
hereof (or the remaining portion thereof) or the application of such provision
to any other persons or circumstances.
SECTION 27. GOVERNING LAW. This Agreement shall be governed by and
-------------
construed in accordance with the internal laws of the State of New York
applicable to agreements made and to be performed entirely within such State,
without regard to the conflicts of law principles of such State.
SECTION 28. BINDING EFFECT AND LEGAL CONSTRUCTION. This Agreement shall
-------------------------------------
bind and inure to the benefit of the parties, their respective heirs, executors,
administrators,
53
<PAGE>
other personal representatives, and successors and assigns. If any parts of this
Agreement are found to be void or unenforceable, the remaining provisions shall
nevertheless be binding with the same effect as though the void parts were
deleted. In construing this Agreement, feminine pronouns shall be substituted
for those masculine in form (and vice versa), and plural terms shall be
substituted for singular and singular for plural, in any place where the context
so requires.
[THE BALANCE OF THIS PAGE LEFT INTENTIONALLY BLANK]
54
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed.
ALBANY LADDER COMPANY, INC.
Dated: 3/09/98 By: /s/ Anthony Groat
----------------------------------------
Anthony Groat
President
THE ESTATE OF LESTER J. HEATH, III
Dated: 3/09/98 By: /s/ Penelope D. Heath
----------------------------------------
Penelope D. Heath, Co-Executer
Dated: 3/09/98 By: /s/ A. Arthur Davis, 3rd
----------------------------------------
A. Arthur Davis, 3/rd/, Co-Executor
Dated: 3/11/98 By: /s/ Karl C. Davis
----------------------------------------
Karl C. Davis, Co-Executor
Dated: 3/9/98 /s/ Ellen H. Kanuck
-------------------------------------------
Ellen H. Kanuck
Dated: 3/9/98 /s/ Peggy H. DiPaola
-------------------------------------------
Peggy H. DiPaola
Dated: 3/9/98 /s/ Susan H. Mincher
-------------------------------------------
Susan H. Mincher
Dated: 3/9/98 /s/ Penelope D. Heath
-------------------------------------------
Penelope D. Heath
as Seller's Representative
NATIONAL EQUIPMENT SERVICES, INC.
Dated: 3/9/98 By: /s/ Paul Ingersoll
----------------------------------------
<PAGE>
LIST OF SCHEDULES
TO STOCK PURCHASE AGREEMENT
Schedule 3.03(b) Sample Tax Calculation
Schedule 3.03(c) Allocation of Purchase Price
Schedule 5.01(h) Third Party Consents
Schedule 5.05 Standard Form Real Estate Lease Agreement
Schedule 6.02 Conflicts
Schedule 6.05 Table of Sellers' Stockholdings
Schedule 6.06 Equity Interests
Schedule 6.07 Most Recent Financial Statements
Schedule 6.08 Taxes (Compliance with Filing Requirements)
Schedule 6.8 Table of Basis
Schedule 6.09 Assets
(a) Rental Fleet Equipment
(b) Equipment held for Resale
(c) Fixed Assets
(d) Liens upon Assets
Schedule 6.10 List of all Real Property and Interests in Real Property
Leased by the Company
Schedule 6.11 List of Intellectual Property
(a) List of Jurisdictions in which Trademarks Registered
(b) Licensed Programs
Schedule 6.12 List of Contracts
(a) Employment Agreements
(b) Covenants
(c) Agreements with Affiliates
(d) Leases
(e) Loans
(f) Guaranties
<PAGE>
(g) Liens
(h) Indemnities
(i) Confidentiality Agreements
Schedule 6.13 Litigation
Schedule 6.15 List of Benefit Plans
Schedule 6.16 Material Adverse Change in Business
Schedule 6.17(a) Compliance with Applicable Laws
Schedule 6.17(b) Non-Compliance with Environmental Laws
Schedule 6.18 Employee and Labor Matters
Schedule 6.21 Officers and Directors; Bank Accounts
Schedule 7.02 No Conflicts
Schedule 8.02 Negative Covenants of the Company and the Sellers
57
<PAGE>
Exhibit 10.34
================================================================================
STOCK PURCHASE AGREEMENT
BY AND AMONG
FALCONITE, INC.,
THE STOCKHOLDERS OF FALCONITE, INC.,
AND
NATIONAL EQUIPMENT SERVICES, INC.
DATED AS OF APRIL 1, 1998
================================================================================
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
ARTICLE I
DEFINITIONS........................................................ 1
1.1 Definitions................................................ 1
1.2 Other Definitional Provisions.............................. 5
1.3 Cross Reference of Other Definitions....................... 5
ARTICLE II
PURCHASE AND SALE OF STOCK......................................... 6
2.1 Stock Purchase............................................. 6
2.2 Purchase Price for Company Stock........................... 6
2.3 Purchase Price Adjustments................................. 7
2.4 Distribution of Escrow Account............................. 9
2.5 Closing Transactions....................................... 9
ARTICLE III
CONDITIONS TO CLOSING.............................................. 10
3.1 Conditions to the Purchaser's Obligations.................. 10
3.2 Conditions to Each Sellers' Obligations.................... 13
ARTICLE IV
COVENANTS PRIOR TO CLOSING......................................... 15
4.1 Affirmative Covenants of the Company and Each Seller....... 15
4.2 Negative Covenants of the Company and Each Seller.......... 16
4.3 Covenants of Purchaser..................................... 17
ARTICLE V
REPRESENTATIONS AND WARRANTIES CONCERNING THE COMPANY.............. 17
5.1 Organization and Corporate Power........................... 17
5.2 Authorization of Transactions.............................. 18
5.3 Capitalization............................................. 18
5.4 Subsidiaries; Investments.................................. 18
5.5 Absence of Conflicts....................................... 19
5.6 Financial Statements and Related Matters................... 19
5.7 Absence of Undisclosed Liabilities......................... 20
5.8 Absence of Certain Developments............................ 20
5.9 Title to Properties........................................ 21
5.10 Taxes...................................................... 23
</TABLE>
<PAGE>
<TABLE>
<S> <C>
5.11 Contracts and Commitments..............................24
5.12 Proprietary Rights.....................................26
5.13 Litigation; Proceedings................................26
5.14 Brokerage..............................................26
5.15 Governmental Licenses and Permits......................27
5.16 Employees..............................................27
5.17 Employee Benefit Plans.................................27
5.18 Insurance..............................................28
5.19 Officers and Directors; Bank Accounts..................28
5.20 Affiliate Transactions.................................28
5.21 Compliance with Laws...................................29
5.22 Environmental Matters..................................29
5.23 Disclosure.............................................30
5.24 Closing Date...........................................30
ARTICLE VI
REPRESENTATIONS AND WARRANTIES CONCERNING THE SELLERS............30
6.1 Authorization of Transactions..........................30
6.2 Absence of Conflicts...................................31
6.3 Brokerage..............................................31
6.4 Shares.................................................31
6.5 Investment in Subordinated Notes.......................32
6.6 Closing Date...........................................32
ARTICLE VII
REPRESENTATIONS AND WARRANTIES CONCERNING THE PURCHASER..........32
7.1 Organization and Corporate Power.......................32
7.2 Authorization..........................................32
7.3 Absence of Conflicts...................................33
7.4 Litigation; Proceedings................................33
7.5 Brokerage..............................................33
7.6 NES Securities.........................................33
7.7 Disclosure.............................................33
7.8 Closing Date...........................................33
ARTICLE VIII
TERMINATION......................................................34
8.1 Termination............................................34
8.2 Effect of Termination..................................34
</TABLE>
-ii-
<PAGE>
<TABLE>
<S> <C>
ARTICLE IX
INDEMNIFICATION AND RELATED MATTERS..............................35
9.1 Survival................................................35
9.2 Indemnification.........................................35
ARTICLE X
ADDITIONAL AGREEMENTS............................................39
10.1 Subordinated Notes......................................39
10.2 Continuing Assistance...................................40
10.3 Tax Matters.............................................40
10.4 Press Releases and Announcements........................42
10.5 Further Transfers.......................................42
10.6 Specific Performance....................................43
10.7 Transition Assistance...................................43
10.8 Expenses................................................43
10.9 Exclusivity.............................................43
10.10 Books and Records.......................................44
10.11 Appointment of Representative...........................44
10.12 Noncompetition, Nonsolicitation and Confidentiality.....46
10.13 Certain Financial Information...........................47
ARTICLE XI
MISCELLANEOUS....................................................48
11.1 Amendment and Waiver....................................48
11.2 Notices.................................................48
11.3 Binding Agreement; Assignment...........................48
11.4 Severability............................................49
11.5 No Strict Construction..................................49
11.6 Captions................................................49
11.7 Entire Agreement........................................49
11.8 Counterparts............................................49
11.9 Governing Law...........................................49
11.10 Parties in Interest.....................................49
11.11 Performance.............................................50
</TABLE>
-iii-
<PAGE>
INDEX OF EXHIBITS
-----------------
Exhibit A - Form of Subordinated Convertible Promissory Note
Exhibit B - Form of Escrow Agreement
Exhibit C - Form of Employment Agreement
Exhibit D - Form of Opinion of Counsel to the Company and the Sellers
Exhibit E - Form of Opinion of Counsel to the Purchaser
Exhibit F - The Company's Model Projections
INDEX OF SCHEDULES
------------------
Schedule of Stockholders
EBITDA Schedule
Indebtedness Schedule
Negative Covenants Exception Schedule
Organization Schedule
Subsidiaries Schedule
Conflicts Schedule
Financial Statements Schedule
Developments Schedule
Real Property Schedule
Assets Schedule
Taxes Schedule
Contracts Schedule
Proprietary Rights Schedule
Litigation Schedule
Brokerage Schedule
Permits Schedule
Employees Schedule
Benefit Plans Schedule
Insurance Schedule
Officers, Directors and Bank Accounts Schedule
Affiliated Transactions Schedule
Environmental Schedule
-iv-
<PAGE>
STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT is made as of April 1, 1998, by and
among FALCONITE, INC., an Illinois corporation (the "Company"), the stockholders
-------
of the Company listed on the "Schedule of Stockholders" attached hereto
------------------------
(collectively, the "Sellers" and individually, a "Seller"), and NATIONAL
------- ------
EQUIPMENT SERVICES, INC., a Delaware corporation (the "Purchaser"). The
---------
Company, the Sellers and the Purchaser are referred to herein collectively as
the "Parties" and individually as a "Party."
------- -----
WHEREAS, the authorized capital stock of the Company consists of
50,000,000 shares of Common Stock, par value $.01 per share (the "Common
------
Stock"), of which 8,330,000 shares are issued and outstanding, and 1,000,000
- -----
shares of Preferred Stock, par value $.01 per share (the "Preferred Stock"), of
---------------
which no shares are issued or outstanding;
WHEREAS, the Sellers own beneficially and of record 100% of the issued
and outstanding Common Stock; and
WHEREAS, the Purchaser desires to acquire from each Seller, and each
Seller desires to sell to the Purchaser, all of the Common Stock owned by such
Seller (collectively, the "Acquired Stock").
--------------
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Parties agree as follows:
ARTICLE I
DEFINITIONS
1.1 Definitions. For purposes hereof, the following terms, when used
-----------
herein with initial capital letters, shall have the respective meanings set
forth herein:
"Affiliate" of any Person means any other Person controlling,
---------
controlled by or under common control with such first Person, where "control"
-------
means the possession, directly or indirectly, of the power to direct the
management and policies of a Person whether through the ownership of voting
securities or otherwise.
"Affiliated Group" means an affiliated group as defined in Section
----------------
1504 of the Code (or any similar combined, consolidated or unitary group defined
under state, local or foreign income Tax law).
"Agreement" means this Stock Purchase Agreement, including all
---------
Exhibits and Schedules hereto, as it may be amended from time to time in
accordance with its terms.
"CERCLA" means the Comprehensive Environmental Response, Compensation
------
and Liability Act of 1980, as amended.
<PAGE>
"Code" means the United States Internal Revenue Code of 1986, as
----
amended.
"EBITDA" has the meaning given to such term in the "EBITDA Schedule"
------ ---------------
attached hereto.
"Environmental Affiliates" of any Person means, with respect to any
------------------------
particular matter, all other Persons whose liabilities or obligations with
respect to that particular matter have been assumed by, or are otherwise deemed
by law to be those of, such first Person.
"Environmental and Safety Requirements" means all federal, state,
-------------------------------------
local and foreign statutes, regulations, ordinances and similar provisions
having the force or effect of law, all judicial and administrative orders and
determinations, all contractual obligations and all common law concerning public
health and safety, worker health and safety and pollution or protection of the
environment, including all such standards of conduct and bases of obligations
relating to the presence, use, production, generation, handling, transport,
treatment, storage, disposal, distribution, labeling, testing, processing,
discharge, release, threatened release, control, or cleanup of any hazardous
materials, substances or wastes, chemical substances or mixtures, pesticides,
pollutants, contaminants, toxic chemicals, petroleum products or by-products,
asbestos, polychlorinated biphenyls (or PCBs), noise or radiation.
"Environmental Lien" means any Lien, whether recorded or unrecorded,
------------------
in favor of any governmental entity or any department, agency or political
subdivision thereof relating to any liability of the Company or any Seller or
any Environmental Affiliate of the Company or any Seller arising under any
Environmental and Safety Requirement.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
-----
amended.
"GAAP" means, at a given time, United States generally accepted
----
accounting principles, consistently applied.
"Indebtedness" of any Person means, without duplication: (a)
------------
indebtedness for borrowed money or for the deferred purchase price of property
or services in respect of which such Person is liable, contingently or
otherwise, as obligor or otherwise (other than trade payables and other current
liabilities incurred in the ordinary course of business) and any commitment by
which such Person assures a creditor against loss, including contingent
reimbursement obligations with respect to letters of credit; (b) indebtedness
guaranteed in any manner by such Person, including a guarantee in the form of an
agreement to repurchase or reimburse; (c) obligations under capitalized leases
in respect of which such Person is liable, contingently or otherwise, as
obligor, guarantor or otherwise, or in respect of which obligations such Person
assures a creditor against loss; and (d) any unsatisfied obligation of such
Person for "withdrawal liability" to a "multiemployer plan," as such terms are
defined under ERISA.
"Insider" means, any officer, director, employee, stockholder, partner
-------
or Affiliate, as applicable, of the Company or any of its Affiliates or any
immediate family member (i.e., parent, child or sibling) of such Person
(including, without limitation, any Person related by marriage or adoption to
any such individual) or any entity in which any such Person owns a beneficial
interest
-2-
<PAGE>
in excess of ten percent (10%) of the aggregate voting control or equity
ownership interest of such entity.
"Licenses" means all permits, licenses, franchises, certificates,
--------
approvals and other authorizations of foreign, federal, state and local
governments or other similar rights.
"Lien" means any mortgage, pledge, security interest, encumbrance,
----
easement, restriction, charge, or other lien.
"Loss" means, with respect to any Person, any damage, liability,
----
demand, claim, action, cause of action, cost, damage, diminution in value,
deficiency, Tax, penalty, fine or other loss or expense, whether or not arising
out of a third party claim, including all interest, penalties, reasonable
attorneys' fees and expenses and all amounts paid or incurred in connection with
any action, demand, proceeding, investigation or claim by any third party
(including any governmental entity or any department, agency or political
subdivision thereof) against or affecting such Person or which, if determined
adversely to such Person, would give rise to, evidence the existence of, or
relate to, any other Loss and the investigation, defense or settlement of any of
the foregoing.
"Material Adverse Effect" means any material adverse effect on the
-----------------------
business, financial condition, operations, results of operations, or future
prospects of the Company or any of its material Subsidiaries.
"Net Equity" means (i) the book value of the Company's assets minus
----------
(ii) the book value of the Company's liabilities (including, without limitation,
all Indebtedness of the Company and its Subsidiaries and all fees, expenses and
prepayment premiums and penalties (if any) which are or would be incurred by the
Company and its Subsidiaries in connection with the repayment of such
Indebtedness and the release of any guaranties related thereto), determined on a
consolidated basis in accordance with GAAP.
"Ordinary Course of Business" means the ordinary course of the
---------------------------
Company's and its Subsidiaries' businesses consistent with past practice
(including, without limitation, with respect to collection of accounts
receivable, purchases of inventory and supplies, repairs and maintenance,
payment of accounts payable and accrued expenses, levels of capital expenditures
and operation of cash management practices generally).
"Permitted Encumbrances" means (A) statutory liens for current taxes
----------------------
or other governmental charges with respect to the Real Property not yet due and
payable or the amount or validity of which is being contested; (B) mechanics,
carriers, workers, repairers and similar statutory liens arising or incurred in
the ordinary course of business for amounts which are not delinquent and which
could not, individually or in the aggregate, have a Material Adverse Effect; (C)
zoning, entitlement, building and other land use regulations imposed by
governmental agencies having jurisdiction over the Real Property which are not
violated by the current use and operation of the Real Property; and (D)
covenants, conditions, restrictions, easements and other matters of record
affecting title to the Real Property which do not unreasonably interfere with
the current use, occupancy, or value, or the marketability of title, of the Real
Property.
-3-
<PAGE>
"Person" means an individual, a partnership, a corporation, an
------
association, a limited liability company, a joint stock company, a trust, a
joint venture, an unincorporated organization, a governmental entity or any
department, agency or political subdivision thereof and any other entity.
"Proprietary Rights" means any and all patents, patent applications,
------------------
trademarks, service marks, trademark or service mark applications and
registrations, trade and corporate names, copyrights, copyright applications and
registrations, trade secrets, know-how, technology, computer software and
software systems, business and marketing plans, customer and supplier lists,
confidential information and all other proprietary property, rights and
interests.
"Release" shall have the meaning set forth in CERCLA.
-------
"Subsidiary" means, with respect to any Person, any corporation a
----------
majority of the total voting power of shares of stock of which is entitled
(without regard to the occurrence of any contingency) to vote in the election of
directors, managers or trustees thereof is at the time owned or controlled,
directly or indirectly, by that Person or one or more of the other Subsidiaries
of that Person or a combination thereof, or any partnership, association or
other business entity a majority of the partnership or other similar ownership
interests of which are at the time owned or controlled, directly or indirectly,
by that Person or one or more Subsidiaries of that Person or a combination
thereof. For purposes of this definition, a Person is deemed to have a majority
ownership interest in a partnership, association or other business entity if
such Person is allocated a majority of the gains or losses of such partnership,
association or other business entity or is or controls a managing director or
general partner of such partnership, association or other business entity.
"Tax Returns" means returns, declarations, reports, claims for refund,
-----------
information returns or other documents (including any related or supporting
schedules, statements or information) filed or required to be filed in
connection with the determination, assessment or collection of Taxes of any
party or the administration of any laws, regulations or administrative
requirements relating to any Taxes.
"Taxes" means any federal, state, local, or foreign income, gross
-----
receipts, license, payroll, employment, excise, severance, stamp, occupation,
premium, windfall profits, environmental, customs duties, capital stock,
franchise, profits, withholding, social security, unemployment, disability, real
property, personal property, sales, use, transfer, registration, value added,
alternative or add-on minimum, or other tax, fee, assessment or charge of any
kind whatsoever, including any interest, penalty, or addition thereto, whether
disputed or not.
"Transaction Documents" means this Agreement, and all other
---------------------
agreements, instruments, certificates and other documents to be entered into or
delivered by any Party in connection with the transactions contemplated to be
consummated pursuant to this Agreement.
"Treasury Regulations" means the United States Treasury Regulations
--------------------
promulgated pursuant to the Code.
-4-
<PAGE>
1.2 OTHER DEFINITIONAL PROVISIONS.
-----------------------------
(a) Accounting Terms. Accounting terms which are not otherwise
----------------
defined in this Agreement have the meanings given to them under GAAP. To the
extent that the definition of accounting term that is defined in this Agreement
is inconsistent with the meaning of such term under GAAP, the definition set
forth in this Agreement will control.
(b) "Hereof," etc. The terms "hereof," "herein" and "hereunder" and
-------------
terms of similar import are references to this Agreement as a whole and not to
any particular provision of this Agreement. Section, clause, Schedule and
Exhibit references contained in this Agreement are references to Sections,
clauses, Schedules and Exhibits in or to this Agreement, unless otherwise
specified.
(c) Successor Laws. Any reference to any particular Code section or
--------------
any other law or regulation will be interpreted to include any revision of or
successor to that section regardless of how it is numbered or classified.
1.3 CROSS REFERENCE OF OTHER DEFINITIONS. Each capitalized term
------------------------------------
listed below is defined in the corresponding Section of this Agreement:
<TABLE>
<CAPTION>
Term Section
- ---- -------
<S> <C>
Acquired Stock............................................. Recitals
Actual Net Equity.......................................... 2.3(a)
Applicable Limitation Date................................. 9.1
Authorized Action.......................................... 10.11(d)
Cap........................................................ 9.2(b)(iii)
Cash Portion............................................... 2.2
Closing.................................................... 2.5(a)
Closing Date............................................... 2.5(a)
Closing Net Accounts Receivable............................ 2.3(b)(i)
Closing Review............................................. 2.3(a)
Closing Transactions....................................... 2.5(b)
COBRA...................................................... 5.17(a)
Common Stock............................................... Recitals
Company.................................................... Preface
Company Multiemployer Plans................................ 5.17(a)
Confidential Information................................... 10.12(c)
Deductible................................................. 9.2(b)(ii)
Draft Computation.......................................... 2.3(a)
Employment Agreement....................................... 3.1(h)
ERISA...................................................... 5.17(a)
Escrow Account............................................. 2.2
Escrow Agreement........................................... 2.2
Financial Statements....................................... 5.6(a)
Firm....................................................... 2.3(a)
Indemnified Party.......................................... 9.2(e)
</TABLE>
-5-
<PAGE>
<TABLE>
<S> <C>
Indemnifying Party......................................... 9.2(e)
HSR Act.................................................... 3.1(d)
HSR Filing................................................. 5.5
Latest Balance Sheet....................................... 5.6(a)
Leased Properties.......................................... 5.9(b)
NES Securities............................................. 6.5
Net Equity Shortfall....................................... 2.3(a)
Noncompete Period.......................................... 10.12(a)
Noncompete Payment......................................... 10.12(a)
Noncompeting Parties....................................... 10.12(a)
Objection Notice........................................... 2.3(a)
Owned Real Property........................................ 5.9(a)
Party...................................................... Preface
Pending Claim.............................................. 2.4
Preferred Stock............................................ Recitals
Purchase Price............................................. 2.2
Purchaser.................................................. Preface
Purchaser Parties.......................................... 9.2(a)
Real Property.............................................. 5.9(b)
Receivables Determination Date............................. 2.3(b)(i)
Remaining Escrow........................................... 2.4
Representative............................................. 10.11(a)
Reserve.................................................... 2.3(b)(i)
Seller..................................................... Preface
Seller Parties............................................. 9.2(c)
Subordinated Notes......................................... 2.2
Subsidiary Stock........................................... 5.4
Surveys.................................................... 3.1(k)
Title Company.............................................. 3.1(j)
Title Policies............................................. 3.1(j)
Transaction Expenses....................................... 10.8
Uncollected Receivables Amount............................. 2.3(b)(i)
Updated Financial Statement................................ 4.1(j)
</TABLE>
ARTICLE II
PURCHASE AND SALE OF STOCK
--------------------------
2.1 STOCK PURCHASE. On and subject to the terms and conditions
--------------
set forth in this Agreement, on the Closing Date, the Purchaser shall purchase
from each Seller, and each Seller shall sell and transfer to the Purchaser, all
of the shares of Common Stock owned by such Seller as such ownership is set
forth on the Schedule of Stockholders attached hereto, free and clear of any
------------------------
Liens.
2.2 PURCHASE PRICE FOR COMPANY STOCK. The aggregate purchase price to
--------------------------------
be paid to Sellers for the Acquired Stock (the "Purchase Price") is $65,750,000,
--------------
which amount shall be paid as follows: (a) the Purchaser shall deliver to the
Sellers $57,000,000 (as adjusted pursuant to Section 2.3 below) in cash (as
adjusted, the "Cash Portion"); (b) the Purchaser shall issue to the
------------
-6-
<PAGE>
Sellers $3,750,000 aggregate principal amount of Subordinated Convertible
Promissory Notes in the form of Exhibit A attached hereto (the "Subordinated
--------- ------------
Notes"); and (c) the Purchaser shall deposit $5,000,000 in an escrow account
- -----
(the "Escrow Account") governed by an Escrow Agreement substantially in form of
--------------
Exhibit B attached hereto (the "Escrow Agreement"). The Escrow Account shall be
- --------- ----------------
available to satisfy any amounts owing to the Purchaser pursuant to Section 2.3
and/or Section 9.2. The Purchase Price will be allocated among the Sellers in
the manner set forth in Schedule of Stockholders attached hereto. The Cash
------------------------
Portion is subject to adjustment pursuant to Section 2.3.
2.3 PURCHASE PRICE ADJUSTMENTS.
--------------------------
(a) Post-Closing Adjustment for Net Equity. Within 90 days after the
--------------------------------------
Closing Date, the Purchaser and its auditors will conduct a review (the "Closing
-------
Review") of the Net Equity as of the close of business on the day before the
- ------
Closing Date and will prepare and deliver to the Representative a computation of
the Net Equity as of the close of business on the day before the Closing Date
(the "Draft Computation"). The Purchaser and its auditors will give the
-----------------
Representative and its auditors an opportunity to observe the Closing Review and
will make available to such Persons all records and work papers used in
preparing the Draft Computation. If the Representative disagrees with the
computation of the Net Equity reflected on the Draft Computation, the
Representative may, within thirty (30) days after receipt of the Draft
Computation, deliver a notice (an "Objection Notice") to the Purchaser setting
----------------
forth the Representative's calculation of the amount of the Net Equity as of the
close of business on the day before the Closing Date. The Purchaser and the
Representative will use reasonable efforts to resolve any disagreements as to
the computation of the Net Equity, but if they do not obtain a final resolution
within 30 days after the Purchaser has received the Objection Notice, the
Purchaser and the Representative will jointly retain an independent accounting
firm of recognized national or regional standing (the "Firm") to resolve any
----
remaining disagreements. If the Purchaser and the Representative are unable to
agree on the choice of the Firm, the Firm will be a so-called "big-six"
accounting firm (or successor thereof) selected by lot (after excluding any firm
having a prior audit relationship with either the Purchaser or the Company, any
such firm which may decline to so serve, one firm designated by the Purchaser,
and one firm designated by the Representative). The Purchaser and the
Representative will direct the Firm to render a determination of Net Equity as
of the close of business on the day before the Closing Date within 30 days of
its retention and the Purchaser, the Representative and their respective agents
will cooperate with the Firm during its engagement. The Firm shall consider
only those items in the Draft Computation set forth in the Objection Notice
which the Purchaser and the Representative are unable to resolve, and the Firm
may utilize all records and work papers which the Firm shall determine necessary
or appropriate in the calculation of Net Equity. The Firm's determination will
be based on the definition of Net Equity included herein. Except as may be
mutually agreed in writing by the Purchaser and the Representative, the
determination of the Firm will be conclusive and binding upon the Purchaser and
the Sellers. The Purchaser and the Sellers shall bear the costs and expenses of
the Firm based on the percentage which the portion of the contested amount not
awarded to each Party bears to the amount actually contested by such Party. The
amount of the Net Equity, as finally determined pursuant to this Section 2.3(a),
is referred to herein as the "Actual Net Equity." If the Actual Net Equity is
-----------------
less than $34,129,000, the Purchaser shall be entitled to receive from the
Escrow Account, within two (2) business days after the determination thereof,
the amount of such shortfall (the "Net Equity Shortfall"); provided, however,
--------------------
that if the amount then left in the Escrow Account is less than the amount of
the Net Equity
-7-
<PAGE>
Shortfall, the Representative shall cause the Sellers to pay to the Purchaser,
within two (2) business days after the determination of the Actual Net Equity,
the amount by which the Escrow Account is less than Net Equity Shortfall by wire
transfer or delivery of other immediately available funds. Additionally, if the
Actual Net Equity is greater than $34,129,000, the Purchaser shall pay to the
Representative for the account of the Sellers, within two (2) business days
after the determination of the Actual Net Equity, the amount of such excess by
wire transfer or delivery of other immediately available funds. Notwithstanding
anything to the contrary set forth herein, in the event the Representative
delivers an Objection Notice to the Purchaser pursuant to this Section 2.3(a),
and in the event the Representative's determination of the amount of the Net
Equity as of the close of business on the day before the Closing Date set forth
in such Objection Notice is less than $34,129,000, the Purchaser shall be
entitled to receive from the Escrow Account, within two (2) business days after
receipt of the Objection Notice, the amount of such shortfall; provided,
however, that if the amount then left in the Escrow Account is less than the
amount of such shortfall, the Representative shall cause the Sellers to pay to
the Purchaser, within two (2) business days after receipt by the Purchaser of
the Objection Notice, the amount by which the Escrow Account is less than such
shortfall by wire transfer or delivery of other immediately available funds;
provided, further, that any amounts received by the Purchaser pursuant to this
sentence, shall be applied towards any amount otherwise due, or shall be added
to any amounts otherwise payable, pursuant to this Section 2.3(a).
(b) Accounts Receivable Adjustment.
------------------------------
(i) Notwithstanding anything herein to the contrary, and in addition
to any other adjustments set forth in this Agreement, the Cash Portion will
be reduced dollar-for-dollar by the aggregate amount of the notes and
accounts receivable of the Company, reduced by the amount of any reserve or
provision in respect thereof (the "Reserve"), calculated on a consolidated
-------
basis, in existence as of the Closing and utilized in determining the
Actual Net Equity (the "Closing Net Accounts Receivable"), which are
-------------------------------
uncollected by the Company or its Subsidiaries (the "Uncollected
-----------
Receivables Amount") as of the 120th day following the Closing Date (the
------------------
"Receivables Determination Date").
-------------------------------
(ii) If there is an Uncollected Receivables Amount, the Purchaser
shall be entitled to receive the Uncollected Receivables Amount from the
Escrow Account within two (2) business days after the Receivables
Determination Date; provided, however, that if the amount then left in the
Escrow Account is less than the amount of the Uncollected Receivables
Amount, the Representative shall pay to the Purchaser, within two (2)
business days after the Receivables Determination Date, the amount by which
the Escrow Account is less than Uncollected Receivables Amount by wire
transfer or delivery of other immediately available funds. In addition, in
the event that as of the Receivables Determination Date, the Company's
collections with respect to the Closing Net Accounts Receivable have
exceeded the amount of Closing Net Accounts Receivable (i.e., the
uncollected amount is less than the Reserve), the Purchaser shall pay such
excess to the Representative within two (2) business days after the
Receivables Determination Date by wire transfer or delivery of other
immediately available funds.
(iii) The Company shall use commercially reasonable efforts to collect
the Closing Net Accounts Receivable and shall cooperate with the
Representative with respect to such
-8-
<PAGE>
collection efforts and shall not settle for or accept less than the full
amount of such Closing Net Accounts Receivable without the prior written
consent of the Representative (which consent shall not be unreasonably
withheld). Notwithstanding the foregoing, the Company shall not be required
to retain a collection agency, bring any suit, or take any other action out
of the Ordinary Course of Business to collect any of the Closing Net
Accounts Receivable.
(iv) To the extent that the Company has not collected the full amount
of the Closing Net Accounts Receivable and the Purchaser has been
compensated therefor in accordance with this Section, the Company shall
assign any such uncollected Closing Net Accounts Receivable to the Sellers
and shall cooperate in the Representative's attempts to collect thereon.
(v) In the event that the Company shall receive any remittance from or
on behalf of any account debtor with respect to any Closing Net Accounts
Receivable after such Closing Net Accounts Receivable has been assigned to
the Sellers, the Company shall endorse such remittance to the order of the
Representative for the account of the Sellers and forward the same to the
Representative promptly upon receipt thereof.
2.4 DISTRIBUTION OF ESCROW ACCOUNT. On the 180th day after the
------------------------------
Closing Date, the Purchaser shall direct the escrow agent under the Escrow
Agreement to pay to the Representative an amount equal to the amount of the
Escrow Account, if any, remaining after (i) all amounts owing to the Purchaser
pursuant to Section 2.3 have been satisfied and (ii) all claims of the Purchaser
under Section 9.2 which have theretofore been finally resolved have been
satisfied (the "Remaining Escrow") less any amount for which the Purchaser
----------------
claims, prior to such 180th day, that it is entitled to receive indemnification
pursuant to Section 9.2 (each, a "Pending Claim"). As soon as practicable
-------------
following final resolution of all Pending Claims, the Purchaser shall direct the
escrow agent under the Escrow Agreement to pay to the Representative an
aggregate amount equal to the portion, if any, of the Escrow Account which
remains after payment of the Remaining Escrow and final resolution of all
Pending Claims.
2.5 CLOSING TRANSACTIONS.
--------------------
(a) Closing. The closing of the transactions contemplated by this
-------
Agreement (the "Closing") shall take place at the offices of Kirkland & Ellis,
-------
200 East Randolph Drive, Chicago, Illinois 60601, commencing at 10:00 a.m. on
the business day on which the satisfaction or waiver of all conditions to the
obligations of the Parties to consummate the transactions contemplated hereby
(other than conditions with respect to actions the respective Parties will take
at the Closing itself) are accomplished or obtained, or at such other place or
on such other date as may be mutually agreeable to the Purchaser and the
Representative; provided, however, that in the event the Purchaser satisfies the
condition set forth in Section 3.1(m) without consummating an initial public
offering and sale of shares of its common stock pursuant to an effective
registration statement under the Securities Act of 1933, as amended, the Closing
shall take place on the second business day following the satisfaction or waiver
of all conditions to the obligations of the Parties to consummate the
transactions contemplated hereby (other than conditions with respect to actions
the respective Parties will take at the Closing itself), or at such other place
or on such other date as may be mutually agreeable to the Purchaser and the
Representative. The date and time of the Closing are herein referred to as the
"Closing Date."
------------
-9-
<PAGE>
(b) Closing Transactions. Subject to the conditions set forth in this
---------------------
Agreement, the Parties shall consummate the following transactions (the "Closing
-------
Transactions") on the Closing Date:
- ------------
(i) each Seller shall deliver to the Purchaser certificates
representing the Acquired Stock owned by such Seller, duly endorsed for
transfer or accompanied by duly executed stock powers with all requisite
state and federal transfer stamps affixed thereto;
(ii) The Purchaser shall deliver to Sellers the Cash Portion in the
manner set forth on the Schedule of Stockholders in immediately available
------------------------
funds;
(iii) The Purchaser shall deliver to the Sellers the Subordinated
Notes in the manner set forth on the Schedule of Stockholders;
------------------------
(iv) The Purchaser shall deliver to the Sellers the Noncompete
Payment in the manner set forth on the Schedule of Stockholders;
------------------------
(v) The Purchaser shall deposit $5,000,000 in the Escrow Account in
the manner contemplated by Section 2.2 and the Escrow Agreement; and
(vi) the Company, the Sellers and the Purchaser, as applicable, shall
deliver the opinions, certificates and other documents and instruments
required to be delivered by or on behalf of such Party under Article III.
ARTICLE III
CONDITIONS TO CLOSING
---------------------
3.1 CONDITIONS TO THE PURCHASER'S OBLIGATIONS. The obligation of the
-----------------------------------------
Purchaser to consummate the transactions contemplated by this Agreement is
subject to the satisfaction of the following conditions as of the Closing Date:
(a) The representations and warranties set forth in Article V and
Article VI hereof shall be true and correct in all material respects at and as
of the Closing Date as though then made and as though the Closing Date were
substituted for the date of this Agreement throughout such representations and
warranties (without taking into account any disclosures made by the Company or
the Sellers to the Purchaser pursuant to Sections 4.1(g), 5.24 and 6.6 hereof);
(b) The Company and each Seller shall have performed and complied in
all material respects with all of the covenants and agreements required to be
performed by each of them under this Agreement on or prior to the Closing;
(c) All material consents by third parties that are required for the
transfer of the Acquired Stock to the Purchaser, and the consummation of the
other transactions contemplated hereby or that are required in order to prevent
a breach of, a default under, a termination or modification of, or any
acceleration of, any obligations under any material contract to which the
Company or any of its Subsidiaries is a party shall have been obtained, and
payoff letters with
-10-
<PAGE>
respect to all of the Company's and its Subsidiaries' Indebtedness outstanding
as of the Closing and releases of any and all Liens held by third parties
against property of the Company or any of its Subsidiaries shall have been
obtained, all on terms reasonably satisfactory to the Purchaser;
(d) All governmental filings, authorizations and approvals that are
required for the transfer of the Acquired Stock to the Purchaser and the
consummation of the other transactions contemplated hereby shall have been duly
made and obtained on terms reasonably satisfactory to the Purchaser and the
applicable waiting periods, if any, under the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended (the "HSR Act"), shall have expired or been
-------
terminated;
(e) No action, suit or proceeding shall be pending or threatened
before any court or quasi-judicial or administrative agency of any federal,
state, local or foreign jurisdiction or before any arbitrator wherein an
unfavorable judgment, decree, injunction, order or ruling would prevent the
performance of this Agreement or any of the transactions contemplated hereby,
declare unlawful the transactions contemplated by this Agreement, cause such
transactions to be rescinded or materially and adversely affect the right of the
Purchaser to own, operate or control the Company or any of its Subsidiaries, and
no judgment, decree, injunction, order or ruling shall have been entered which
has any of the foregoing effects;
(f) Except as otherwise specified in writing by the Purchaser to the
Representative, all of the Company's and each of its Subsidiaries' directors and
officers shall have resigned and such resignations shall be effective as of the
Closing Date;
(g) The Company shall have terminated any and all agreements,
arrangements or plans relating to its or to any of its Subsidiaries' equity
securities, and all such agreements, arrangements and plans shall be of no
further force and effect and there shall be no rights or obligations outstanding
under any such agreements, arrangements or plans;
(h) The Company and each of Michael A. Falconite and Ralph W. McCurry
shall have entered into an agreement relating to his employment with the Company
(the "Employment Agreements"), substantially in the form of Exhibit C attached
--------------------- ---------
hereto, and the Employment Agreements shall be in full force and effect;
(i) The Purchaser shall have received an opinion, dated the Closing
Date, of Thompson Coburn, counsel to the Company and the Sellers, substantially
in the form of Exhibit D attached hereto;
---------
(j) Title Insurance. The Purchaser shall have obtained, at the
---------------
Purchaser's cost and expense, with respect to each parcel of Owned Real Property
an ALTA owner's policy of title insurance Form B-1990 with deletion of
creditor's rights exception issued by a title insurer (the "Title Company")
-------------
reasonably satisfactory to the Purchaser, in such amount as the Purchaser
reasonably determines to be the fair market value of the Owned Real Property,
insuring title to the Owned Real Property in the Company subject only to the
Permitted Encumbrances ("Title Policies"). The Title Policies shall contain: (A)
--------------
an "Extended Coverage Endorsement" insuring over the general exceptions
contained in such policies; (B) an ALTA Zoning Endorsement 3.1 (or equivalent);
(C) an endorsement insuring that the Owned Real Property or Leased Property, as
the case may be, described in such Title Policy is the parcel shown on the
Survey (as defined below) with respect to
-11-
<PAGE>
such Owned Real Property; (D) an endorsement insuring that each street adjacent
to such Owned Real Property is a public street and that there is direct and
unencumbered access, ingress and egress to such street from such Owned Real
Property; (E) if any parcel of Owned Real Property contains more than one record
parcel, a contiguity endorsement insuring that all such record parcels are
contiguous to one another; (F) an Owner's Comprehensive Endorsement; (G) a tax
parcel endorsement, and (H) such other endorsements as shall be reasonably
requested by the Purchaser or reasonably required by any lender to the
Purchaser.
(k) Surveys. The Purchaser shall have received, at the Sellers'
-------
cost and expense, a current ALTA/ACSM survey of each parcel of Owned Real
Property with respect to which a Title Policy is required (the "Surveys") made
-------
in accordance with the 1992 ALTA/ACSM standards including items 1 through 13 of
Table A thereof made by a surveyor licensed in the jurisdiction in which such
parcel of Owned Real Property is located and certified to the Purchaser, the
Purchaser's lender and the Title Company as having been so made, disclosing the
location of all improvements, easements, party-walls, sidewalks, roadways,
utility lines and other matters required to be shown on the surveys and showing
each such parcel of Owned Real Property to be free from encroachments of
improvements located thereon onto adjacent property and to be free from
encroachments of improvements located on property adjacent onto such parcel of
Owned Real Property.
(l) On or prior to the Closing Date, the Sellers shall have
delivered to Purchaser all of the following:
(i) a certificate from the Company and the Sellers in a form
reasonably satisfactory to the Purchaser, dated the Closing Date, stating
that the preconditions specified in Sections 3.1(a) through (k) have been
satisfied;
(ii) copies of all third party and governmental consents, approvals,
filings, releases and terminations required to be obtained by the Sellers,
the Company or any of the Company's Subsidiaries in connection with the
consummation of the transactions contemplated herein;
(iii) certified copies of the resolutions of the Company's board of
directors approving the transactions contemplated by this Agreement;
(iv) with respect to the Company and each of its Subsidiaries,
certificates of the secretary of state of such company's state of
incorporation and each state where such company is required to qualify to
do business providing that such company is in good standing in such
jurisdiction;
(v) copies of the resignations described in Section 3.1(f);
(vi) all documents and records relating to the business of the
Company or any of its Subsidiaries that are in any Seller's possession;
(vii) landlord consents and estoppel certificates from the Company's
and each of its Subsidiaries' landlords in form and substance reasonably
satisfactory to the Purchaser and its lenders; and
-12-
<PAGE>
(viii) such other documents or instruments as the Purchaser may
reasonably request to effect the transactions contemplated hereby;
(m) The Purchaser shall have obtained on terms and conditions
reasonably satisfactory to it all of the debt and equity financing required in
order to consummate the transactions contemplated hereby, and to fund the
working capital requirements of the Company and its Subsidiaries after the
Closing; provided that the completion by the Purchaser of an initial public
offering of its common stock shall satisfy such condition; and
(n) All proceedings to be taken by the Company and each Seller in
connection with the consummation of the Closing Transactions and the other
transactions contemplated hereby and all certificates, opinions, instruments and
other documents required to be delivered by the Company and each Seller to
effect the transactions contemplated hereby reasonably requested by the
Purchaser shall be reasonably satisfactory in form and substance to the
Purchaser.
Any condition specified in this Section 3.1 may be waived by the Purchaser;
provided that no such waiver shall be effective unless it is set forth in a
writing executed by the Purchaser.
3.2 CONDITIONS TO EACH SELLERS' OBLIGATIONS. The obligation of each
---------------------------------------
Seller to consummate the transactions contemplated by this Agreement is subject
to the satisfaction of the following conditions as of the Closing Date:
(a) The representations and warranties set forth in Article VII
shall be true and correct in all material respects at and as of the Closing Date
as though then made and as though the Closing Date were substituted for the date
of this Agreement throughout such representations and warranties (without taking
into account any disclosures made by the Purchaser to Sellers pursuant to
Sections 4.3(a) and 7.8 hereof);
(b) The Purchaser shall have performed and complied in all material
respects with all of the covenants and agreements required to be performed by it
under this Agreement on or prior to the Closing;
(c) All governmental filings, authorizations and approvals that are
required for the transfer of the Acquired Stock to the Purchaser and the
consummation of the other transactions contemplated hereby shall have been duly
made and obtained on terms reasonably satisfactory to the Representative and the
applicable waiting periods, if any, under the HSR Act shall have expired or been
terminated;
(d) No action, suit or proceeding shall be pending before any court
or quasi-judicial or administrative agency of any federal, state, local or
foreign jurisdiction or before any arbitrator wherein an unfavorable judgment,
decree, injunction, order or ruling would prevent the performance of this
Agreement or any of the transactions contemplated hereby, declare unlawful the
transactions contemplated by this Agreement, cause such transactions to be
rescinded or materially and adversely affect the right of the Purchaser to own,
operate or control the Company or any of its Subsidiaries, and no judgment,
decree, injunction, order or ruling shall have been entered which has any of the
foregoing effects;
-13-
<PAGE>
(e) The Company and each of Michael A. Falconite and Ralph W.
McCurry shall have entered into an Employment Agreement, and the Employment
Agreements shall be in full force and effect;
(f) The Sellers shall have received an opinion, dated the Closing
Date, of Kirkland & Ellis, counsel to the Purchaser, substantially in the form
of Exhibit E attached hereto;
---------
(g) The Indebtedness described on the "Indebtedness Schedule"
---------------------
attached hereto shall have been paid and the related personal guaranties of
Michael A. Falconite and Ralph W. McCurry shall have been released;
(h) On or prior to the Closing Date, the Purchaser shall have
delivered to the Representative all of the following:
(i) a certificate from the Purchaser in a form reasonably
satisfactory to the Representative, dated the Closing Date, stating that
the preconditions specified in Sections 3.2(a) through (d), inclusive, have
been satisfied;
(ii) copies of all third party and governmental consents, approvals,
filings, releases and terminations required to be obtained by the Purchaser
in connection with the consummation of the transactions contemplated
herein;
(iii) certified copies of the resolutions of the Purchaser's board of
directors approving the transactions contemplated by this Agreement;
(iv) a certificate of the secretary of state of Delaware providing
that the Purchaser is in good standing in such jurisdiction; and
(v) such other documents or instruments as the Sellers may
reasonably request to effect the transactions contemplated hereby; and
(i) All proceedings to be taken by the Purchaser in connection with
the consummation of the Closing Transactions and the other transactions
contemplated hereby and all certificates, opinions, instruments and other
documents required to be delivered by the Purchaser to effect the transactions
contemplated hereby reasonably requested by the Representative shall be
reasonably satisfactory in form and substance to the Representative.
Any condition specified in this Section 3.2 may be waived by the Representative
on behalf of all of the Sellers; provided that no such waiver shall be effective
unless it is set forth in a writing executed by the Representative.
-14-
<PAGE>
ARTICLE IV
COVENANTS PRIOR TO CLOSING
4.1 AFFIRMATIVE COVENANTS OF THE COMPANY AND EACH SELLER. Prior to
----------------------------------------------------
the Closing, unless the Purchaser otherwise agrees in writing, each Seller shall
cause the Company and each of its Subsidiaries to, and in the case of Sections
4.1(f), (g), (h) and (i) each Seller also shall:
(a) except as otherwise explicitly permitted by this Agreement,
conduct its business and operations only in the Ordinary Course of Business;
(b) keep in full force and effect its corporate existence and all
rights, franchises and intellectual property relating or pertaining to its
business and use its best efforts to cause its current insurance (or
reinsurance) policies not to be canceled or terminated or any of the coverage
thereunder to lapse;
(c) use its best efforts to carry on the business of the Company and
each of its Subsidiaries in the same manner as presently conducted and to keep
the Company's and each of its Subsidiaries' business organization and properties
intact, including its present business operations, physical facilities, working
conditions and employees and its present relationships with lessors, licensors,
suppliers and customers and others having business relations with it;
(d) maintain the material assets of the Company and each of its
Subsidiaries in good repair, order and condition (normal wear and tear excepted)
consistent with current needs, replace in accordance with prudent practices its
inoperable, worn out or obsolete assets with assets of good quality consistent
with prudent practices and current needs and, in the event of a casualty, loss
or damage to any material portion of such assets or properties prior to the
Closing Date, if the Company or such Subsidiary is insured, either repair or
replace such damaged property or use the proceeds of such insurance in such
other manner as mutually agreed upon by the Representative and the Purchaser;
(e) maintain the books, accounts and records of the Company and each
of its Subsidiaries in accordance with past custom and practice as reflected in
the Financial Statements;
(f) encourage those employees identified by the Purchaser as
employees who are expected to continue their employment with the Company after
the Closing to continue their employment with the Company and its Subsidiaries
after the Closing;
(g) promptly (once the Company, any of the Company's Subsidiaries or
any Seller obtains knowledge thereof) inform Purchaser in writing of any
variances from the representations and warranties contained in Article V or
Article VI hereof or any breach of any covenant hereunder by the Company, any of
the Company's Subsidiaries or any Seller;
(h) cooperate with the Purchaser and use commercially reasonable best
efforts to cause the conditions to the Purchaser's obligation to close to be
satisfied (including, without limitation, the execution and delivery of all
agreements contemplated hereunder to be so executed
-15-
<PAGE>
and delivered and the making and obtaining of all third party and governmental
notices, filings, authorizations, approvals, consents, releases and
terminations);
(i) cooperate with the Purchaser in the Purchaser's investigation of
the business and properties of the Company and its Subsidiaries, to permit the
Purchaser and its employees, agents, accounting, legal and other authorized
representatives upon prior notice to the Company to (i) have reasonable access
to the premises, books and records of the Company and its Subsidiaries at
reasonable hours, (ii) visit and inspect any of the properties of the Company
and its Subsidiaries, and (iii) discuss the affairs, finances and accounts of
the Company and its Subsidiaries with the respective directors, officers,
partners, key employees, key customers, key sales representatives, key suppliers
and independent accountants of the Company and its Subsidiaries; and
(j) as soon as practicable after the end of each month (but in any
event within 20 days after the end of each month), deliver to the Purchaser a
copy of the Company's unaudited consolidated balance sheet as of the last day of
such month and the related statements of income and cash flows for the one month
and year-to-date periods then ended (each, an "Updated Financial Statement").
---------------------------
4.2 NEGATIVE COVENANTS OF THE COMPANY AND EACH SELLER. Except as set
-------------------------------------------------
forth on the "Negative Covenants Exception Schedule" attached hereto and except
-------------------------------------
as expressly contemplated by this Agreement, prior to the Closing, unless the
Purchaser otherwise agrees in writing, each Seller shall cause the Company and
each of its Subsidiaries to not:
(a) take any action that would require disclosure under Section 5.8;
(b) other than in the Ordinary Course of Business, make any loans,
enter into any transaction with any Insider or make or grant any increase in any
employee's, officer's or director's compensation or make or grant any increase
in any employee benefit plan, incentive arrangement or other benefit covering
any of the employees of the Company or any of its Subsidiaries;
(c) establish or, except in accordance with the terms of the Plans
disclosed herein or with past practice or as required by applicable law,
contribute to any pension, retirement, profit sharing or stock bonus plan or
multiemployer plan covering the employees of the Company or any of its
Subsidiaries;
(d) except as specifically contemplated by this Agreement, enter into
any contract, agreement or transaction, other than in the Ordinary Course of
Business and at arm's length with unaffiliated Persons;
(e) declare, pay, make or otherwise effectuate any dividends,
distributions, redemptions, equity repurchases or other transactions involving
the Company's or any of its Subsidiaries' capital stock or equity securities;
(f) except for (i) the sale of used equipment in an aggregate amount
not to exceed the amount identified on the "Company's Model Projections"
---------------------------
attached as Exhibit F hereto during the applicable period, or (ii) in the
---------
Ordinary Course of Business, sell, transfer, contribute, distribute, or
otherwise dispose of any securities or assets of the Company or any of its
Subsidiaries to any Person;
-16-
<PAGE>
(g) except for capital expenditures in an aggregate amount not to
exceed the amount identified on the Company's Model Projections during the
---------------------------
applicable period, make any capital expenditures or commitments for capital
expenditures that aggregate in excess of $50,000;
(h) other than in the Ordinary Course of Business and except for
capital expenditures in an aggregate amount not to exceed the amount identified
on the Company's Model Projections during the applicable period, incur any
---------------------------
indebtedness for borrowed money other than indebtedness necessary to finance the
Company's or its Subsidiaries' working capital needs;
(i) agree to do any of the foregoing, or negotiate or have any
discussions with any Person with respect to any of the foregoing, other than in
the Ordinary Course of Business.
4.3 COVENANTS OF PURCHASER. Prior to the Closing, the Purchaser
----------------------
shall:
(a) promptly (once it obtains knowledge thereof) inform the
Representative in writing of any variances from the representations and
warranties contained in Article VII or any breach of any covenant hereunder by
Purchaser; and
(b) cooperate with Sellers and use its commercially reasonable best
efforts to cause the conditions to each Seller's obligation to close to be
satisfied (including, without limitation, the execution and delivery of all
agreements contemplated hereunder to be so executed and delivered and the making
and obtaining of all third party and governmental filings, authorizations,
approvals, consents, releases and terminations).
ARTICLE V
REPRESENTATIONS AND WARRANTIES
CONCERNING THE COMPANY
----------------------
As a material inducement to Purchaser to enter into this Agreement,
each Seller hereby jointly and severally represents and warrants that:
5.1 ORGANIZATION AND CORPORATE POWER. The Company and each of its
--------------------------------
Subsidiaries is a corporation duly organized, validly existing and in good
standing under the laws of its state of incorporation and is qualified to do
business in every jurisdiction in which it is required to be qualified. The
jurisdictions of incorporation of the Company and each of its Subsidiaries and
all jurisdictions in which such company is qualified to do business are set
forth on the "Organization Schedule" attached hereto. The Company and each of
---------------------
its Subsidiaries has full power and authority and all licenses, permits and
authorizations necessary to own and operate its properties and to carry on its
business as now conducted. Correct and complete copies of the Company's and each
of its Subsidiaries' articles of incorporation and by-laws have been furnished
to the Purchaser, which documents reflect all amendments made thereto at any
time prior to the date of this Agreement. Correct and complete copies of the
minute books containing the records of meetings of the stockholders and board of
directors, the stock certificate books and the stock record books of the Company
and each of its Subsidiaries have been furnished to the Purchaser. Neither
-17-
<PAGE>
the Company nor any of its Subsidiaries is in default under or in violation of
any provision of its articles of incorporation or by-laws.
5.2 AUTHORIZATION OF TRANSACTIONS. The Company has full corporate
-----------------------------
power and authority to execute and deliver the Transaction Documents and to
consummate the transactions contemplated hereby and thereby. The board of
directors of the Company has duly approved the Transaction Documents and has
duly authorized the execution and delivery of the Transaction Documents and the
consummation of the transactions contemplated thereby. No other corporate
proceedings on the part of the Company or any of its stockholders or
Subsidiaries are necessary to approve and authorize the execution and delivery
of the Transaction Documents and the consummation of the transactions
contemplated thereby. All of the Transaction Documents have been (or, with
respect to those Transaction Documents to be executed at Closing, upon Closing
will be) duly executed and delivered by the Company and constitute the valid and
binding agreements of the Company, enforceable against the Company in accordance
with their terms, except as enforceability may be limited by bankruptcy,
fraudulent conveyance, insolvency, moratorium, reorganization or similar laws
affecting creditors' rights generally and the discretionary nature of specific
performance and other equitable remedies.
5.3 CAPITALIZATION. The authorized, issued and outstanding stock of
--------------
the Company consists of 50,000,000 shares of Common Stock of which 8,330,000
shares are issued and outstanding, and 1,000,000 shares of Preferred Stock of
which no shares are issued and outstanding. All of the issued and outstanding
shares of the Company's capital stock have been duly authorized, are validly
issued, fully paid, and nonassessable, and are held of record by the Sellers in
the amounts set forth on the Schedule of Stockholders and are not subject to,
------------------------
nor were they issued in violation of, any preemptive rights or rights of first
refusal. Except as set forth on the Schedule of Stockholders, there are no
------------------------
outstanding or authorized options, warrants, rights, contracts, calls, puts,
rights to subscribe, conversion rights or other agreements or commitments to
which the Company is a party or which are binding upon the Company providing for
the issuance, disposition or acquisition of any of its capital stock (other than
this Agreement). There are no outstanding or authorized stock appreciation,
phantom stock or similar rights with respect to the Company. There are no voting
trusts, proxies or any other agreements or understandings with respect to the
voting of the capital stock of the Company. The Company is not subject to any
obligation (contingent or otherwise) to repurchase or otherwise acquire or
retire any shares of its capital stock.
5.4 SUBSIDIARIES; INVESTMENTS. Except as set forth on the
-------------------------
"Subsidiaries Schedule" attached hereto, the Company does not own or hold any
---------------------
shares of stock or any other security or interest in any other Person or any
rights to acquire any such stock or other security or interest. All of the
authorized, issued and outstanding shares of capital stock of each of the
Company's Subsidiaries (the "Subsidiary Stock") and the class and par value of
----------------
such Subsidiary Stock are set forth on the Subsidiaries Schedule. All of the
---------------------
issued and outstanding shares of Subsidiary Stock have been duly authorized, are
validly issued, fully paid, and nonassessable, and are held of record and
beneficially by the Persons and in the amounts set forth on the Subsidiaries
------------
Schedule and are not subject to, nor were they issued in violation of, any
- --------
preemptive rights or rights of first refusal, and are owned of record and
beneficially by the respective Persons as set forth on the Subsidiaries Schedule
---------------------
free and clear of all Liens (but subject to applicable laws concerning
unregistered securities). There are no outstanding or authorized options,
warrants, rights, contracts, calls, puts, rights to subscribe, conversion rights
or other agreements or commitments to which the
-18-
<PAGE>
Company or any of its Subsidiaries is a party or which are binding upon the
Company or any of its Subsidiaries providing for the issuance, disposition or
acquisition of any capital stock of any of the Company's Subsidiaries. There are
no outstanding or authorized stock appreciation, phantom stock or similar rights
with respect to the Company's Subsidiaries. There are no voting trusts, proxies
or any other agreements or understandings with respect to the voting of the
Subsidiary Stock. Neither the Company nor any of its Subsidiaries is subject to
any obligation (contingent or otherwise) to repurchase or otherwise acquire or
retire any shares of Subsidiary Stock.
5.5 ABSENCE OF CONFLICTS. Except as set forth on the "Conflicts
-------------------- ---------
Schedule" attached hereto, and except for the filing requirements under the HSR
- --------
Act (the "HSR Filing"), the execution, delivery and performance of the
----------
Transaction Documents and the consummation of the transactions contemplated
thereby by the Company and the Sellers do not and shall not (a) conflict with or
result in any breach of any of the terms, conditions or provisions of, (b)
constitute a default under, (c) result in a violation of, (d) give any third
party the right to modify, terminate or accelerate any obligation under, (e)
result in the creation of any Lien upon the Acquired Stock or the assets of the
Company or any of its Subsidiaries, or (f) require any authorization, consent,
approval, exemption or other action by or notice or declaration to, or filing
with, any court or administrative or other governmental body or agency, under
the provisions of the articles of incorporation or by-laws of the Company or any
of its Subsidiaries or any indenture, mortgage, lease, loan agreement or other
agreement or instrument to which the Company or any of the Company's
Subsidiaries is bound or affected, or any law, statute, rule or regulation to
which the Company or any of the Company's Subsidiaries is subject or any
judgment, order or decree to which the Company or any of the Company's
Subsidiaries is subject.
5.6 FINANCIAL STATEMENTS AND RELATED MATTERS.
----------------------------------------
(a) Financial Statements. Attached hereto as the "Financial
-------------------- ---------
Statements Schedule" are copies of (i) the Company's unaudited consolidated and
- -------------------
consolidating balance sheet as of January 31, 1998 (the "Latest Balance Sheet")
--------------------
and the related statements of income and cash flows for the one-month period
then ended and (ii) the Company's and its predecessor's audited consolidated and
combined balance sheets and statements of income and cash flows for the fiscal
years ended December 31, 1997, 1996 and 1995. Each of the foregoing financial
statements and each of the Updated Financial Statements (including in all cases
the notes thereto, if any) (the "Financial Statements") is (and in the case of
--------------------
the Updated Financial Statements, will be) accurate and complete, is consistent
with the Company's and its Subsidiaries' books and records (which, in turn, are
accurate and complete), present fairly the Company's financial condition and
results of operations as of the times and for the periods referred to therein,
and has been prepared in accordance with GAAP, subject in the case of unaudited
financial statements to changes resulting from normal year-end adjustments for
recurring accruals (which shall not be material individually or in the
aggregate) and to the absence of footnote disclosure.
(b) Inventory. The Company's and its Subsidiaries' inventory (as set
---------
forth on the Latest Balance Sheet), net of the reserves applicable to such
inventory, consists of a quantity and quality which, except as reflected in such
reserve, is usable and saleable in the Ordinary Course of Business, and the
items of such inventory are not defective, slow-moving, obsolete or damaged and
are merchantable and fit for their particular use.
-19-
<PAGE>
(c) Rental Equipment Fleet. The Company's and its Subsidiaries'
----------------------
rental equipment (as set forth on the Latest Balance Sheet), net of the reserves
and accumulated depreciation applicable to such rental equipment, consists of a
quantity and quality which, except as reflected in such reserve and accumulated
depreciation, is usable and rentable in the Ordinary Course of Business, and the
items of such rental equipment are not defective, obsolete or damaged and are
merchantable and fit for their particular use, subject in each case to
applicable reserves and depreciation.
5.7 ABSENCE OF UNDISCLOSED LIABILITIES. Neither the Company nor any
----------------------------------
of its Subsidiaries has any obligations or liabilities (whether accrued,
absolute, contingent, unliquidated or otherwise, whether or not known, whether
due or to become due and regardless of when asserted) arising out of
transactions entered into at or prior to the Closing, or any action or inaction
at or prior to the Closing, or any state of facts existing at or prior to the
Closing, except (i) obligations under contracts or commitments described on the
Contracts Schedule attached hereto or under contracts and commitments which are
- ------------------
not required to be disclosed thereon (but not liabilities for breaches thereof),
(ii) liabilities reflected on the liabilities side of the Latest Balance Sheet,
(iii) liabilities which have arisen after the date of the Latest Balance Sheet
in the Ordinary Course of Business or otherwise in accordance with the terms and
conditions of this Agreement (none of which is a liability for breach of
contract, breach of warranty, tort or infringement or a claim or lawsuit or an
environmental liability) and (iv) other liabilities described in the Schedules
to this Agreement.
5.8 ABSENCE OF CERTAIN DEVELOPMENTS. Except as set forth on the
-------------------------------
"Developments Schedule" attached hereto and except as expressly contemplated by
---------------------
this Agreement, since December 31, 1997, neither the Company nor any of its
Subsidiaries has:
(a) suffered any change that has had or could reasonably be expected
to have a Material Adverse Effect or suffered any theft, damage, destruction or
casualty loss in excess of $100,000, to its assets, whether or not covered by
insurance or suffered any substantial destruction of its books and records;
(b) redeemed or repurchased, directly or indirectly, any shares of
capital stock or other equity security or declared, set aside or paid any
dividends or made any other distributions (whether in cash or in kind) with
respect to any shares of its capital stock or other equity security;
(c) issued, sold or transferred any equity securities, any securities
convertible, exchangeable or exercisable into shares of its capital stock or
other equity securities, or warrants, options or other rights to acquire shares
of its capital stock or other equity securities;
(d) incurred or become subject to any liabilities, except liabilities
disclosed in the Schedules to this Agreement or incurred in the Ordinary Course
of Business;
(e) subjected any portion of its properties or assets to any Lien;
(f) sold, leased, assigned or transferred (including, without
limitation, transfers to any Seller or any Insider) a portion of its tangible
assets, except for sales of inventory and used equipment in the Ordinary Course
of Business, or canceled without fair consideration any material debts or claims
owing to or held by it;
-20-
<PAGE>
(g) sold, assigned, licensed or transferred (including, without
limitation, transfers to any Seller or any Insider) any Proprietary Rights owned
by, issued to or licensed to the Company or any of its Subsidiaries or disclosed
any confidential information (other than pursuant to agreements requiring the
disclosure to maintain the confidentiality of and preserving all rights of the
Company and its Subsidiaries in such confidential information) or received any
confidential information of any third party in violation of any obligation of
confidentiality;
(h) suffered any extraordinary losses or waived any rights of
material value outside the Ordinary Course of Business;
(i) incurred any indebtedness for borrowed money (other than
indebtedness to finance its working capital and capital expenditure needs);
(j) entered into, amended or terminated any material lease, contract,
agreement or commitment other than in the Ordinary Course of Business, or taken
any other action or entered into any other transaction other than in the
Ordinary Course of Business;
(k) entered into any other material transaction, or materially
changed any business practice;
(l) made or granted any bonus (except for bonuses paid to employees
and sales representatives in the Ordinary Course of Business and reflected on
the Financial Statements) or any wage, salary or compensation increase to any
director, officer, employee or sales representative, group of employees or
consultant or made or granted any increase in any employee benefit plan or
arrangement, or amended or terminated any existing employee benefit plan or
arrangement or adopted any new employee benefit plan or arrangement;
(m) made any other change in employment terms for any of its
directors, officers, and employees outside the Ordinary Course of Business;
(n) incurred intercompany charges or conducted its cash management
customs and practices other than in the Ordinary Course of Business (including,
without limitation, with respect to collection of accounts receivable, purchases
of inventory and supplies, repairs and maintenance, and payment of accounts
payable and accrued expenses);
(o) made any loans or advances to, or guarantees for the benefit of,
any Persons other than in the Ordinary Course of Business;
(p) changed (or authorized any change) in its articles of
incorporation or by-laws; or
(q) agreed or committed to do any of the foregoing.
5.9 TITLE TO PROPERTIES.
-------------------
(a) Owned Properties. The "Real Property Schedule" attached hereto
---------------- ----------------------
sets forth a list of all owned real property (collectively, the "Owned Real
----------
Property") used by the Company or
- --------
-21-
<PAGE>
any of its Subsidiaries. With respect to each such parcel of Owned Real
Property: (i) the Company has good and marketable title thereto and such parcel
is free and clear of all Liens, except Liens set forth on the Real Property
-------------
Schedule and Permitted Encumbrances; (ii) there are no leases, subleases,
- --------
licenses, concessions, or other agreements, written or oral, granting to any
person the right of use or occupancy of any portion of such parcel; and (iii)
there are no outstanding actions or rights of first refusal to purchase such
parcel, or any portion thereof or interest therein.
(b) The leases and subleases described on the Real Property Schedule
----------------------
(the "Leased Properties," and together with the Owned Real Property referred to
-----------------
herein as the "Real Property") constitute all of the leases and subleases under
-------------
which the Company or any of its Subsidiaries holds leasehold or subleasehold
interests in real property. The real property leases and subleases described on
the Real Property Schedule are valid, binding, enforceable and in full force and
----------------------
effect and have not been modified (except to the extent disclosed in the
documents delivered to the Purchaser), and the Company or one or more of its
Subsidiaries holds a valid and existing leasehold interest under such leases or
subleases to which it is a party. The Company has delivered to the Purchaser
complete and accurate copies of each of the leases or subleases described on the
Real Property Schedule. With respect to each lease and sublease listed on the
- ----------------------
Real Property Schedule:
- ----------------------
(i) neither the Company, any of its Subsidiaries nor any other party
to the lease or sublease is in breach or default, and no event has occurred
which, with notice or lapse of time, would constitute such a breach or
default or permit termination, modification or acceleration under the lease
or sublease;
(ii) no party to the lease or sublease has repudiated any provision
thereof and there are no disputes, oral agreements or forbearance programs
in effect as to the lease or sublease;
(iii) neither the Company nor any of its Subsidiaries has assigned,
transferred, conveyed, mortgaged, deeded in trust or encumbered any
interest in the leasehold or subleasehold;
(iv) all buildings, improvements or other property leased or
subleased thereunder have received all approvals of governmental
authorities required in connection with the operation thereof and have been
operated and maintained by the Company in accordance with applicable laws,
rules and regulations; and
(v) to the Company's knowledge, the owner of the building,
improvements or other real property leased or subleased has good and
marketable title to the parcel of real property, free and clear of all
Liens, other than (A) installments of special assessments and taxes not yet
due and payable and (B) recorded easements, covenants and restrictions of
record which do not impair the current use, occupancy or value, or the
marketability of title, of the property subject thereto.
(c) The real property described on the Real Property Schedule
----------------------
constitutes all of the real property used or occupied by the Company or any of
its Subsidiaries.
-22-
<PAGE>
(d) Except as set forth on the "Assets Schedule" attached hereto,
---------------
the Company or one or more of its Subsidiaries owns good and marketable title
to, or a valid leasehold interest in, free and clear of all Liens, all of the
personal property and assets which are shown on the Latest Balance Sheet or
acquired thereafter or located on the Real Property or used by the Company or
any of its Subsidiaries.
(e) The buildings, machinery, equipment, personal properties,
vehicles and other tangible assets of the Company or its Subsidiaries located
upon or used in connection with the Real Property are operated in conformity
with all applicable laws and regulations, are in good condition and repair, wear
and tear in the Ordinary Course of Business excepted, and are usable in the
Ordinary Course of Business. The Company or one or more of its Subsidiaries owns
or leases under valid leases all buildings, machinery, equipment and other
tangible assets necessary for the conduct of the business of the Company and its
Subsidiaries.
5.10 TAXES. In each case, except as set forth on the "Taxes
----- -----
Schedule" attached hereto:
- --------
(a) The Company, each of its Subsidiaries and each Affiliated Group
have filed all Tax Returns which they are required to file under applicable laws
and regulations; all such Tax Returns are complete and correct in all material
respects and have been prepared in compliance with all applicable laws and
regulations in all material respects; the Company, each of its Subsidiaries and
each Affiliated Group in all material respects have paid all Taxes due and owing
by them (whether or not such Taxes are required to be shown on a Tax Return) and
have withheld and paid over to the appropriate taxing authority all Taxes which
they are required to withhold from amounts paid or owing to any employee,
equityholder, creditor or other third party; neither the Company, any of its
Subsidiaries nor any Affiliated Group has waived any statute of limitations with
respect to any Taxes or agreed to any extension of time with respect to any Tax
assessment or deficiency; the Company and its Subsidiaries have not incurred any
liability for Taxes other than in the Ordinary Course of Business; the
assessment of any additional Taxes for periods for which Tax Returns have been
filed by the Company, each of its Subsidiaries and each Affiliated Group shall
not exceed the recorded liability therefor on the Latest Balance Sheet
(excluding any amount recorded which is attributable solely to timing
differences between book and Tax income); no foreign, federal, state or local
tax audits or administrative or judicial proceedings are pending or being
conducted with respect to the Company, any Subsidiary or any Affiliated Group,
no written notice indicating an intent to open an audit or other review has been
received by the Company from any foreign, federal, state or local taxing
authority; and there are no material unresolved questions or claims concerning
the Company's or any of its Subsidiaries' Tax liability.
(b) Neither the Company nor any of its Subsidiaries has made an
election under Section 341(f) of the Code. With the exception of Taxes
collected by, withheld by or paid over to the Company or any of its Subsidiaries
and which are identified as such in the books and records of the Company or its
Subsidiaries, neither the Company nor any of its Subsidiaries is liable for the
Taxes of another Person that is not a Subsidiary of the Company under (a)
Treasury Regulation (S) 1.1502-6 (or comparable provisions of state, local or
foreign law), (b) as a transferee or successor, (c) by contract or indemnity or
(d) otherwise. Neither the Company nor any of its Subsidiaries is a party to
any tax sharing agreement. The Company, each of its Subsidiaries and each
Affiliated Group have disclosed on their federal income Tax Returns any position
taken for which substantial
-23-
<PAGE>
authority (within he meaning of Section 6662(d)(2)(B)(i) of the Code) did not
exist at the time the return is filed. Neither the Company nor any of its
Subsidiaries has made any payments, is obligated to make payments or is a party
to an agreement that could obligate it to make any payments that would not be
deductible under Section 280G of the Code.
(c) No claim has ever been made by a taxing authority in a
jurisdiction where the Company or any Subsidiary does not file tax returns that
the Company or such Subsidiary is or may be subject to taxes assessed by such
jurisdiction.
(d) There are no Liens for Taxes (other than for current Taxes not
yet due and payable) upon the assets of the Company or any Subsidiary.
(e) Neither the Company nor any Subsidiary will be required (i) as a
result of a change in method of accounting for a taxable period ending on or
prior to the Closing Date, to include any adjustment in taxable income for any
taxable period (or any portion thereof) or (ii) as a result of any "closing
agreement," as described in Section 7121 of the Code (or any corresponding
provision of state, local or foreign income Tax law), to include any item of
income in, or exclude any item of deduction from, taxable income for any taxable
period (or portion thereof) ending after the Closing Date.
(f) The Company has not been a member of an Affiliated Group other
than the one of which the Company was the common parent, or filed or been
included in a combined, consolidated or unitary income Tax Return, other than
one filed by the Sellers or the Company.
(g) The Purchaser will not be required to deduct and withhold any
amount pursuant to Section 1445(a) of the Code upon the transfer of the Acquired
Stock to the Purchaser.
(h) Neither the Company nor any Subsidiary owns any interest in real
property in the State of New York or in any other jurisdiction in which a tax
(other than a net income or franchise tax) is imposed on the gain on a transfer
of an interest in real property.
5.11 CONTRACTS AND COMMITMENTS.
-------------------------
(a) Except as specifically contemplated by this Agreement and except
as set forth on the "Contracts Schedule" attached hereto, neither the Company
------------------
nor any of its Subsidiaries is a party to or bound by, whether written or oral,
any:
(i) collective bargaining agreement or contract with any labor union
or any bonus, pension, profit sharing, retirement or any other form of
deferred compensation plan or any stock purchase, stock option, group
health insurance or similar plan or practice, whether formal or informal;
(ii) any contract for the employment of any officer, individual
employee or other person on a full-time or consulting basis or any
severance agreements;
(iii) agreement or indenture relating to the borrowing of money or to
mortgaging, pledging or otherwise placing a Lien on any of its assets;
-24-
<PAGE>
(iv) agreements with respect to the lending or investing of funds;
(v) license or royalty agreements (other than license agreements
for mass marketed shrink wrap software);
(vi) guaranty of any obligation, other than endorsements made for
collection;
(vii) lease or agreement under which it is lessee of, or holds or
operates, any personal property owned by any other party calling for
payments in excess of $100,000 annually (other than leases of equipment in
the Ordinary Course of Business);
(viii) lease or agreement under which it is lessor of or permits any
third party to hold or operate any property, real or personal, owned or
controlled by it (other than leases of equipment in the Ordinary Course of
Business);
(ix) contract or group of related contracts with the same party
continuing over a period of more than six months from the date or dates
thereof, involving more than $50,000;
(x) contract which prohibits it from freely engaging in business
anywhere in the world; or
(xi) other agreement material to it whether or not entered into in
the Ordinary Course of Business.
(b) Except as disclosed on the Contracts Schedule, (i) no contract
------------------
or commitment required to be disclosed on the Contracts Schedule has been
------------------
breached or cancelled by the other party and the Company, its Subsidiaries and
the Sellers have no knowledge of any anticipated breach by any other party to
any contract required to be set forth on the Contracts Schedule, (ii) no
------------------
customer or supplier has indicated in writing or orally to the Company, any of
its Subsidiaries or any Seller that it shall stop or decrease the rate of
business done with the Company or any of its Subsidiaries or that it desires to
renegotiate its contract or current arrangement with the Company of any of its
Subsidiaries, (iii) the Company and each of its Subsidiaries has performed all
the obligations required to be performed by it in connection with the contracts
or commitments required to be disclosed on the Contracts Schedule and is not in
------------------
default under or in breach of any contract or commitment required to be
disclosed on the Contracts Schedule, and no event has occurred which with the
------------------
passage of time or the giving of notice or both would result in a default or
breach thereunder, (iv) neither the Company nor any of its Subsidiaries has any
present expectation or intention of not fully performing any obligation pursuant
to any contract required to be set forth on the Contracts Schedule, and (vi)
------------------
each agreement required to be set forth on the Contracts Schedule is legal,
------------------
valid, binding, enforceable and in full force and effect and will continue as
such following the consummation of the transactions contemplated hereby, except
as enforceability may be limited by bankruptcy, fraudulent conveyance,
insolvency, moratorium, reorganization or similar laws affecting creditors'
rights generally and the discretionary nature of specific performance and other
equitable remedies.
(c) The Sellers have provided the Purchaser with a true and correct
copy of all written contracts which are required to be disclosed on the
Contracts Schedule, in each case together
- ------------------
-25-
<PAGE>
with all amendments, waivers or other changes thereto (all of which are
disclosed on the Contracts Schedule). The Contracts Schedule contains an
------------------ ------------------
accurate and complete description of all material terms of all oral contracts
required to be set forth thereon.
5.12 PROPRIETARY RIGHTS.
------------------
(b) The "Proprietary Rights Schedule" attached hereto sets forth a
---------------------------
complete and correct list of: (i) all patented, registered or applied for
Proprietary Rights owned or used by the Company or any of its Subsidiaries; (ii)
all trade names, unregistered trademarks and material unregistered copyrights
owned or used by the Company or any of its Subsidiaries; (iii) all licenses or
other agreements to which the Company or any of its Subsidiaries is a party,
either as licensee or licensor, for any Proprietary Rights (other than license
agreements for mass marketed shrink wrap software).
(c) Except as set forth on the Proprietary Rights Schedule, (i) the
---------------------------
Company or one or more of its Subsidiaries owns and possesses without
restriction as to use, all right, title and interest in and to the Proprietary
Rights necessary for the operation of the Company's and each of its
Subsidiaries' businesses as currently conducted; (ii) neither the Company nor
any of its Subsidiaries has received any notices of invalidity, infringement or
misappropriation from any third party with respect to any such Proprietary
Rights; (iii) neither the Company nor any of its Subsidiaries has interfered
with, infringed upon, misappropriated or otherwise come into conflict with any
Proprietary Rights of any third parties; and (iv) to the Company's and each of
its Subsidiaries' knowledge, no third party has interfered with, infringed upon,
misappropriated, or otherwise come into conflict with any Proprietary Rights of
the Company or any of its Subsidiaries.
(d) The transactions contemplated by this Agreement shall have no
adverse effect on the Company's or any of its Subsidiaries' right, title and
interest in and to any of their Proprietary Rights. The Company and each of its
Subsidiaries has taken all necessary and desirable actions to maintain and
protect its Proprietary Rights and shall continue to maintain and protect those
rights prior to the Closing so as to not adversely affect the validity or
enforcement of such Proprietary Rights.
5.13 LITIGATION; PROCEEDINGS. Except as set forth on the
-----------------------
"Litigation Schedule" attached hereto, there are no actions, suits, proceedings,
- --------------------
orders, judgments, decrees or investigations pending or, to the Company's or any
of its Subsidiaries' knowledge, threatened against or affecting the Company or
any of its Subsidiaries at law or in equity, or before or by any federal, state,
municipal or other governmental department, commission, board, bureau, agency or
instrumentality, domestic or foreign, and to the knowledge of the Company or any
of its Subsidiaries there is no basis for any of the foregoing. Neither the
Company nor any of its Subsidiaries is subject to any outstanding order,
judgment or decree issued by any court or quasi-judicial or administrative
agency of any federal, state, local or foreign jurisdiction or any arbitrator.
5.14 BROKERAGE. Except as set forth on the "Brokerage Schedule"
--------- ------------------
attached hereto, there are no claims for brokerage commissions, finders' fees or
similar compensation in connection with the transactions contemplated by this
Agreement based on any arrangement or agreement made by or on behalf of the
Company or any of its Subsidiaries.
-26-
<PAGE>
5.15 GOVERNMENTAL LICENSES AND PERMITS. Except as indicated on
---------------------------------
the Permits Schedule, the Company and each of its Subsidiaries owns or possesses
----------------
all right, title and interest in and to all Licenses which are necessary to
conduct its business as presently conducted and as proposed to be conducted and
shall use its reasonable efforts to maintain all such Licenses. No loss or
expiration of any License is pending or, to the Company's or any of its
Subsidiaries' knowledge, threatened or reasonably foreseeable (including,
without limitation, as a result of the transactions contemplated hereby) other
than expiration in accordance with the terms thereof.
5.16 EMPLOYEES. Except as set forth on the "Employees Schedule"
--------- ------------------
attached hereto, (i) to the knowledge of the Company or any of its Subsidiaries,
no key executive employee and no group of employees or independent contractors
of the Company or any of its Subsidiaries has any plans to terminate his, her or
its employment or relationship as an independent contractor with the Company or
such Subsidiary, (ii) the Company and each of its Subsidiaries have complied
with all applicable laws relating to the employment of personnel and labor, and
(iii) since January 1, 1987, neither the Company nor any of its Subsidiaries has
experienced any strikes, grievances, unfair labor practices claims or other
material employee or labor disputes. Neither the Company nor any of its
Subsidiaries has engaged in any unfair labor practice. Neither the Company nor
any of its Subsidiaries has any knowledge of any organizational effort presently
being made or threatened by or on behalf of any labor union with respect to
employees of the Company or any of its Subsidiaries.
5.17 EMPLOYEE BENEFIT PLANS.
----------------------
(a) Except as set forth on the "Benefit Plans Schedule" attached
----------------------
hereto, with respect to current or former employees of the Company and each of
its Subsidiaries, neither the Company nor any of its Subsidiaries maintains or
contributes to or has any actual or potential liability with respect to any (i)
deferred compensation or bonus or retirement plans or arrangements, (ii)
qualified or nonqualified defined contribution or defined benefit plans or
arrangements which are employee pension benefit plans (as defined in Section
3(2) of the Employee Retirement Income Security Act of 1974 ("ERISA")), or (iii)
-----
employee welfare benefit plans, (as defined in Section 3(1) of ERISA), stock
option or stock purchase plans, or material fringe benefit plans or programs
whether in writing or oral and whether or not terminated. Except for payments
to multiemployer pension plans (as defined in Section 3(37) of ERISA) for the
benefit of employees who are members of labor unions (the "Company Multiemployer
---------------------
Plans"), neither the Company nor any of its Subsidiaries has ever contributed to
- -----
any multiemployer pension plan (as defined in Section 3(37) of ERISA), and
neither the Company nor any of its Subsidiaries has ever maintained or
contributed to any defined benefit plan (as defined in Section 3(35) of ERISA).
Neither the Company nor any of its Subsidiaries maintains or contributes to any
employee welfare benefit plan which provides health, accident or life insurance
benefits to former employees, their spouses or dependents, other than in
accordance with Section 4980B of the Code ("COBRA").
-----
(b) The employee benefit plans (and related trusts and insurance
contracts) set forth on the Benefit Plans Schedule comply in form and in
----------------------
operation in all respects with the requirements of applicable laws and
regulations, including ERISA and the Code and the nondiscrimination rules
thereof; provided, however, that the foregoing representation is given to the
Company's best knowledge with respect to the Company Multiemployer Plans.
-27-
<PAGE>
(c) All required reports and descriptions (including Form 5500 Annual
Reports, Summary Annual Reports and Summary Plan Descriptions) with respect to
the employee benefit plans set forth on the Benefit Plans Schedule (other than
----------------------
the Company Multiemployer Plans) have been properly and timely filed with the
appropriate government agency and distributed to participants as required. The
Company and each of its Subsidiaries have complied with the requirements of
COBRA.
(d) With respect to each employee benefit plan set forth on the
Benefit Plans Schedule (other than the Company Multiemployer Plans), (i) there
- ----------------------
have been no prohibited transactions as defined in Section 406 of ERISA or
Section 4975 of the Code for which no exemption is applicable, (ii) no fiduciary
(as defined in Section 3(21) of ERISA) has any liability for breach of fiduciary
duty or any other failure to act or comply in connection with the administration
or investment of the assets of such plans, and (iii) no actions, investigations,
suits or claims with respect to the assets thereof (other than routine claims
for benefits) are pending or threatened, and neither the Company nor any of its
Subsidiaries has any knowledge of any facts which would give rise to or could
reasonably be expected to give rise to any such actions, suits or claims.
(e) With respect to each of the employee benefit plans listed on the
Benefit Plans Schedule (other than the Company Multiemployer Plans), the Sellers
- ----------------------
have furnished to the Purchaser true and complete copies of (i) the plan
documents, summary plan descriptions and summaries of material modifications and
other material employee communications, (ii) the Form 5500 Annual Report
(including all schedules and other attachments for the most recent three years),
(iii) all related trust agreements, insurance contracts or other funding
agreements which implement such plans and (iv) all contracts relating to each
such plan, including, without limitation, service provider agreements, insurance
contracts, investment management agreements and recordkeeping agreements.
5.18 INSURANCE. The "Insurance Schedule" attached hereto lists and
--------- ------------------
briefly describes each insurance policy maintained by the Company and each
of its Subsidiaries with respect to its properties, assets and business,
together with a claims history for the past five years. All of such insurance
policies are in full force and effect, and neither the Company nor any of its
Subsidiaries is in default with respect to its obligations under any such
insurance policies and neither the Company nor any of its Subsidiaries has been
denied insurance coverage. Except as set forth on the Insurance Schedule,
------------------
neither the Company nor any of its Subsidiaries has any self-insurance or co-
insurance programs, and the reserves set forth on the Latest Balance Sheet are
adequate to cover all anticipated liabilities with respect to self-insurance or
coinsurance programs.
5.19 OFFICERS AND DIRECTORS; BANK ACCOUNTS. The "Officers,
------------------------------------- ---------
Directors and Bank Accounts Schedule" attached hereto lists all officers and
- ------------------------------------
directors of the Company and each of its Subsidiaries, and all bank accounts,
safety deposit boxes and lock boxes (designating each authorized signatory with
respect thereto) for the Company and each of its Subsidiaries.
5.20 AFFILIATE TRANSACTIONS. Except as disclosed on the
----------------------
"Affiliated Transactions Schedule" attached hereto, no Insider is a party to any
- ---------------------------------
agreement, contract, commitment or transaction with the Company or any of its
Subsidiaries or which is pertaining to the business of the Company or any of its
Subsidiaries (except by virtue of his or her employment) or has any interest
-28-
<PAGE>
in any property, real or personal or mixed, tangible or intangible, used in or
pertaining to the business of the Company or any of its Subsidiaries.
5.21 COMPLIANCE WITH LAWS. Except as set forth on the Taxes
-------------------- -----
Schedule, the Company, each of its Subsidiaries and their respective officers,
- --------
directors, partners, agents and employees have complied with and are in
compliance with all applicable laws, regulations and ordinances of foreign,
federal, state and local governments and all agencies thereof which are
applicable to the business, business practices (including, but not limited to,
the Company's and its Subsidiaries' marketing and sales of their respective
products and services) or any owned or leased properties of the Company or any
of its Subsidiaries and to which the Company or any of its Subsidiaries may be
subject, and no claims have been filed against the Company or any of its
Subsidiaries alleging a violation of any such laws or regulations, and neither
the Company nor any of its Subsidiaries has received notice of any such
violations.
5.22 ENVIRONMENTAL MATTERS. Except as set forth on the
---------------------
"Environmental Schedule" attached hereto:
- -----------------------
(a) The Company and each of its Subsidiaries have complied with and
are currently in compliance with all Environmental and Safety Requirements, and
neither the Company nor any of its Subsidiaries has received any oral or written
notice, report or information regarding any liabilities (whether accrued,
absolute, contingent, unliquidated or otherwise) or any corrective,
investigatory or remedial obligations arising under Environmental and Safety
Requirements which relate to the Company or to any of its Subsidiaries or to any
of their respective properties or facilities.
(b) Without limiting the generality of the foregoing, the Company and
each of its Subsidiaries have obtained and complied with, and are currently in
compliance with, all permits, licenses and other authorizations that may be
required pursuant to any Environmental and Safety Requirements for the occupancy
of their respective properties or facilities or the operation of their
respective businesses. A list of all such permits, licenses and other
authorizations which are material to the Company and its Subsidiaries taken as a
whole is set forth on the Environmental Schedule.
----------------------
(c) Neither this Agreement or the other Transaction Documents nor the
consummation of the transactions contemplated hereby and thereby shall impose
any obligations on the Company or any of its Subsidiaries or otherwise for site
investigation or cleanup, or notification to or consent of any government
agencies or third parties under any Environmental and Safety Requirements
(including, without limitation, any so called "transaction-triggered" or
"responsible property transfer" laws and regulations).
(d) None of the following exists at any property or facility owned,
occupied or operated by the Company or any of its Subsidiaries: (i)
underground storage tanks or surface impoundments; (ii) asbestos-containing
material in any form or condition; (iii) materials or equipment containing
polychlorinated biphenyls; or (iv) landfills.
(e) Neither the Company nor any of its Subsidiaries have treated,
stored, disposed of, arranged for or permitted the disposal of, transported,
handled or Released any substance (including, without limitation, any hazardous
substance) or owned, occupied or operated any facility
-29-
<PAGE>
or property, so as to give rise to liabilities of the Company of any of its
Subsidiaries for response costs, natural resource damages or attorneys' fees
pursuant to CERCLA or any other Environmental and Safety Requirements.
(f) Without limiting the generality of the foregoing, no facts, events
or conditions relating to the past or present properties, facilities or
operations of the Company or any of its Subsidiaries shall prevent, hinder or
limit continued compliance with Environmental and Safety Requirements, give rise
to any corrective, investigatory or remedial obligations pursuant to
Environmental and Safety Requirements or give rise to any other liabilities
(whether accrued, absolute, contingent, unliquidated or otherwise) pursuant to
Environmental and Safety Requirements, including, without limitation, those
liabilities relating to onsite or offsite Releases or threatened Releases of
hazardous materials, substances or wastes, personal injury, property damage or
natural resources damage.
(g) Neither the Company nor any of its Subsidiaries have, either
expressly or by operation of law, assumed or undertaken any liability or
corrective investigatory or remedial obligation of any other Person relating to
any Environmental and Safety Requirements.
(h) No Environmental Lien has attached to any property owned, leased
or operated by the Company or any of its Subsidiaries.
5.23 DISCLOSURE. Neither this Agreement, the other Transaction
----------
Documents, nor any of the schedules, attachments or Exhibits hereto, contain any
untrue statement of a material fact or omit a material fact necessary to make
each statement contained herein or therein, not misleading; There is no fact
which has not been disclosed to the Purchaser of which the Company, any of its
Subsidiaries or any of the Sellers has knowledge which has a Material Adverse
Effect or could reasonably be anticipated to have a Material Adverse Effect.
5.24 CLOSING DATE. All of the representations and warranties of
------------
the Company contained in this Article V and elsewhere in this Agreement and all
information delivered in any schedule, attachment or Exhibit hereto are true and
correct on the date of this Agreement and shall be true and correct on the
Closing Date, except to the extent that the Representative has advised the
Purchaser otherwise in writing at or prior to the Closing.
ARTICLE VI
REPRESENTATIONS AND WARRANTIES CONCERNING THE SELLERS
As a material inducement to the Purchaser to enter into this
Agreement, each Seller severally represents and warrants to the Purchaser that:
6.1 AUTHORIZATION OF TRANSACTIONS.
-----------------------------
(a) Each such Seller that is an individual has full power, authority
and legal capacity to execute and deliver the Transaction Documents to which he
is a party and to consummate the transactions contemplated thereby and hereby.
Each Seller that is an individual has
-30-
<PAGE>
(or, with respect to those Transaction Documents to be executed at Closing, upon
Closing will have) duly executed and delivered all of the Transaction Documents
to which he is a party, and such Transaction Documents constitute the valid and
binding agreements of such Seller, enforceable against such Seller in accordance
with their terms, except as enforceability may be limited by bankruptcy,
fraudulent conveyance, insolvency, moratorium, reorganization or similar laws
affecting creditors' rights generally and the discretionary nature of specific
performance and other equitable remedies.
(b) Each such Seller that is a trust or a limited partnership has full
power and authority to execute and deliver the Transaction Documents to which it
is a party and to consummate the transactions contemplated hereby and thereby.
Each trustee of each Seller that is a trust and each general partner of each
Seller that is a limited partner has duly approved the Transaction Documents to
which such Seller is a party and has duly authorized the execution and delivery
of the Transaction Documents to which such Seller is a party and the
consummation of the transactions contemplated thereby. No other proceedings on
the part of such Seller are necessary to approve and authorize the execution and
delivery of the Transaction Documents to which such Seller is a party and the
consummation of the transactions contemplated thereby. Each such Seller has
(or, with respect to those Transaction Documents to be executed at Closing, upon
Closing will have) duly executed and delivered all of the Transaction Documents
to which it is a party and such Transaction Documents constitute the valid and
binding agreements of such Seller, enforceable against such Seller in accordance
with their terms, except as enforceability may be limited by bankruptcy,
fraudulent conveyance, insolvency, moratorium, reorganization or similar laws
affecting creditors' rights generally and the discretionary nature of specific
performance and other equitable remedies.
6.2 ABSENCE OF CONFLICTS. Except for the HSR Filing, neither the
--------------------
execution and the delivery of this Agreement and the other documents
contemplated hereby to which such Seller is a party, nor the consummation of the
transactions contemplated hereby and thereby, shall (a) conflict with, result in
a breach of any of the provisions of, (b) constitute a default under, (c) result
in the violation of, (d) give any third party the right to terminate or to
accelerate any obligation under, (e) result in the creation of any Lien upon the
Acquired Stock owned by such Seller, or (f) require any authorization, consent,
approval, execution or other action by or notice to any court or other
governmental body, under the provisions of any indenture, mortgage, lease, loan
agreement or other agreement or instrument to which such Seller is bound or
affected, or any statute, regulation, rule, judgment, order, decree or other
restriction of any government, governmental agency or court to which such Seller
is subject. No notice to, filing with or authorization, consent or approval of
any government or governmental agency by such Seller is necessary for the
consummation of the transactions contemplated by this Agreement and the other
documents contemplated hereby to which such Seller is a party.
6.3 BROKERAGE. Except as set forth on the Brokerage Schedule, there
--------- ------------------
are no claims for brokerage commissions, finders' fees or similar compensation
in connection with the transactions contemplated by this Agreement based on any
arrangement or agreement made by or on behalf of such Seller.
6.4 SHARES. Such Seller holds of record and owns beneficially
------
the shares of Acquired Stock as indicated on the Schedule of Stockholders, free
------------------------
and clear of any Liens but subject to laws relating to unregistered securities.
Except as set forth on the Schedule of Stockholders, (i)
------------------------
-31-
<PAGE>
such Seller is not a party to any option, warrant, right, contract, call, put or
other agreement or commitment providing for the disposition or acquisition of
any capital stock of the Company (other than this Agreement) and (ii) such
Seller is not a party to any voting trust, proxy or other agreement or
understanding with respect to the voting of any capital stock of the Company.
6.5 INVESTMENT IN SUBORDINATED NOTES. Such Seller (a) understands
--------------------------------
that the Subordinated Notes (and the capital stock issuable upon conversion
thereof) (the "NES Securities") have not been, and will not be, registered under
--------------
the Securities Act of 1933, as amended, or under any state securities laws, and
are being offered and sold in reliance upon federal and state exemptions for
transactions not involving any public offering, (b) understands that the
transfer of the NES Securities is restricted, (c) is acquiring the NES
Securities solely for his or its own account for investment purposes, and not
with a view to the distribution thereof, (d) is a sophisticated investor with
knowledge and experience in business and financial matters, (e) has received
certain information concerning the Purchaser and has had the opportunity to
obtain additional information as desired in order to evaluate the merits and the
risks inherent in holding the NES Securities and (f) is able to bear the
economic risk and lack of liquidity inherent in holding the NES Securities.
6.6 CLOSING DATE. All of the representations and warranties
------------
concerning such Seller contained in this Article VI and elsewhere in this
Agreement and all information delivered in any schedule, attachment or Exhibit
hereto are true and correct on the date of this Agreement and shall be true and
correct on the Closing Date except to the extent that such Seller has advised
the Purchaser otherwise in writing at or prior to the Closing.
ARTICLE VII
REPRESENTATIONS AND WARRANTIES CONCERNING THE PURCHASER
-------------------------------------------------------
As a material inducement to Sellers to enter into this Agreement, the
Purchaser hereby represents and warrants to Sellers that:
7.1 ORGANIZATION AND CORPORATE POWER. The Purchaser is a
--------------------------------
corporation duly organized, validly existing and in good standing under the laws
of the State of Delaware, with full corporate power and authority to enter into
this Agreement and the other agreements contemplated hereby to which the
Purchaser is a party and perform its obligations hereunder and thereunder.
Correct and complete copies of the Purchaser's articles of incorporation and by-
laws have been furnished to the Representative, which documents reflect all
amendments made thereto at any time prior to the date of this Agreement.
7.2 AUTHORIZATION OF TRANSACTION. The execution, delivery and
----------------------------
performance of this Agreement and the other agreements contemplated hereby to
which the Purchaser is a party have been duly and validly authorized by all
requisite corporate action on the part of the Purchaser, and no other corporate
proceedings on its part are necessary to authorize the execution, delivery or
performance of this Agreement. This Agreement constitutes, and each of the
other agreements contemplated hereby to which the Purchaser is a party shall
when executed constitute, a valid and binding obligation of the Purchaser,
enforceable in accordance with their terms, except as enforceability may be
limited by bankruptcy, fraudulent conveyance, insolvency, moratorium,
-32-
<PAGE>
reorganization or similar laws affecting creditors' rights generally and the
discretionary nature of specific performance and other equitable remedies.
7.3 Absence of Conflicts. Except for the HSR Filing, the execution,
--------------------
delivery and performance of the Transaction Documents and the consummation of
the transactions contemplated thereby by the Purchaser do not and shall not (a)
conflict with or result in any breach of any of the terms, conditions or
provisions of, (b) constitute a default under, (c) result in a violation of, (d)
give any third party the right to modify, terminate or accelerate any obligation
under, (e) result in the creation of any Lien upon the assets of the Purchaser
or any of its Subsidiaries, or (f) require any authorization, consent, approval,
exemption or other action by or notice or declaration to, or filing with, any
court or administrative or other governmental body or agency, under the
provisions of the articles of incorporation or by-laws of the Purchaser or any
of its Subsidiaries or any indenture, mortgage, lease, loan agreement or other
agreement or instrument to which the Purchaser or any of its Subsidiaries is
bound or affected, or any law, statute, rule or regulation to which the
Purchaser or any of its Subsidiaries is subject or any judgment, order or decree
to which the Purchaser or any of its Subsidiaries is subject.
7.4 LITIGATION; PROCEEDINGS. There are no actions, suits,
-----------------------
proceedings, orders, judgments, decrees or investigations pending or, to the
Purchaser's knowledge, threatened against or affecting the Purchaser at law or
in equity, or before or by any federal, state, municipal or other governmental
department, commission, board, bureau, agency or instrumentality, domestic or
foreign, and to the knowledge of the Purchaser there is no basis for any of the
foregoing. The Company is not subject to any outstanding order, judgment or
decree issued by any court or quasi-judicial or administrative agency of any
federal, state, local or foreign jurisdiction or any arbitrator.
7.5 BROKERAGE. There are no claims for brokerage commissions,
---------
finders' fees or similar compensation in connection with the transactions
contemplated by this Agreement based on any arrangement or agreement made by or
on behalf of the Purchaser.
7.6 NES SECURITIES. The NES Securities to be issued pursuant to the
--------------
terms of this Agreement have been duly authorized for issuance by all requisite
corporate action of the Purchaser, and the capital stock of the Purchaser
issuable upon conversion of the Subordinated Notes shall, when issued pursuant
to the terms of the Subordinated Notes, be duly and validly issued, fully paid
and non-assessable voting common stock of the Purchaser, without violation of
any preemptive or dissenters or similar rights.
7.7 DISCLOSURE. There is no fact which has not been disclosed to the
----------
Representative of which the Purchaser has knowledge which has a material adverse
effect, or could reasonably be anticipated to have a material adverse effect, on
the business, financial condition, operations, results of operations, or future
prospects of the Purchaser.
7.8 CLOSING DATE. All of the representations and warranties of the
------------
Purchaser contained in this Article VII and elsewhere in this Agreement and all
information delivered in any schedule, attachment or Exhibit hereto are true and
correct on the date of this Agreement and shall be true and correct on the
Closing Date, except to the extent that the Purchaser has advised Sellers
otherwise in writing at or prior to the Closing.
-33-
<PAGE>
ARTICLE VII
TERMINATION
-----------
8.1 Termination. This Agreement may be terminated at any time prior
-----------
to the Closing:
(a) by mutual written consent of the Representative and the
Purchaser;
(b) by the Representative if there has been a material
misrepresentation or breach on the part of the Purchaser of the representations,
warranties or covenants set forth in this Agreement or if events have occurred
which have made it impossible to satisfy a condition precedent to the Sellers'
obligations to consummate the transactions contemplated hereby unless the
Sellers' willful or knowing breach of this Agreement has caused the condition to
be unsatisfied;
(c) by the Purchaser if there has been a material misrepresentation
or breach on the part of any of the Sellers or the Company of the
representations, warranties or covenants set forth in this Agreement or if
events have occurred which have made it impossible to satisfy a condition
precedent to the Purchaser's obligations to consummate the transactions
contemplated hereby unless the Purchaser's willful or knowing breach of this
Agreement has caused the condition to be unsatisfied;
(d) by the Representative at any time after August 31, 1998 if (i)
the Closing has not occurred at or prior to such time as a result of the
Purchaser's failure to satisfy the condition set forth in Section 3.1(m)
(Financing), and (ii) the conditions set forth in Section 3.1(a) through 3.1(l),
inclusive, have been satisfied, and (iii) aggregate EBITDA for the period
beginning on April 1, 1998 and ending on August 31, 1998 is equal to, or greater
than, $14,518,080.
(e) by the Purchaser at any time prior to the first to occur of (i)
the time at which the Purchaser files a registration statement on Form S-1 with
the Securities and Exchange Commission which includes information concerning the
Company, and (ii) April 10, 1998, if the Purchaser is not satisfied with the
results of its business, accounting, insurance, legal, environmental or other
due diligence review of the Company; or
(f) by the Representative or the Purchaser at any time after
September 10, 1998 if the Closing has not occurred at or prior to such time;
provided, however, that neither the Purchaser nor the Representative shall be
entitled to terminate this Agreement pursuant to this Section 8.1(f) if such
Party's willful or knowing breach of this Agreement has prevented the
consummation of the transactions contemplated hereby at or prior to such time.
8.2 EFFECT OF TERMINATION. In the event of termination of this
---------------------
Agreement by either the Representative or the Purchaser as provided in Section
8.1, this Agreement shall forthwith become void and there shall be no liability
on the part of any Party to any other Party under this Agreement, except that
the provisions of Sections 10.4 and 10.8 and Article IX shall continue in full
force and effect and except that nothing herein shall relieve any Party from
liability for any breach of this Agreement prior to such termination; provided
that in the event of termination of this Agreement by the Representative
pursuant to Section 8.1(d), the Purchaser's sole obligation to the
-34-
<PAGE>
Company and the Sellers shall be the payment to the Company of (i) the Company's
reasonable legal fees and accounting fees incurred in connection with the
negotiation of this Agreement and the preparation for the Closing and (ii)
$2,000,000 as liquidated damages.
ARTICLE IX
INDEMNIFICATION AND RELATED MATTERS
-----------------------------------
9.1 SURVIVAL. All representations, warranties, covenants and
--------
agreements set forth in this Agreement or in any writing or certificate
delivered in connection with this Agreement shall survive the Closing Date and
the consummation of the transactions contemplated hereby and shall not be
affected by any examination made for or on behalf of any Party, the knowledge of
any of such Party's officers, directors, stockholders, employees or agents, or
the acceptance of any certificate or opinion. Notwithstanding the foregoing, no
Party shall be entitled to recover for any Loss pursuant to Section 9.2(a)(i) or
Section 9.2(c)(i) unless written notice of a claim thereof is delivered to the
other Party prior to the Applicable Limitation Date. For purposes of this
Agreement, the term "Applicable Limitation Date" shall mean the first
--------------------------
anniversary of the Closing Date; provided that the Applicable Limitation Date
with respect to the following Losses shall be as follows: (i) with respect to
any Loss arising from or related to a breach of the representations and
warranties set forth in Section 5.10 (Taxes) (or in Section 5.24 (Closing Date)
with respect to Section 5.10), the Applicable Limitation Date shall be the 30th
day after expiration of the statute of limitations (including any extensions
thereto to the extent that such statute of limitations may be tolled) applicable
to the Tax which gave rise to such Loss, (ii) with respect to any Loss arising
from or related to a breach of the representations and warranties set forth in
Section 5.22 (Environmental) (or in Section 5.24 (Closing Date) with respect to
Section 5.22), the Applicable Limitation Date shall be the third anniversary of
the Closing Date, and (iii) with respect to any Loss arising from or related to
a breach of the representations and warranties set forth in Section 5.1
(Organization and Corporate Power) (or in Section 5.24 (Closing Date) with
respect to Section 5.1), Section 5.2 (Authorization of Transactions) (or in
Section 5.24 (Closing Date) with respect to Section 5.2), Section 5.3
(Capitalization) (or in Section 5.24 (Closing Date) with respect to Section
5.3), Section 5.14 (Brokerage) (or in Section 5.24 (Closing Date) with respect
to Section 5.14) or Article VI (Representations and Warranties with Respect to
Sellers) and with respect to any Loss arising from or related to a breach of the
representations and warranties of Purchaser set forth in Section 7.1
(Organization an Corporate Power) (or in Section 7.8 (Closing Date) with respect
to Section 7.1), 7.2 (Authorization of Transactions) (or in Section 7.8 (Closing
Date) with respect to Section 7.2) or 7.5 (Brokerage) (or in Section 7.8
(Closing Date) with respect to Section 7.5), the Applicable Limitation Date
shall be on the 30th day after expiration of the statute of limitations
applicable to actions for breach of contract with respect to this Agreement.
9.2 INDEMNIFICATION.
---------------
(a) Each Seller shall jointly and severally indemnify the Purchaser,
and the Company and each of their respective officers, directors, stockholders,
employees, agents, representatives, affiliates, successors and assigns
(collectively, the "Purchaser Parties") and hold each of them harmless from and
-----------------
against and pay on behalf of or reimburse such Purchaser Parties
-35-
<PAGE>
in respect of any Loss which any such Purchaser Party may suffer, sustain or
become subject to, as a result of or relating to:
(i) (A) the breach of any representation or warranty made by the
Company or any Seller contained in this Agreement (other than in Article VI
of this Agreement) or any certificate delivered to the Purchaser with
respect thereto in connection with the Closing, or (B) with respect to each
Company Multiemployer Plan, (1) any prohibited transaction (as defined in
Section 406 of ERISA or Section 4975 of the Code for which no exemption is
applicable) which took place at or prior to the Closing, (2) any breach of
fiduciary duty which took place at or prior to the Closing or any other
failure to act or comply at or prior to the Closing in connection with the
administration or investment of the assets of such plan, (3) any action,
investigation, suit or claim with respect to the assets thereof (other than
routine claims for benefits) which is pending or threatened prior to the
Closing, (4) such plan's failure to comply in form and in operation in all
respects with the requirements of applicable laws and regulations,
including ERISA and the Code and the nondiscrimination rules thereof, (5)
any liability which the Company would have if the Company were to withdraw
from such plan as of the Closing Date, or (6) any facts of which the
Company or any of its Subsidiaries has any knowledge at or prior to the
Closing and which would give rise to or could reasonably be expected to
give rise to any such actions, suits or claims; or
(ii) the breach of any representation or warranty made by such
Seller contained in Article VI of this Agreement or any certificate
delivered by such Seller to the Purchaser with respect thereto in
connection with the Closing; or
(iii) the breach of any covenant or agreement made by the Company (if
such covenant or agreement is to be performed at or prior to the Closing)
or any Seller contained in this Agreement, the other Transaction Documents
(other than the Employment Agreements), any Exhibit hereto or any
certificate delivered to the Purchaser with respect thereto in connection
with the Closing; or
(iv) all sales and use Taxes payable by the Company or any of its
Subsidiaries after the Closing with respect to transactions, operations,
activities and events occurring at or prior to the Closing to the extent
the amount of such sales and use Taxes exceeds the accrual for such sales
and use Taxes utilized in determining the amount of Actual Net Equity.
The Purchaser Party's remedy for any indemnification of Losses hereunder may be
satisfied by proceeding against one or more Sellers individually for all or any
portion of any such Loss; provided that no Seller shall be liable hereunder for
Losses in excess of such Seller's pro rata portion of the Cap based on such
Seller's proportionate ownership of the Acquired Stock as set forth on the
Schedule of Stockholders. Notwithstanding the foregoing (including, without
- ------------------------
limitation, the first sentence of Section 9.2(a)), if any such Loss arises from
a breach of such Seller's representation or warranty contained in Article VI,
the Purchaser Party shall proceed solely against such breaching Seller for the
entire amount of such Loss.
(b) The indemnification provided for in Section 9.2(a)(i) above is
subject to the following limitations:
-36-
<PAGE>
(i) the Sellers will be liable to the Purchaser Parties with respect
to claims referred to in Section 9.2(a)(i) only if the Purchaser Party
gives the Representative written notice thereof within the Applicable
Limitation Date;
(ii) the Sellers will be liable to the Purchaser Parties with respect
to claims referred to in Section 9.2(a)(i) only if the aggregate amount of
all Losses relating to any and all claims referred to in Section 9.2(a)(i)
exceeds $750,000 (the "Deductible") and then only to the extent of such
----------
excess;
(iii) the aggregate amount of all payments made by the Sellers in
satisfaction of claims for indemnification pursuant to Section 9.2(a)(i)
shall not exceed $15,000,000 (the "Cap"); and
---
(iv) notwithstanding any implication to the contrary contained in
this Agreement, so long as the Purchaser Party delivers written notice of a
claim to the Representative no later than the Applicable Limitation Date,
the Sellers shall be required to indemnify the Purchaser Parties for all
Losses (in excess of the Deductible and up to the Cap) which the Purchaser
Parties may incur in respect of the matters which are the subject of such
claim, regardless of when incurred.
(c) The Purchaser shall indemnify the Sellers and hold each Seller
and its officers, directors, stockholders, employees, agents, representatives,
affiliates, successors and assigns (collectively, the "Seller Parties") harmless
--------------
from and against and pay on behalf of or reimburse such Seller Party in respect
of any Loss which any Seller Party may suffer, sustain or become subject to, as
a result of or relating to:
(i) the breach of any representation or warranty made by the
Purchaser contained in Article VII of this Agreement or any certificate
delivered by the Purchaser to the Sellers with respect thereto in
connection with the Closing; or
(ii) the breach of any representation, warranty (other than
representations or warranties set forth in Article VII), covenant or
agreement made by the Purchaser contained in this Agreement, the other
Transaction Documents, any Exhibit hereto or any certificate delivered by
the Purchaser to the Sellers with respect thereto in connection with the
Closing.
(d) The indemnification provided for in Section 9.2(c)(i) above is
subject to the following limitations:
(i) The Purchaser will be liable to the Seller Parties with respect
to claims referred to in Section 9.2(c)(i) only if the Representative gives
the Purchaser written notice thereof within the Applicable Limitation Date;
(ii) the Purchaser will be liable to the Seller Parties with respect
to claims referred to in Section 9.2(c)(i) only if the aggregate amount of
all Losses relating to any and all claims referred to in Section 9.2(c)(i)
exceeds the Deductible and then only to the extent of such excess;
-37-
<PAGE>
(iii) The aggregate amount of all payments made by the Purchaser in
satisfaction of claims for indemnification pursuant to Section 9.2(c)(i)
shall not exceed the Cap; and
(iv) notwithstanding any implication to the contrary contained in
this Agreement, so long as the Representative delivers written notice of a
claim to the Purchaser no later than the Applicable Limitation Date, the
Purchaser shall be required to indemnify the Seller Parties for all Losses
(in excess of the Deductible and up to the Cap) which the Seller Parties
may incur in respect of the matters which are the subject of such claim,
regardless of when incurred.
(e) If a party hereto seeks indemnification under this Article IX,
such party (the "Indemnified Party") shall give written notice to the other
-----------------
party (the "Indemnifying Party") after receiving written notice of any action,
------------------
lawsuit, proceeding, investigation or other claim against it (if by a third
party) or discovering the liability, obligation or facts giving rise to such
claim for indemnification, describing the claim, the amount thereof (if known
and quantifiable), whether insurance may be available (if known), and the basis
thereof; provided that the failure to so notify the Indemnifying Party shall not
relieve the Indemnifying Party of its or his obligations hereunder except to the
extent such failure shall have harmed the Indemnifying Party. In that regard,
if any action, lawsuit, proceeding, investigation or other claim shall be
brought or asserted by any third party which, if adversely determined, would
entitle the Indemnified Party to indemnity pursuant to this Article IX, the
Indemnified Party shall promptly notify the Indemnifying Party of the same in
writing, specifying in detail the basis of such claim and the facts pertaining
thereto and the Indemnifying Party shall be entitled to notify any applicable
insurer and to control (subject to the rights of such insurer) the defense of
such action, lawsuit, proceeding, investigation or other claim giving rise to
the Indemnified Party's claim for indemnification at its expense with reputable
counsel reasonably acceptable to the Indemnified Party; provided that, as a
condition precedent to the Indemnifying Party's right to assume control of such
defense, it must first agree to be fully responsible for all Losses relating to
such claims and that it will provide full indemnification to the Indemnified
Party for all Losses (to the extent not reimbursed by insurance) relating to
such claim; and provided further that the Indemnifying Party shall not have the
right to assume control of such defense and shall pay the fees and expenses of
counsel retained by the Indemnified Party, if the claim over which the
Indemnifying Party seeks to assume control (i) seeks non-monetary relief, (ii)
involves criminal or quasi-criminal allegations, or (iii) involves a claim
which, upon petition by the Indemnified Party, the appropriate court rules that
the Indemnifying Party failed or is failing to vigorously prosecute or defend.
If the Indemnifying Party is permitted to assume and control the defense
and elects to do so, the Indemnified Party shall have the right to employ
counsel separate from counsel employed by the Indemnifying Party in any such
action and to participate in the defense thereof, but the fees and expenses of
such counsel employed by the Indemnified Party shall be at the expense of the
Indemnified Party unless (i) the employment thereof has been specifically
authorized by the Indemnifying Party in writing, or (ii) the Indemnifying Party
has been advised by counsel that a reasonable likelihood exists of a conflict of
interest between the Indemnifying Party and the Indemnified Party.
If the Indemnifying Party shall control the defense of any such claim, the
Indemnifying Party shall obtain the prior written consent of the Indemnified
Party (which shall not be unreasonably
-38-
<PAGE>
withheld) before entering into any settlement of a claim or ceasing to defend
such claim, if pursuant to or as a result of such settlement or cessation,
injunction or other equitable relief will be imposed against the Indemnified
Party or if such settlement does not expressly unconditionally release the
Indemnified Party from all liabilities and obligations with respect to such
claim, without prejudice. If the Indemnified Party shall control the defense of
any such claim, the Indemnified Party shall obtain the prior written consent of
the Indemnifying Party (which shall not be unreasonably withheld) before
entering into any settlement of a claim or ceasing to defend such claim, if the
Indemnifying Party is a named defendant in such claim and pursuant to or as a
result of such settlement or cessation, injunction or other equitable relief
will be imposed against the Indemnifying Party or if such settlement does not
expressly unconditionally release the Indemnifying Party from all liabilities
and obligations with respect to such claim, without prejudice.
(f) Amounts paid to or on behalf of Sellers or Purchaser as
indemnification shall be treated as adjustments to the Purchase Price.
(g) Effective upon the Closing, each Seller hereby irrevocably
waives, releases and discharges the Company from any and all liabilities and
obligations to such Seller of any kind or nature whatsoever, whether in his
capacity as Seller hereunder, as a stockholder, officer or director of the
Company or otherwise (including, without limitation, in respect of rights of
contribution or indemnification other than compensation as an employee of the
Company), in each case whether absolute or contingent, liquidated or
unliquidated, and whether arising hereunder or under any other agreement or
understanding or otherwise at law or equity, and each Seller shall not seek to
recover any amounts in connection therewith or thereunder from the Company;
provided that from and after the Closing Date the Purchaser shall cause the
Company to maintain directors and officers insurance coverage substantially
similar to such coverage maintained by the Purchaser with respect to its other
operating Subsidiaries. In no event shall the Company or its Subsidiaries have
any liability whatsoever for any breaches of the representations, warranties,
agreements or covenants of the Company, and the Sellers shall in no event seek
contribution from the Company or any Subsidiary for any such breaches or in
respect of any other payments required to be made by Sellers pursuant to this
Agreement.
(h) The parties hereto acknowledge and agree that, except with
respect to (i) any claim for indemnification based upon actual fraud or
intentional misrepresentation, or (ii) any equitable remedies for injunction or
specific performance which the Purchaser may be able to pursue with respect to
any of the obligations of the Sellers or the Company, the provisions of this
Article IX shall be the sole and exclusive remedy of the parties hereto against
each other for any Loss or other claim arising out of this Agreement and the
transactions contemplated herein.
ARTICLE X
ADDITIONAL AGREEMENTS
---------------------
10.1 SUBORDINATED NOTES. Each Subordinated Note will be imprinted
------------------
with a legend substantially in the following form:
-39-
<PAGE>
THIS NOTE WAS ORIGINALLY ISSUED ON _______ __, 1998, AND HAS NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED. THE TRANSFER OF
THIS NOTE IS SUBJECT TO CERTAIN RESTRICTIONS SET FORTH IN THE PURCHASE
AGREEMENT. THE ISSUER OF THIS NOTE WILL FURNISH A COPY OF THESE PROVISIONS
TO THE HOLDER HEREOF WITHOUT CHARGE UPON WRITTEN REQUEST.
The transfer of any Subordinated Note is subject to the following condition:
In connection with the transfer of any Subordinated Note, the holder thereof
shall deliver written notice to the Company describing in reasonable detail the
transfer or proposed transfer, together with an opinion of Thompson Coburn or
other counsel which (to the Company's reasonable satisfaction) is knowledgeable
in securities law matters, or other evidence satisfactory to the Company to the
effect that such transfer of a Subordinated Note may be effected without
registration of such Subordinated Note under the Securities Act of 1933, as
amended. In addition, if the holder of the Subordinated Note delivers to the
Company an opinion of Thompson Coburn or such other counsel that no subsequent
transfer of such Subordinated Note shall require registration under the
Securities Act of 1933, as amended, the Company shall promptly upon such
contemplated transfer deliver a new copy of such Subordinated Note which does
not bear the Securities Act portion of the legend set forth in this Section
10.1. Notwithstanding the foregoing, the Sellers shall be entitled to transfer
Subordinated Notes among themselves and the beneficiaries and partners of
Sellers which are trusts or limited partnerships without furnishing an opinion
of counsel. If the Company is not required to deliver a new copy of such
Subordinated Note not bearing such portion of the legend, the holder thereof
shall not transfer the same until the prospective transferee has confirmed to
the Company in writing its agreement to be bound by the conditions contained in
this paragraph.
10.2 CONTINUING ASSISTANCE. Subsequent to the Closing, each Seller
---------------------
and the Purchaser (at their own cost) shall assist each other (including making
records available) in the preparation of their respective Tax Returns and the
filing and execution of Tax elections, if required, as well as any audits or
litigation that ensue as a result of the filing thereof, to the extent that such
assistance is reasonably requested.
10.3 TAX MATTERS. The following provisions shall govern the
-----------
allocation of responsibility as between the Purchaser and the Sellers for
certain tax matters following the Closing Date:
(a) Tax Periods Ending on or Before the Closing Date. The Purchaser
------------------------------------------------
shall prepare or cause to be prepared and file or cause to be filed all Tax
Returns for the Company for all periods ending on or prior to the Closing Date
which are filed after the Closing Date (other than income Tax Returns with
respect to periods for which the consolidated, unitary and combined income Tax
Returns of the Sellers will include the operations of the Company). The Company
shall permit the Sellers to review and comment on each such Tax Return described
in the preceding sentence prior to filing, and, to the extent consistent with
applicable laws, each such Tax Return shall be prepared on a basis consistent
with the past practices of the Company and each of its Subsidiaries. The
Sellers shall reimburse the Purchaser for Taxes of the Company with respect to
such periods within fifteen (15) days of payment by the Purchaser or the Company
of such Taxes to the extent the amounts of such Taxes are not utilized in
determining the Actual Net Equity. The Purchaser shall cause the Company and
each of its Subsidiaries to join in the Purchaser's federal
-40-
<PAGE>
income Tax Return for the Taxable period beginning the day after the Closing
Date, and, to the extent possible, shall cause the Company and each of its
Subsidiaries to join in the Purchaser's other consolidated, combined and unitary
Tax Returns for the Taxable periods beginning the day after the Closing Date.
(b) Tax Periods Beginning Before and Ending After the Closing Date.
--------------------------------------------------------------
The Purchaser shall prepare or cause to be prepared and file or cause to be
filed any Tax Returns of the Company for Tax periods which begin before the
Closing Date and end after the Closing Date. The Sellers shall pay to the
Purchaser within fifteen (15) days of the date on which Taxes are paid with
respect to such periods an amount equal to the portion of such Taxes which
relates to the portion of such Taxable period ending on the Closing Date to the
extent the amounts of such Taxes are not utilized in determining the Actual Net
Equity. For purposes of this Section, in the case of any Taxes that are imposed
on a periodic basis and are payable for a Taxable period that includes (but does
not end on) the Closing Date, the portion of such Taxes which relates to the
portion of such Taxable period ending on the Closing Date shall (x) in the case
of any Taxes other than Taxes based upon or related to receipts or income, be
deemed to be the amount of such Tax for the entire Taxable period multiplied by
a fraction the numerator of which is the number of days in the Taxable period
ending on the Closing Date and the denominator of which is the number of days in
the entire Taxable period, and (y) in the case of any Tax based upon or related
to receipts or income be deemed equal to the amount which would be payable if
the relevant Taxable period ended on the Closing Date. All determinations
necessary to give effect to the foregoing allocations shall be made in a manner
consistent with prior practice of the Company and each of its Subsidiaries
jointly by the Purchaser and the Representative.
(c) Cooperation on Tax Matters.
--------------------------
(i) The Purchaser, the Company and the Sellers shall cooperate
fully, as and to the extent reasonably requested by the other party, in
connection with the filing of Tax Returns and any audit, litigation or other
proceeding with respect to Taxes. Such cooperation shall include the retention
and (upon the other party's request) the provision of records and information
which are reasonably relevant to any such audit, litigation or other proceeding
and making employees available on a mutually convenient basis to provide
additional information and explanation of any material provided hereunder. The
Company and the Sellers agree (A) to retain all books and records with respect
to Tax matters and pertinent to the Company relating to any taxable period
beginning before the Closing Date until the expiration of the statute of
limitations (and, to the extent notified by the Purchaser or the Sellers, any
extensions thereof) of the respective taxable periods, and to abide by all
record retention agreements entered into with any taxing authority, and (B) to
give the other party reasonable written notice prior to transferring ,
destroying or discarding any such books and records and, if the other party so
requests, the Company or the Sellers, as the case may be, shall allow the other
party to take possession of such books and records.
(ii) The Purchaser and the Sellers further agree, upon request,
to use their best efforts to obtain any certificate or other document from any
governmental authority or any other Person as may be necessary to mitigate,
reduce or eliminate any Tax that could be imposed (including, but not limited
to, with respect to the transactions contemplated hereby).
-41-
<PAGE>
(d) Tax Sharing Agreements. All tax-sharing agreements or similar
----------------------
agreements with respect to or involving the Company shall be terminated as of
the Closing Date and, after the Closing Date, the Company shall not be bound
thereby or have any liability thereunder.
(e) Certain Taxes. All transfer, documentary, sales, use, stamp,
-------------
registration and other such Taxes and fees (including any penalties and
interest) incurred in connection with this Agreement, shall be paid by the
Sellers when due, and the Sellers will, at their own expense, file all necessary
Tax Returns and other documentation with respect to all such transfer,
documentary, sales, use, stamp, registration and other Taxes and fees, and, if
required by applicable law, the Purchaser will, and will cause its Affiliates
to, join in the execution of any such Tax Returns and other documentation.
(f) Real Property Holding Corporation Status. The Sellers will
----------------------------------------
furnish the Purchaser prior to the Closing a certification pursuant to Treasury
Regulation (S) 1.897-2 to the effect that the Company is not a "United States
real property holding corporation" as defined in Section 897 of the Code.
(g) Sales and Use Taxes. Within 15 days after (i) the expiration of
-------------------
all statutes of limitations (including any extensions thereof to the extent that
any such statute of limitations may be tolled) or (ii) the settlement of such
sale and use Tax dispute, with respect to any sales and use Taxes payable by the
Company or any of its Subsidiaries with respect to transactions, operations,
activities and events occurring at or prior to the Closing, to the extent the
amount paid by the Company and its Subsidiaries after the Closing is less than
the accrual for such sales and use Taxes utilized in determining the amount of
Actual Net Equity, the Company shall pay the difference to the Representative in
cash for the benefit of the Sellers.
10.4 PRESS RELEASES AND ANNOUNCEMENTS. Prior to the Closing Date, no
--------------------------------
press releases related to this Agreement and the transactions contemplated
herein, or other announcements to the employees, customers or suppliers of the
Company or any of its Subsidiaries shall be issued without the mutual approval
of all Parties, except for any public disclosure which any Party in good faith
believes is required by law or regulation (in which case the disclosure shall be
prepared jointly by the Sellers and the Purchaser); provided that in the event
the Purchaser files a registration statement with the Securities and Exchange
Commission, the Purchaser shall be entitled to (i) disclose the transactions
contemplated hereby in such registration statement, (ii) include a detailed
description of the Company and its Subsidiaries in such registration statement,
and (iii) include copies of the Company's and its predecessor's consolidated
financial statements in such registration statement; provided that prior to
filing any such registration statement, the Purchaser shall deliver a copy of a
substantially final draft of such registration statement to the Representative
and provide the Representative with a reasonable opportunity to comment on such
draft. After the Closing Date, no press releases related to this Agreement and
the transactions contemplated herein, or other announcements to the employees,
customers or suppliers of the Company or any of its Subsidiaries shall be issued
without the Purchaser's consent (which shall not be unreasonably withheld).
10.5 FURTHER TRANSFERS. Each Seller shall execute and deliver such
-----------------
further instruments of conveyance and transfer and take such additional action
as the Purchaser may reasonably request to effect, consummate, confirm or
evidence the transfer to the Purchaser of the Acquired Stock and any other
transactions contemplated hereby.
-42-
<PAGE>
10.6 SPECIFIC PERFORMANCE. Each Seller acknowledges that the Company's
--------------------
and each of its Subsidiaries' businesses is unique and recognizes and affirms
that in the event of a breach of this Agreement by such Seller, money damages
may be inadequate and Purchaser may have no adequate remedy at law. Accordingly,
each Seller agrees that Purchaser shall have the right, in addition to any other
rights and remedies existing in its favor, to enforce its rights and such
Seller's obligations hereunder not only by an action or actions for damages but
also by an action or actions for specific performance, injunctive and/or other
equitable relief.
10.7 TRANSITION ASSISTANCE. Each Seller shall not in any manner take
---------------------
any action which is designed, intended, or might be reasonably anticipated to
have the effect of discouraging customers, suppliers, lessors, licensors and
other business associates from maintaining the same business relationships with
the Company and/or any of its Subsidiaries after the date of this Agreement as
were maintained with the Company and/or any of its Subsidiaries prior to the
date of this Agreement.
10.8 EXPENSES. Except as otherwise provided herein, each Seller and
--------
the Purchaser shall pay all of their own fees, costs and expenses (including,
without limitation, fees, costs and expenses of legal counsel, investment
bankers, brokers or other representatives and consultants and appraisal fees,
costs and expenses) incurred in connection with the negotiation of the this
Agreement and the other agreements contemplated hereby, the performance of its
obligations hereunder and thereunder, and the consummation of the transactions
contemplated hereby and thereby (collectively, the "Transaction Expenses"); it
--------------------
being understood that the Sellers shall pay the fees, costs and expenses of the
Company and its Subsidiaries and that the Company shall pay any of the Sellers'
fees, costs and expenses (including, without limitation, legal and accounting
fees, costs and expenses) arising in connection with the transactions
contemplated hereby if the transactions are not consummated. At the request of
the Sellers, the fees, costs and expenses for which they are liable pursuant to
this Section 10.8 may be deducted from the Cash Purchase Price and paid directly
to the Sellers' legal counsel, investment bankers and other agents and
representatives. To the extent that the Company pays or becomes liable with
respect to any Transaction Expenses of the Company, any of its Subsidiaries or
the Sellers, the Cash Purchase Price shall be reduced dollar-for-dollar.
10.9 EXCLUSIVITY. Until this Agreement is terminated by its terms,
-----------
neither the Company, any of its Subsidiaries nor the Sellers (and neither the
Company nor the Sellers shall cause or permit any Insider or agent or any other
Person acting on behalf of any Seller, the Company, or its Affiliates to), (a)
solicit, initiate or encourage the submission of any proposal or offer from any
Person (including any of them) relating to any (i) liquidation, dissolution or
recapitalization of, (ii) merger or consolidation with or into, (iii)
acquisition or purchase of assets (other than in the Ordinary Course of
Business) of or any equity interest in or (iv) similar transaction or business
combination involving the Company or (b) participate in any discussions or
negotiations regarding, furnish any information with respect to, assist or
participate in, or facilitate in any other manner any effort or attempt by any
other Person to do or seek any of the foregoing. The Company and each Seller
agrees that it will discontinue immediately (and will cause any Insider or agent
or any other Person acting on behalf of any Seller, the Company, or its
Affiliates to discontinue immediately) any negotiations or discussion with
respect to any of the foregoing. Until this Agreement is terminated by its
terms, the Sellers and the Company shall notify the Purchaser
-43-
<PAGE>
immediately if any Person makes any proposal, offer, inquiry or contact with
respect to any of the foregoing.
10.10 BOOKS AND RECORDS. Unless otherwise consented to in writing by
-----------------
the Representative and the Purchaser, the Purchaser and the Sellers will not,
for a period of seven years following the date hereof, destroy, alter or
otherwise dispose of any of the books and records of the Company acquired by the
Purchaser hereunder or retained by any Seller without first offering to
surrender to the other Party such books and records or any portion thereof of
which the Sellers or the Purchaser may intend to destroy, alter or dispose. The
Purchaser and the Sellers will allow the other party's representatives,
attorneys and accountants access to such books and records, upon reasonable
request during such party's normal business hours, for the purpose of examining
and copying the same in connection with any matter whether or not related to or
arising out of this Agreement or the transactions contemplated hereby.
10.11 APPOINTMENT OF REPRESENTATIVE.
-----------------------------
(a) Powers of Attorney. Each Seller irrevocably constitutes and
------------------
appoints Michael A. Falconite (the "Representative") as such Seller's true and
--------------
lawful agent, proxy and attorney-in-fact and agent and authorizes the
Representative acting for such Seller and in such Seller's name, place and
stead, in any and all capacities to do and perform every act and thing required
or permitted to be done in connection with the transactions contemplated by this
Agreement, as fully to all intents and purposes as such Person might or could do
in person, including, without limitation:
(i) determine the presence (or absence) of claims for
indemnification against the Purchaser pursuant to Section 9.2 above;
(ii) deliver all notices required to be delivered by such Seller
under this Agreement, including, without limitation, any notice of a claim
for which indemnification is sought under Section 9.2 above;
(iii) receive all notices required to be delivered to such Seller
under this Agreement, including, without limitation, any notice of a claim
for which indemnification is sought under Section 9.2 above;
(iv) take any and all action on behalf of such Seller from time to
time as the Representative may deem necessary or desirable to defend,
pursue, resolve and/or settle claims under this Agreement, including,
without limitation, indemnification under Section 9.2; and
(v) to engage and employ agents and representatives for such Seller
(including accountants, legal counsel and other professionals) and to incur
such other expenses as he deems necessary or prudent in connection with the
administration of the foregoing.
Each Seller grants unto said attorney-in-fact and agent full power and authority
to do and perform each and every act and thing necessary or desirable to be done
in connection with the transactions contemplated by this Agreement, as fully to
all intents and purposes as the undersigned might or
-44-
<PAGE>
could do in person, hereby ratifying and confirming all that the Representative
may lawfully do or cause to be done by virtue hereof. Each Seller will, by
executing this Agreement agree that such agency, proxy and power of attorney are
coupled with an interest, and are therefore irrevocable without the consent of
the Representative and shall survive the death, incapacity, or bankruptcy of
such Seller. Each Seller acknowledges and agrees that upon execution of this
Agreement, any delivery by the Representative of any waiver, amendment,
agreement, opinion, certificate or other documents executed by the
Representative or any decisions made by the Representative pursuant to this
Section 10.11, such Seller shall be bound by such documents or decision as fully
as if such Seller had executed and delivered such documents or made such
decisions.
(b) The Representative shall not have by reason of this Agreement a
fiduciary relationship in respect of any Seller, except in respect of amounts
received on behalf of such Seller. The Representative shall not be liable to any
Seller for any action taken or omitted by him or any agent employed by him
hereunder or under any other Transaction Document, or in connection therewith,
except that the Representative shall not be relieved of any liability imposed by
law for gross negligence or willful misconduct. The Representative shall not be
liable to Sellers for any apportionment or distribution of payments made by him
in good faith, and if any such apportionment or distribution is subsequently
determined to have been made in error the sole recourse of any Seller to whom
payment was due, but not made, shall be to recover from other Sellers any
payment in excess of the amount to which they are determined to have been
entitled. The Representative shall not be required to make any inquiry
concerning either the performance or observance of any of the terms, provisions
or conditions of this Agreement.
(c) Replacement of the Representative. Upon the death, disability or
---------------------------------
incapacity of the initial Representative appointed pursuant to Section 10.11(a)
above, each Seller acknowledges and agrees that such Representative's executor,
guardian or legal representative, as the case may be, shall (in consultation
with Sellers) appoint a replacement reasonably believed by such person as
capable of carrying out the duties and performing the obligations of the
Representative hereunder within thirty (30) days. In the event that the
Representative resigns for any reason, the Representative shall (in consultation
with Sellers) select another representative to fill such vacancy. Any
substituted representative shall be deemed the Representative for all purposes
of this Agreement and the other Transaction Documents.
(d) Actions of the Representative; Liability of the Representative.
--------------------------------------------------------------
Each Seller agrees that Purchaser shall be entitled to rely on any action taken
by the Representative, on behalf of the Sellers, pursuant to Section 10.11(a)
above (each, an "Authorized Action"), and that each Authorized Action shall be
-----------------
binding on each Seller as fully as if such Seller had taken such Authorized
Action. The Purchaser agrees that the Representative shall have no liability to
the Purchaser for any Authorized Action, except to the extent that such
Authorized Action is found by a final order of a court of competent jurisdiction
to have constituted fraud or willful misconduct. The Sellers jointly and
severally agree to pay, and to indemnify and hold harmless the Purchaser from
and against any losses which it may suffer, sustain, or become subject to, as
the result of any claim by any Person that an Authorized Action is not binding
on, or enforceable against, the Sellers. In addition, the Sellers hereby release
and discharge the Purchaser from and against any liability arising out of or in
connection with the Representative's failure to distribute any amounts received
by the Representative on the Sellers' behalf to the Sellers.
-45-
<PAGE>
(e) Allocation of Payments. Subject to Section 9.2, whenever the
----------------------
Sellers are entitled to receive any payments hereunder or are obligated to make
any payments hereunder (including those specified in Section 9.2), each Seller
shall be entitled to receive from the Purchaser or shall be obligated to pay to
the Purchaser such portion of any such payment as set forth on the Schedule of
-----------
Stockholders.
- ------------
10.12 NONCOMPETITION, NONSOLICITATION AND CONFIDENTIALITY.
---------------------------------------------------
(a) Noncompetition. In consideration of the mutual covenants
--------------
provided for herein to the Sellers at the Closing, during the period beginning
on the Closing Date and ending on the fourth anniversary of the Closing Date
(the "Noncompete Period"), none of the Sellers (and none of the beneficiaries of
-----------------
any Seller that is a trust) (collectively, the "Noncompeting Parties") shall
--------------------
engage, and each of the Sellers shall cause the Noncompeting Parties that are
not themselves Sellers to not engage, (whether as an owner, operator, manager,
employee, officer, director, consultant, advisor, representative or otherwise)
directly or indirectly in any business that the Company or any of its
Subsidiaries conducts or proposes to conduct as of the Closing Date in any
geographic area in which the Company or any of its Subsidiaries conducts its
business as of the Closing Date, except as expressly permitted under any
employment agreement with the Company executed at the Closing as contemplated
hereunder; provided that ownership of less than 2% of the outstanding stock of
any publicly-traded corporation shall not be deemed to be engaging solely by
reason thereof in any of its businesses. The parties hereto agree that the
covenant set forth in this Section 10.12 is reasonable with respect to its
duration, geographical area and scope. If the final judgment of a court of
competent jurisdiction declares that any term or provision of this Section
10.12(a) is invalid or unenforceable, the Parties agree that the court making
the determination of invalidity or unenforceability shall have the power to
reduce the scope, duration, or area of the term or provision, to delete specific
words or phrases, or to replace any invalid or unenforceable term or provision
with a term or provision that is valid and enforceable and that comes closest to
expressing the intention of the invalid or unenforceable term or provision, and
this Agreement shall be enforceable as so modified after the expiration of the
time within which the judgment may be appealed. As further consideration for the
obligations of the Sellers pursuant to this Section 10.12, the Purchaser shall
pay to the Sellers $500,000 in cash on the Closing Date, allocated among the
Sellers in accordance with the Schedule of Stockholders (the "Noncompete
------------------------ ----------
Payment").
- -------
(b) Nonsolicitation. Each Seller agrees that, during the Noncompete
---------------
Period, such Seller (i) shall not, shall cause the other Noncompeting Parties to
not, and shall use his best efforts not to permit such Seller's affiliates to,
directly or indirectly contact, approach or solicit for the purpose of offering
employment to or hiring (whether as an employee, consultant, agent, independent
contractor or otherwise) or actually hire any person (other than Joseph A.
Falconite, Emilie Nicole Falconite or Angela S. Grimm) employed by the Company
or any of its Subsidiaries at any time prior to the Closing Date or during the
Noncompete Period, without the prior written consent of the Company and (ii)
shall not induce or attempt to induce, and shall cause the other Noncompeting
Parties to not induce or attempt to induce, any customer or other business
relation of the Company or any of its Subsidiaries into any business
relationship which might materially harm the Company or any of its Subsidiaries.
The term "indirectly" as used in this Section 10.12 is intended to mean any acts
----------
authorized or directed by or on behalf of any Seller or any Person controlled by
such Seller.
-46-
<PAGE>
(c) Confidentiality. Each Seller shall, and shall cause the other
---------------
Noncompeting Parties to, treat and hold as confidential any information
concerning the business and affairs of the Company or any of its Subsidiaries
that is not already generally available to the public (the "Confidential
------------
Information"), refrain from using any of the Confidential Information except in
- -----------
connection with this Agreement, and deliver promptly to the Purchaser or
destroy, at the request and option of the Purchaser, all tangible embodiments
(and all copies) of the Confidential Information which are in his possession or
under his control. In the event that any Noncompeting Party is requested or
required (by oral question or request for information or documents in any legal
proceeding, interrogatory, subpoena, civil investigative demand, or similar
process) to disclose any Confidential Information, the Sellers shall cause such
Noncompeting Party to notify the Purchaser promptly of the request or
requirement so that the Purchaser may seek an appropriate protective order or
waive compliance with the provisions of this Section 10.12(c). If, in the
absence of a protective order or the receipt of a waiver hereunder, any
Noncompeting Party is, on the advice of counsel, compelled to disclose any
Confidential Information to any tribunal or else stand liable for contempt, such
Noncompeting Party may disclose the Confidential Information to the tribunal;
provided that the Sellers shall cause such disclosing Noncompeting Party shall
use his best efforts to obtain, at the request of the Purchaser, an order or
other assurance that confidential treatment shall be accorded to such portion of
the Confidential Information required to be disclosed as the Purchaser shall
designate.
(d) Trade Names. No Seller shall use or permit any of his Affiliates
-----------
to use the "Falconite Equipment," "M&M Equipment," "M&M Properties" and
"Erzinger" names or any names confusingly similar thereto in any manner anywhere
in the world after Closing.
(e) Remedy for Breach. Each Seller acknowledges and agrees that in
-----------------
the event of a breach by any Seller of any of the provisions of this Section
10.12, monetary damages shall not constitute a sufficient remedy. Consequently,
in the event of any such breach, the Company, the Purchaser and/or their
respective Subsidiaries, successors or assigns may, in addition to other rights
and remedies existing in their favor, apply to any court of law or equity of
competent jurisdiction for specific performance and/or injunctive or other
relief in order to enforce or prevent any violations of the provisions hereof,
in each case without the requirement of posting a bond or proving actual
damages.
10.13 CERTAIN FINANCIAL INFORMATION. In the event the Purchaser files
-----------------------------
a registration statement with the Securities and Exchange Commission prior to
the Closing Date, the Company shall use commercially reasonable best efforts to
furnish to the Purchaser within five business days following a request therefor
by the Purchaser (a) audited financial statements for the Company (on a
consolidated basis) for the years ended December 31, 1997, 1996 and 1995 and
unaudited interim financial statements for the Company (on a consolidated basis)
for any interim financial period ending on or prior to the Closing, each of
which shall be prepared in accordance with the requirements of GAAP and meet the
requirements of Regulation S-X of the Securities Act of 1933, as amended
(including Article 11, as applicable), (b) the consent of the Company's
independent accountants to the use of their reports therein, and (c) appropriate
"comfort letters" from the Company's independent accountants addressed to the
Purchaser's underwriters or agents. The actual out-of-pocket expenses incurred
by the Company in connection with furnishing such information to the Purchaser
shall be borne by the Purchaser and shall not be an obligation of the Sellers.
-47-
<PAGE>
ARTICLE XI
MISCELLANEOUS
-------------
11.1 AMENDMENT AND WAIVER. This Agreement may be amended and any
--------------------
provision of this Agreement may be waived, provided that any such amendment or
waiver shall be binding upon a Party only if such amendment or waiver is set
forth in a writing executed by the Purchaser and the Representative. No course
of dealing between or among any Persons having any interest in this Agreement
shall be deemed effective to modify, amend or discharge any part of this
Agreement or any rights or obligations of any Party under or by reason of this
Agreement.
11.2 NOTICES. All notices, demands and other communications given or
-------
delivered under this Agreement shall be in writing and shall be deemed to have
been given when personally delivered, mailed by first class mail, return receipt
requested, or delivered by express courier service or telecopied (with hard copy
to follow). Notices, demands and communications to each Seller shall, unless
another address is specified in writing, or unless receipt of notice has been
specifically delegated to the Representatives under this Agreement, be sent to
the address or telecopy number indicated on the signature page attached hereto,
and notices, demands and communications to the Representative, the Company and
the Purchaser shall, unless another address is specified in writing, be sent to
the address or telecopy number indicated below:
NOTICE TO THE REPRESENTATIVE: WITH A COPY TO:
- ---------------------------- --------------
Michael A. Falconite Thompson Coburn
Falconite, Inc. One Mercantile Center
2525 Wayne Sullivan Dr. St. Louis, MO 63101
Paducah, KY 42003 Telecopy: (314) 552-7000
Telecopy: (502) 575-0570 Attn.: Thomas A. Litz, Esq.
NOTICES TO THE COMPANY: WITH A COPY TO:
- ---------------------- --------------
Falconite, Inc. Thompson Coburn
2525 Wayne Sullivan Dr. One Mercantile Center
Paducah, KY 42003 St. Louis, MO 63101
Telecopy: (502) 575-0570 Telecopy: (314) 552-7000
Attn.: Chief Executive Officer Attn.: Thomas A. Litz, Esq.
NOTICES TO PURCHASER: WITH A COPY TO:
- -------------------- --------------
National Equipment Services, Inc. Kirkland & Ellis
1800 Sherman Ave., Suite 100 200 East Randolph Drive
Evanston, IL 60201 Chicago, IL 60601
Telecopy: (847) 733-1078 Telecopy: (312) 861-2200
Attn.: Chief Executive Officer Attn.: Sanford E. Perl, Esq.
11.3 BINDING AGREEMENT; ASSIGNMENT. This Agreement and all of the
-----------------------------
provisions hereof shall be binding upon and inure to the benefit of the Parties
and their respective successors and permitted assigns; provided that neither
this Agreement nor any of the rights, interests or obligations hereunder may be
assigned by any Seller without the prior written consent of Purchaser
-48-
<PAGE>
or by Purchaser (except as otherwise provided in this Agreement) without the
prior written consent of each Seller. Without limiting the generality of the
foregoing:
(a) the Purchaser may assign its rights under this Agreement for
collateral security purposes to any lender providing financing to the Purchaser,
the Company, or any of their Affiliates and any such lender may exercise all of
the rights and remedies of the Purchaser hereunder; and
(b) the Purchaser may assign its rights under this Agreement, in
whole or in part, to any subsequent purchaser of the Company or any material
portion of its assets (whether such sale is structured as a sale of stock, a
sale of assets, a merger or otherwise).
11.4 SEVERABILITY. Whenever possible, each provision of this
------------
Agreement shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement is held to be prohibited
by or invalid under applicable law, such provision shall be ineffective only to
the extent of such prohibition or invalidity, without invalidating the remainder
of such provisions or the remaining provisions of this Agreement.
11.5 NO STRICT CONSTRUCTION. The language used in this Agreement
----------------------
shall be deemed to be the language chosen by the Parties to express their mutual
intent, and no rule of strict construction shall be applied against any Person.
11.6 CAPTIONS. The captions used in this Agreement are for
--------
convenience of reference only and do not constitute a part of this Agreement and
shall not be deemed to limit, characterize or in any way affect any provision of
this Agreement, and all provisions of this Agreement shall be enforced and
construed as if no captions had been used in this Agreement.
11.7 ENTIRE AGREEMENT. This Agreement and the documents referred to
----------------
herein contain the entire agreement between the Parties and supersede any prior
understandings, agreements or representations by or between the Parties, written
or oral, which may have related to the subject matter hereof in any way.
11.8 COUNTERPARTS. This Agreement may be executed in multiple
------------
counterparts, each of which shall be deemed an original but all of which taken
together shall constitute one and the same instrument.
11.9 GOVERNING LAW. All questions concerning the construction,
-------------
validity and interpretation of this Agreement shall be governed by and construed
in accordance with the domestic laws of the State of Illinois, without giving
effect to any choice of law or conflict of law provision (whether of the State
of Illinois or any other jurisdiction) that would cause the application of the
laws of any jurisdiction other than the State of Illinois.
11.10 PARTIES IN INTEREST. Nothing in this Agreement, express or
-------------------
implied, is intended to confer on any person other than the Parties and their
respective successors and assigns any rights or remedies under or by virtue of
this Agreement.
-49-
<PAGE>
11.11 PERFORMANCE. The beneficiaries of each Seller that is a trust,
-----------
and the limited partners of each Seller that is a limited partnership, shall,
and hereby agree to, (i) personally guaranty the obligations of such Seller
pursuant to the Transaction Documents to which such Seller is a party and (ii)
indemnify and hold harmless the Purchaser Parties with respect to the
obligations of such Seller pursuant to the Transaction Document to which such
Seller is a party.
* * * * *
-50-
<PAGE>
IN WITNESS WHEREOF, the Parties have executed this Stock Purchase
Agreement as of the date first written above.
NATIONAL EQUIPMENT SERVICES, INC.
By: /s/ Paul R. Ingersoll
------------------------------
Its: Vice President
FALCONITE, INC.
By: /s/ Michael A. Falconite
------------------------------
Its: President
FALCONITE INVESTMENTS, L.P.
By: Michael A. Falconite Revocable Trust U/A/D 12/17/96
Its: Managing General Partner
By: /s/ Michael A. Falconite
----------------------------
Name: Michael A. Falconite
Title: Trustee
JOSEPH A. FALCONITE REVOCABLE TRUST U/A/D 12/17/96
By: /s/ Joseph A. Falconite
----------------------------
Name: Joseph A. Falconite
Title: Trustee
RALPH W. MCCURRY CHILDREN'S TRUST U/A/D 12/30/96
By: /s/ Wanda Rene McCurry
----------------------------
Name: Wanda Rene McCurry
Title: Trustee
MICHAEL A. FALCONITE REVOCABLE TRUST U/A/D 12/17/96
By: /s/ Michael A. Falconite
----------------------------
Name: Michael A. Falconite
Title: Trustee
/s/ Ralph W. McCurry /s/ David Melber
- ---------------------------- ------------------------
RALPH W. MCCURRY DAVID MELBER
/s/ Emilie N. Falconite /s/ Angela S. Grimm
- ---------------------------- ------------------------
EMILIE N. FALCONITE ANGELA S. GRIMM
<PAGE>
SOLELY WITH RESPECT TO
SECTION 11.11:
/s/ Joseph A. Falconite JOSEPH A. FALCONITE REVOCABLE
- ----------------------------------
Joseph A. Falconite TRUST U/A/D 12/17/96
By: /s/ Joseph A. Falconite
----------------------------
Name: Joseph A. Falconite
Title: Trustee
/s/ Betty L. Falconite MICHAEL A. FALCONITE REVOCABLE
- ----------------------------------
Betty L. Falconite TRUST U/A/D 12/17/96
By: /s/ Micheal A. Falconite
----------------------------
Name: Michael A. Falconite
Title: Trustee
/s/ Micheal A. Falconite BETTY L. FALCONITE REVOCABLE
- ----------------------------------
Michael A. Falconite TRUST U/A/D 12/17/96
By: /s/ Betty L. Falconite
----------------------------
Name: Betty L. Falconite
Title: Trustee
/s/ Emilie Nicole Falconite JOE AND BETTY FALCONITE EXEMPT
- ----------------------------------
Emilie Nicole Falconite FAMILY TRUST U/A/D 12/17/96
By: /s/ Micheal A. Falconite
----------------------------
Name: Michael A. Falconite
Title: Trustee
/s/ Joseph Vincent Falconite BETTY FALCONITE RETAINED
- ----------------------------------
Joseph Vincent Falconite ANNUITY TRUST U/A/D 12/23/96
By: /s/ Betty L. Falconite
----------------------------
Name: Betty L. Falconite
Title: Trustee
/s/ Ralph Wesley McCurry, Jr. JOE FALCONITE RETAINED ANNUITY
- ----------------------------------
Ralph Wesley McCurry, Jr. TRUST U/A/D 12/23/96
By: /s/ Joseph A. Falconite
----------------------------
Name: Joseph A. Falconite
Title: Trustee
/s/ Michael Ellison McCurry
- ----------------------------------
Michael Ellison McCurry
/s/ Griffin Hamilton McCurry
- ----------------------------------
Griffin Hamilton McCurry
<PAGE>
EBITDA SCHEDULE
---------------
"EBITDA" means, with respect to the Company for any period (provided
------
that all calculations for periods of less than a full quarter shall be prorated
based on the actual number of days in the applicable period), the net income of
the Company for such period prior to the provisions for (i) interest expense and
interest income for such period, (ii) federal, state, local income taxes
(including franchise taxes based on income) for such period, (iii) gains or
losses with respect to the sale of capital assets not in the Ordinary Course of
Business for such period and (iv) depreciation expense and amortization expense
for such period, determined on a consolidated basis in accordance with GAAP
consistently applied through all periods involved, but modified as follows
(without duplication):
(a) if the Company or any of its Subsidiaries sells, exchanges or
otherwise disposes of any material portion of its assets or liabilities
other than in the Ordinary Course of Business (a "Material Disposition"),
--------------------
EBITDA will be adjusted to what it would have been had such Material
Disposition not occurred (assuming, for purposes of such adjustment, that
the assets or liabilities so disposed of would have contributed to, or
reduced, EBITDA following the date of such Material Disposition at the same
average per diem rate as such assets or liabilities contributed to, or
reduced, EBITDA during the twelve-month period ending on the last day of
the month immediately preceding the date of such Material Disposition);
(b) if the Company or any of its Subsidiaries purchases,
exchanges or otherwise acquires any material assets or liabilities other
than in the Ordinary Course of Business (a "Material Acquisition"), EBITDA
--------------------
will be adjusted to what it would have been had such Material Acquisition
not occurred; and
(d) EBITDA will be adjusted to exclude the effect of the
following items:
(i) any gain or loss resulting from any Material
Disposition at a price different than book value;
(ii) any specific out-of-pocket expenses incurred by the
Company or any of its Subsidiaries in connection with this Agreement
and the transactions contemplated hereby and the consummation of any
Material Disposition or Material Acquisition (e.g., investment banking
and legal fees); and
(iii) any other adjustments agreed to by the Purchaser and
the Representative.
* * * * *
<PAGE>
EXHIBIT 12.1
NATIONAL EQUIPMENT SERVICES, INC. AND SUBSIDIARIES
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
(Amounts in thousands of dollars, except ratios)
<TABLE>
<CAPTION>
For the Period Pro Forma
From Inception Combined
(June 4, 1996) For the Year For the Year
Through Ended Ended
December 31, 1996 December 31, 1997 December 31, 1997
----------------- ----------------- -----------------
<S> <C> <C> <C>
Pre-tax income (loss) $(332) $1,923 $22,248
Fixed charges:
Interest expense on all indebtedness 0 4,545 15,541
Rental expense representative of an interest factor 0 220 1,105
----- ------ -------
Total fixed charges 0 4,765 16,646
----- ------ -------
Earnings before income taxes and fixed charges $(332) $6,688 $38,894
===== ====== =======
Ratio of earnings to fixed charges (A) 1.40 2.34
===== ====== =======
</TABLE>
(A) The company's operations during the period from inception (June 4, 1996)
through December 31, 1996 were limited to organizational and start-up
activities while no revenues were generated; accordingly, presentation of
this rate is not considered meaningful.
<PAGE>
EXHIBIT 21.1
SUBSIDIARIES
<TABLE>
<CAPTION>
STATE OR OTHER
JURISDICTION OF
INCORPORATION OR
REGISTRANT SUBSIDIARY ORGANIZATION
---------- ---------- ------------
<S> <C> <C>
National Equipment Albany Ladder Company, Inc. (d/b/a New York
Services, Inc. Albany Ladder Company and
Albany Ladder Co.)
BAT Acquisition Corp. (d/b/a BAT Delaware
Rentals, Eagle, Eagle Scaffolding
Equipment and Eagle Scaffolding)
NES Acquisition Corp. (d/b/a Lone Delaware
Star Rentals, Industrial Hoist
Services, Sprintank, Sprint Industrial
Services and Dragon)
NES East Acquisition Corp. (d/b/a Delaware
Equipco Sales & Rentals, Equipco
Rentals & Sales, Aerial Platforms,
Inc., Aerial Platforms, CEC, Cormier
Equipment Corporation and NES
East Acquisition Corp. of Delaware)
NES Michigan Acquisition Corp. Delaware
(d/b/a Work Safe and Grand Hi-
Reach)
</TABLE>
<PAGE>
EXHIBIT 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the use in the Prospectus constituting part of this
Registration Statement on Form S-4 of our reports relating to the respective
financial statements which appear in such Prospectus.
<TABLE>
<CAPTION>
FINANCIAL STATEMENTS DATE
-------------------- ----
<S> <C>
National Equipment Services, Inc. and Subsidiaries....... April 1, 1998
Aerial Platforms, Inc.................................... November 4, 1997
Lone Star Rentals, Inc................................... November 4, 1997
BAT Rentals, Inc......................................... November 4, 1997
Sprintank and Sprintank Mobile Storage
(divisions of Sprint Industrial Services, Inc.)......... November 4, 1997
MST Enterprises, Inc. d/b/a Equipco Rental and Sales..... November 4, 1997
Work Safe Supply Company, Inc. and Subsidiaries.......... March 4, 1998
Genpower Pump & Equipment, Inc........................... March 3, 1998
Albany Ladder Company, Inc. ............................. March 31, 1998
</TABLE>
We also consent to the application of the National Equipment Services, Inc.
and Subsidiaries report to the Financial Statement Schedules for the period
from inception (June 4, 1996) through December 31, 1996 and the year ended
December 31, 1997 listed under Item 21(b) of this Registration Statement when
such schedules are read in conjunction with the financial statements referred
to in our report. The audits referred to in such report also included these
schedules. We also consent to the reference to us under the heading "Experts."
/s/ Price Waterhouse LLP
Chicago, Illinois
April 17, 1998
<PAGE>
EXHIBIT 23.2
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the use in the prospectus constituting part of this
Registration Statement on Form S-4 of National Equipment Services, Inc. of our
report dated February 3, 1998 except for the information in Note 8 as to which
the date is March 4, 1998, related to the financial statements of Cormier
Equipment Corporation, which appears in such Prospectus. We also consent to
the references to us under the heading "Experts" in such prospectus.
/s/ Albin, Randall & Bennett
April 16, 1998
<PAGE>
EXHIBIT 23.3
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the inclusion in this registration statement of National
Equipment Services, Inc. on Amendment No. 1 to Form S-4 of our report dated
February 6, 1998 except for the information in Note 6 as to which the date is
March 23, 1998 and the information in Note 12 as to which the date is April 1,
1998, on our audit of the financial statements of Falconite, Inc. We also
consent to the references to our firm under the captions "Experts."
/s/ Coopers & Lybrand L.L.P.
Louisville, Kentucky
April 16, 1998
<PAGE>
EXHIBIT 23.4
INDEPENDENT AUDITORS' CONSENT
The Board of Directors
Falconite, Inc.
We consent to the use of our report dated February 20, 1997 with respect to
the consolidated balance sheet of Falconite, Inc. and subsidiaries as of
December 31, 1996, and the related consolidated statements of income,
shareholders' equity, and cash flows for the years ended December 31, 1995 and
1996 included herein, and to the reference to our firm under the heading
"Experts" in the prospectus.
/s/ KPMG Peat Marwick L.L.P.
St. Louis, Missouri
April 17, 1998
<PAGE>
EXHIBIT 23.5
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the use in the Prospectus constituting part of this
Registration Statement on Form S-4 of National Equipment Services, Inc. of our
report dated March 3, 1998, relating to the financial statements of Dragon
Rentals (A Wholly Owned Division of The Modern Group, Inc.--A Texas
Corporation), which appears in such Prospectus. We also consent to the
references to us under the heading "Experts" in such Prospectus.
/s/ Lawrence, Blackburn, Meek, Maxey & Co. P.C.
April 16, 1998
<PAGE>
EXHIBIT 24.1(ii)
POWER OF ATTORNEY
-----------------
ALBANY LADDER COMPANY, INC.
KNOW ALL MEN BY THESE PRESENTS, that each person whose name appears
below constitutes and appoints Kevin P. Rodgers, Dennis J. O'Connor and Paul R.
Ingersoll and each of them, his true and lawful attorneys-in-fact and agents,
with full power of substitution and resubstitution, for and in his name, place
and stead, in any and all capacities which such person serves or may serve with
respect to Albany Ladder Company, Inc., to sign the Registration Statement on
Form S-4 of (i) National Equipment Services, Inc. and (ii) NES East Acquisition
Corp., BAT Acquisition Corp., NES Michigan Acquisition Corp., Albany Ladder
Company, Inc. and NES Acquisition Corp. (collectively, the "Subsidiary
Guarantors") relating to the registration of $100,000,000 aggregate principal
amount of 10% Senior Subordinated Notes due 2007, Series B (the "Exchange
Notes") to be issued by National Equipment Services, Inc. and the related
guarantees of the Subsidiary Guarantors, and any or all amendments to such
registration statement, and to file the same, with all exhibits thereto, and
other documents in connection therewith, with the Securities and Exchange
Commission, granting unto said attorneys-in-fact and agents, and each of them,
full power and authority to do and perform each and every act and thing
requisite and necessary to be done in and about the premises, as fully to all
intents and purposes as he might or could do in person, hereby ratifying and
confirming all that said attorneys-in-fact and agents or any of them, or their
or his substitutes, may lawfully do or cause to be done by virtue hereof.
This power of attorney has been signed as of the 20th day of March,
1998, by the following persons:
/s/ Kevin P. Rodgers /s/ Dennis J. O'Connor
- --------------------------------------- -------------------------------------
Kevin P. Rodgers, Dennis J. O'Connor,
President, Chief Executive Officer and Chief Financial Officer
Director
/s/ Carl D. Thoma /s/ William C. Kessinger
- --------------------------------------- -------------------------------------
Carl D. Thoma, William C. Kessinger,
Director Director
<PAGE>
POWER OF ATTORNEY
-----------------
NES MICHIGAN ACQUISITION CORP.
KNOW ALL MEN BY THESE PRESENTS, that each person whose name appears
below constitutes and appoints Kevin P. Rodgers, Dennis J. O'Connor and Paul R.
Ingersoll and each of them, his true and lawful attorneys-in-fact and agents,
with full power of substitution and resubstitution, for and in his name, place
and stead, in any and all capacities which such person serves or may serve with
respect to NES Michigan Acquisition Corp., to sign the Registration Statement on
Form S-4 of (i) National Equipment Services, Inc. and (ii) NES East Acquisition
Corp., BAT Acquisition Corp., NES Michigan Acquisition Corp. and NES Acquisition
Corp. (collectively, the "Subsidiary Guarantors") relating to the registration
of $100,000,000 aggregate principal amount of 10% Senior Subordinated Notes due
2007, Series B (the "Exchange Notes") to be issued by National Equipment
Services, Inc. and the related guarantees of the Subsidiary Guarantors, and any
or all amendments to such registration statement, and to file the same, with all
exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorneys-in-fact and
agents, and each of them, full power and authority to do and perform each and
every act and thing requisite and necessary to be done in and about the
premises, as fully to all intents and purposes as he might or could do in
person, hereby ratifying and confirming all that said attorneys-in-fact and
agents or any of them, or their or his substitutes, may lawfully do or cause to
be done by virtue hereof.
This power of attorney has been signed as of the 20th day of March,
1998, by the following persons:
/s/ Kevin P. Rodgers /s/ Dennis J. O'Connor
- --------------------------------------- -------------------------------------
Kevin P. Rodgers, Dennis J. O'Connor,
Chief Executive Officer and Director Chief Financial Officer
/s/ Carl D. Thoma /s/ William C. Kessinger
- --------------------------------------- -------------------------------------
Carl D. Thoma, William C. Kessinger,
Director Director
<PAGE>
POWER OF ATTORNEY
-----------------
NES EAST ACQUISITION CORP.
KNOW ALL MEN BY THESE PRESENTS, that each person whose name appears
below constitutes and appoints Kevin P. Rodgers, Dennis J. O'Connor and Paul R.
Ingersoll and each of them, his true and lawful attorneys-in-fact and agents,
with full power of substitution and resubstitution, for and in his name, place
and stead, in any and all capacities which such person serves or may serve with
respect to NES East Acquisition Corp., to sign the Registration Statement on
Form S-4 of (i) National Equipment Services, Inc. and (ii) NES Michigan
Acquisition Corp., BAT Acquisition Corp., NES East Acquisition Corp. and NES
Acquisition Corp. (collectively, the "Subsidiary Guarantors") relating to the
registration of $100,000,000 aggregate principal amount of 10% Senior
Subordinated Notes due 2007, Series B (the "Exchange Notes") to be issued by
National Equipment Services, Inc. and the related guarantees of the Subsidiary
Guarantors, and any or all amendments to such registration statement, and to
file the same, with all exhibits thereto, and other documents in connection
therewith, with the Securities and Exchange Commission, granting unto said
attorneys-in-fact and agents, and each of them, full power and authority to do
and perform each and every act and thing requisite and necessary to be done in
and about the premises, as fully to all intents and purposes as he might or
could do in person, hereby ratifying and confirming all that said attorneys-in-
fact and agents or any of them, or their or his substitutes, may lawfully do or
cause to be done by virtue hereof.
This power of attorney has been signed as of the 20th day of March,
1998, by the following persons:
/s/ Kevin P. Rodgers /s/ Dennis J. O'Connor
- --------------------------------------- -------------------------------------
Kevin P. Rodgers, Dennis J. O'Connor,
Chief Executive Officer and Director Chief Financial Officer
/s/ Carl D. Thoma /s/ William C. Kessinger
- --------------------------------------- -------------------------------------
Carl D. Thoma, William C. Kessinger,
Director Director
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED FINANCIAL STATEMENTS OF NATIONAL SERVICES EQUIPMENT, INC. AND
SUBSIDIARIES AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<CIK> 0001051381
<NAME> NATIONAL EQUIPMENT SERVICES, INC.
<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> 12-MOS OTHER
<FISCAL-YEAR-END> DEC-31-1997 DEC-31-1996
<PERIOD-START> JAN-01-1997 JUN-04-1996
<PERIOD-END> DEC-31-1997 DEC-31-1996
<CASH> 35,682 12
<SECURITIES> 0 0
<RECEIVABLES> 8,610 0
<ALLOWANCES> 254 0
<INVENTORY> 2,239 0
<CURRENT-ASSETS> 0 0
<PP&E> 55,198 20
<DEPRECIATION> 5,385 3
<TOTAL-ASSETS> 131,137 216
<CURRENT-LIABILITIES> 0 0
<BONDS> 98,782 0
0 0
0 0
<COMMON> 2 1
<OTHER-SE> 26,471 105
<TOTAL-LIABILITY-AND-EQUITY> 131,137 216
<SALES> 14,890 0
<TOTAL-REVENUES> 41,288 0
<CGS> 7,807 0
<TOTAL-COSTS> 25,715 0
<OTHER-EXPENSES> 9,386 336
<LOSS-PROVISION> 479 0
<INTEREST-EXPENSE> 4,545 (4)
<INCOME-PRETAX> 1,923 (332)
<INCOME-TAX> 818 (137)
<INCOME-CONTINUING> 1,105 (195)
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 1,105 (195)
<EPS-PRIMARY> 0 0
<EPS-DILUTED> 0 0
</TABLE>
