<PAGE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------------
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1999
OR
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Commission File No. 001-14163
National Equipment Services, Inc.
(Exact name of registrant as specified in its charter)
DELAWARE 36-4087016
(State or other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
1603 Orrington Avenue, Suite 1600
Evanston, Illinois 60201
(Address of principal executive offices)
(Zip code)
(847) 733-1000
(Registrant's telephone number, including area code)
----------------
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes [X] No [_]
There were 24,123,387 shares of Common Stock ($.01 par value) outstanding as
of May 6, 1999.
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<PAGE>
NATIONAL EQUIPMENT SERVICES, INC.
QUARTERLY REPORT ON FORM 10-Q
For the Quarter ended
March 31, 1999
INDEX
<TABLE>
<CAPTION>
Page
Number
------
<C> <S> <C>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets at December 31, 1998 and March
31, 1999 (Unaudited)........................................ 3
Consolidated Statements of Operations for the three months
ended March 31, 1998 and 1999 (Unaudited)................... 4
Consolidated Statements of Cash Flows for the three months
ended March 31, 1998 and 1999 (Unaudited)................... 5
Notes to Consolidated Financial Statements (Unaudited)...... 6
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations................................... 9
Item 3. Quantitative and Qualitative Disclosures About Market Risk.. 11
PART II. OTHER INFORMATION
Item 1. Legal Proceedings........................................... 12
Item 2. Changes in Securities....................................... 12
Item 3. Defaults upon Senior Securities............................. 12
Item 4. Submission of Matters to a Vote of Security Holders......... 12
Item 5. Other Information........................................... 12
Item 6. Exhibits and Reports on Form 8-K............................ 13
SIGNATURE............................................................. 14
</TABLE>
2
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
NATIONAL EQUIPMENT SERVICES, INC.
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands, except per share data)
<TABLE>
<CAPTION>
March 31, December 31,
1999 1998
----------- ------------
(Unaudited)
<S> <C> <C>
Assets:
Cash and cash equivalents............................ $ 500 $ 344
Accounts receivable, net of allowance for doubtful
accounts of $2,590 and $2,848, respectively......... 58,258 53,323
Inventory, net....................................... 21,744 15,606
Rental equipment, net................................ 398,604 378,254
Property and equipment, net.......................... 31,871 29,016
Intangible assets, net............................... 223,418 218,959
Loan origination costs, net.......................... 10,824 10,197
Prepaid and other assets, net........................ 57,490 14,784
--------- --------
Total assets....................................... $ 802,709 $720,483
========= ========
Liabilities and Stockholders' Equity:
Cash overdraft....................................... $ 9,212 $ 6,331
Accounts payable..................................... 26,979 25,665
Accrued interest..................................... 9,716 2,105
Accrued expenses and other liabilities............... 37,147 35,680
Debt................................................. 581,959 513,836
--------- --------
Total liabilities.................................. 665,013 583,617
--------- --------
Stockholders' Equity:
Common stock, $0.01 par, 100,000,000 shares
authorized; 24,121,885 and 24,123,387 shares issued,
respectively......................................... 241 241
Additional paid-in capital............................ 123,606 123,564
Retained earnings..................................... 13,951 13,163
Stock subscriptions receivable........................ (102) (102)
--------- --------
Total stockholders' equity......................... 137,696 136,866
--------- --------
Total liabilities and stockholders' equity......... $ 802,709 $720,483
========= ========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
3
<PAGE>
NATIONAL EQUIPMENT SERVICES, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
(in thousands, except per share data)
<TABLE>
<CAPTION>
For the Three
Months Ended
March 31,
---------------
1999 1998
------- -------
<S> <C> <C>
Revenues:
Rental revenues................................................ $59,902 $15,815
Rental equipment sales......................................... 6,892 1,742
New equipment sales and other.................................. 20,738 4,594
------- -------
Total revenues............................................... 87,532 22,151
------- -------
Cost of Revenues:
Rental equipment depreciation.................................. 12,931 2,727
Cost of rental equipment sales................................. 4,724 1,037
Cost of new equipment sales.................................... 7,613 2,187
Other operating expenses....................................... 27,026 7,549
------- -------
Total cost of revenues....................................... 52,294 13,500
------- -------
Gross profit.................................................... 35,238 8,651
Selling, general and administrative expenses.................... 18,063 4,531
Non-rental depreciation and amortization........................ 3,301 807
------- -------
Operating income................................................ 13,874 3,313
Other income, net............................................... 207 77
Interest expense, net........................................... 12,722 3,100
------- -------
Income before income taxes...................................... 1,359 290
Income tax expense.............................................. 571 151
------- -------
Net income...................................................... $ 788 $ 139
======= =======
Basic earnings per common share................................. $ 0.03 $ 0.01
======= =======
Average number of common shares used in basic calculation....... 23,311 15,050
======= =======
Diluted earnings per common share............................... $ 0.03 $ 0.01
======= =======
Average number of common shares used in diluted calculation..... 24,123 16,122
======= =======
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
4
<PAGE>
NATIONAL EQUIPMENT SERVICES, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(in thousands)
<TABLE>
<CAPTION>
For the Three
Months Ended
March 31,
------------------
1999 1998
-------- --------
<S> <C> <C>
Operating Activities:
Net income................................................ $ 788 $ 139
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation and amortization............................ 16,232 3,809
Gain on sale of equipment................................ (63) (719)
Changes in operating assets and liabilities:
Accounts receivable..................................... (3,006) (737)
Inventory............................................... (6,025) (413)
Prepaid and other assets................................ (1,857) (795)
Accounts payable........................................ 3,666 3,229
Accrued expenses and other liabilities.................. 7,918 3,148
-------- --------
Net cash provided by operating activities................. 17,653 7,661
-------- --------
Investing Activities:
Net cash paid for acquisitions............................ (50,854) (110,086)
Purchases of rental equipment............................. (35,281) (12,385)
Proceeds from sale of rental equipment.................... 3,846 1,742
Purchases of property and equipment....................... (4,706) (159)
Proceeds from sale of property and equipment.............. 961 16
-------- --------
Net cash used in investing activities..................... (86,034) (120,872)
-------- --------
Financing Activities:
Proceeds from long-term debt.............................. 141,000 81,154
Payments on long-term debt................................ (72,505) --
Net proceeds from sale of common stock.................... 42 248
Payments of loan origination costs........................ -- (100)
-------- --------
Net cash provided by financing activities................. 68,537 81,302
-------- --------
Net increase (decrease) in cash and cash equivalents...... 156 (31,909)
Cash and cash equivalents at beginning of period.......... 344 35,682
-------- --------
Cash and cash equivalents at end of period................ $ 500 $ 3,773
======== ========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
5
<PAGE>
NATIONAL EQUIPMENT SERVICES, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except per share data)
1. Organization
National Equipment Services, Inc. (the "Company") 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. The
Company is primarily involved in the rental of equipment to construction and
industrial users and operates from locations in 29 states.
2. Basis of presentation
The accompanying unaudited financial statements have been prepared in
accordance with generally accepted accounting principles for interim financial
information and with the instructions to Form 10-Q and Article 10 of
Regulation S-X. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments considered
necessary for a fair presentation, consisting only of normal recurring
adjustments, have been included. Results of operations for the interim periods
are not necessarily indicative of the results that may be expected for a full
year.
3. Earnings per share
The Company's earnings per share for the three months ended March 31, 1998
and 1999 is calculated as follows:
<TABLE>
<CAPTION>
For the Three Months Ended
March 31,
-----------------------------
1999 1998
------------- -------------
(unaudited) (unaudited)
<S> <C> <C>
Net income.................................. $ 788 $ 139
============= =============
Basic weighted average shares............... 23,311 15,050
Effect of dilutive securities
Unvested stock............................ 812 1,072
------------- -------------
Diluted weighted average shares............. 24,123 16,122
============= =============
Basic EPS................................... $ 0.03 $ 0.01
============= =============
Diluted EPS................................. $ 0.03 $ 0.01
============= =============
</TABLE>
If the dilution of the Company's convertible debt were included in the above
calculation, the weighted average shares outstanding would have been 25,575
and the earnings available to common stockholders would have been $962
resulting in a diluted earnings per share of $.04. However, the effects on
earnings per share of the convertible debt have been excluded from the above
calculation because the net effect is antidilutive.
4. Acquisitions
As more fully disclosed in the Company's Form 10-K for the year ended
December 31, 1998, the Company completed twelve acquisitions, accounted for as
purchases, at various times during 1998. In 1999, the Company purchased the
following rental equipment companies:
<TABLE>
<CAPTION>
Acquisition
Date Company Location Purchase Price
----------- -------------------------- --------------- --------------
<S> <C> <C> <C>
March 1, 1999 Barricade Light and Rental Phoenix, AZ $ 9,000
March 17, 1999 Mayer-Hammant New Orleans, LA $26,000
March 19, 1999 Wellesley Crane Service Boston, MA $16,000
</TABLE>
6
<PAGE>
NATIONAL EQUIPMENT SERVICES, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(in thousands, except per share data)
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, 1998 and January 1, 1999, respectively, after giving
effect to certain adjustments including increased depreciation and
amortization of property and equipment and other assets, interest expense for
acquisition debt and amortization of related intangibles and goodwill. 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 the Company's future results of operations.
<TABLE>
<CAPTION>
For the Three
Months Ended
March 31,
---------------
1999 1998
------- -------
(Unaudited)
<S> <C> <C>
Revenues................................................ $93,249 $70,256
Operating income........................................ $14,587 $ 9,515
Net income.............................................. $ 1,054 $(2,008)
Basic earnings per share................................ $ 0.04 $ (0.08)
Diluted earnings per share.............................. $ 0.04 $ (0.08)
</TABLE>
5. Inventory
Inventory consists of the following:
<TABLE>
<CAPTION>
March 31, December 31,
1999 1998
--------- ------------
<S> <C> <C>
New equipment...................................... $12,825 $ 7,431
Parts.............................................. 7,895 7,790
Other.............................................. 2,270 1,546
------- -------
22,990 16,767
Less: reserve...................................... (1,246) (1,161)
------- -------
$21,744 $15,606
======= =======
</TABLE>
6. Debt
On November 20, 1997, the Company issued $100,000 of Senior Subordinated
Notes due 2004, Series A (the "Series A Notes"). In conjunction with the
initial public offering in July 1998, the Company entered into a new credit
facility which provides for a term facility of $100,000 and a revolving credit
facility of $300,000. On October 20, 1998, the Company completed its exchange
of $100,000 of Senior Subordinated Notes due 2004, Series B (the "Series B
Notes"), which have been registered for public trading, for the Series A
Notes.
On September 17, 1998, the Company issued a $15,000 junior subordinated
convertible note in connection with its acquisition of all of the issued and
outstanding capital stock of Shaughnessy. The note, issued to the former
stockholders of Shaughnessy, accrues interest at a rate of 8% per annum, and
the Company may prepay all or any portion of the outstanding principal amount
at any time. In addition, the holders of the note may elect to convert the
principal amount of the note, plus accrued interest, into the number of shares
of the Company's Common Stock equal to such amount divided by $13.00. If, on
September 17, 1999, the note has not been prepaid or converted, then the
outstanding principal amount of the note, plus accrued interest, will
automatically convert into a number of shares of Common Stock having a fair
market value equal to such amount.
On December 11, 1998, the Company issued $125,000 of Senior Subordinated
Notes due 2004, Series C (the "Series C Notes"), and on January 8, 1999, the
Company issued $50,000 of additional Series C Notes.
7
<PAGE>
NATIONAL EQUIPMENT SERVICES, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(in thousands except per share data)
On March 16, 1999, the Company completed its exchange of $175,000 of Senior
Subordinated Notes due 2004, Series D (the "Series D Notes"), which have been
registered for public trading, for the Series C Notes.
The indentures for the Series B Notes and the Series D Notes and the credit
facility contain a number of covenants that, among other things, require the
Company 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. The
Company is currently in compliance with all covenants of the indentures
governing the Series B Notes, the Series D Notes and the credit facility.
The Company is a holding company with no independent operations, and the
Company's assets (excluding the common stock of its subsidiaries) are
insignificant. All of the Company's subsidiaries make full, unconditional,
joint and several guarantees of the Series B Notes and the Series D Notes, and
all of these subsidiaries are directly or indirectly wholly-owned by the
Company. The separate financial statements of each of these wholly-owned
subsidiaries are not presented as management believes that separate financial
statements and other disclosures concerning these subsidiaries are not
individually meaningful for presentation or material to investors.
7. Common Stock
On June 4, 1996, in connection with the Company's formation, the Company
authorized 25 shares of Class A Common Stock (24 of which were reserved for
issuance to the Company's majority stockholder), par value $0.01, and 150
shares of Class B Common Stock (75 of which were reserved for issuance to the
Company's majority stockholder), par value $0.01. On October 28, 1997, the
authorized shares of Class A Common Stock were increased to 50.
In connection with its initial public offering of 7,000 shares of Common
Stock on July 13, 1998, the Company exchanged all of its Class A and Class B
Common Stock for newly established Common Stock. The Class A and Class B
Common Stock was converted into an aggregate of 115 shares of newly
established Common Stock. Each share of newly established Common Stock was
then split into 0.139 shares of Common Stock. In conjunction with the July
1998 acquisitions of Falconite and R&R Rentals, the Company issued 278 and 296
shares of the Common Stock, respectively. On August 19, 1998, NES sold 375
additional shares of its Common Stock in connection with the underwriters'
exercise of their over-allotment option.
8. Subsequent events
On April 1, 1999, the Company completed the acquisition of The Mike Madrid
Company, a traffic safety rental company in Indiana, and Advanced Warnings, a
traffic safety rental company in Oklahoma. The aggregate price for these two
purchases was $12,750.
On April 27, 1999, the Company entered into an agreement whereby the Company
will issue and sell up to 100 shares of new Senior Redeemable Convertible
Preferred Stock, Series A ("Preferred Shares") for proceeds of up to $100,000.
Each Preferred Share will be convertible at the option of the holder into the
Company's Common Stock in accordance with a formula equal to $1,000 per share
divided by a conversion price of $13.00 per share, subject to adjustment. If,
at any time after one year from the issue date of the Preferred Shares, the
arithmetic average of the closing market price of the Company's Common Stock
as reported on the New York Stock Exchange over a 60 consecutive trading day
period equals or exceeds $20.00, subject to adjustment, the Company will have
the right, during the 60 day period after the end of such 60 day period, to
require all holders
8
<PAGE>
of Preferred Shares to convert all of their shares into Common Stock according
to the above formula. Based upon the initial conversion price of $13.00 per
share, the 100 Preferred Shares would be convertible into 7,692 shares of
Common Stock.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (in thousands)
The following table sets forth, for the periods indicated, information
derived from the combined and historical consolidated statements of operations
of the Company expressed as a percentage of total revenues.
<TABLE>
<CAPTION>
Three
Months
Ended
March 31,
------------
1998 1999
----- -----
<S> <C> <C>
Rental revenues................................................... 71.4% 68.4%
Rental equipment sales............................................ 7.9 7.9
New equipment sales and other..................................... 20.7 23.7
----- -----
Total revenues.................................................... 100.0 100.0
Cost of revenues.................................................. 60.9 59.7
----- -----
Gross profit...................................................... 39.1 40.3
Selling, general and administrative expenses...................... 20.5 20.6
Non-rental depreciation and amortization.......................... 3.6 3.8
----- -----
Operating income.................................................. 15.0 15.9
Other income, net................................................. 0.3 0.2
Interest expense, net............................................. 14.0 14.5
----- -----
Income before income taxes........................................ 1.3 1.6
Income tax expense................................................ 0.7 0.7
----- -----
Net income........................................................ 0.6% 0.9%
===== =====
</TABLE>
Historical Results of Operations
The Company's historical financial statements included herein cover the
three months ended March 31, 1998 and 1999. The Company believes that
comparison of its historical results for such periods are not meaningful given
the fact that (i) the Company completed eleven acquisitions at different times
during 1998 and (ii) the Company completed three acquisitions during the first
three months of 1999.
Results of Operations for the Three Months Ended March 31, 1998 and 1999
Revenues. Total revenues increased from $22,151 to $87,532 from the first
quarter of 1998 to the first quarter of 1999. Rental revenues increased from
$15,815 to $59,902. The increases were primarily the result of the acquisition
of additional businesses after the first quarter of 1998 as well as the
inclusion in 1999 of a full quarter's results for the businesses acquired
during 1998.
Gross Profit. Gross profit increased from $8,651 to $35,238 from the first
quarter of 1998 to the first quarter of 1999. Gross margin increased from
39.1% to 40.3%. This margin improvement was primarily the result of increased
higher margin rental revenues as a percentage of total revenues.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses increased from $4,531 to $18,063 from the first
quarter of 1998 to the first quarter of 1999. As a percentage of total
revenues, selling, general and administrative expenses increased from 20.5% to
20.6%.
9
<PAGE>
Non-rental Depreciation and Amortization. Non-rental depreciation and
amortization increased from $807 to $3,301 from the first quarter of 1998 to
the first quarter of 1999 due to increased amortization expense from the
acquisition of additional businesses.
Operating Income. As a result of the foregoing, operating income increased
from $3,313 for the first quarter of 1998 to $13,874 or 15.9% of total
revenues for the first quarter of 1999.
Interest Expense, Net. Interest expense, net increased from $3,100 to
$12,722 from the first quarter of 1998 to the first quarter of 1999. This
increase was due to additional debt necessary to complete the Company's
strategy of acquiring additional businesses.
Income Tax Expense. Income tax expense increased from $151 to $571 from the
first quarter of 1998 to the first quarter of 1999.
Liquidity and Capital Resources
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. Rental fleet purchases for the Company were $157,500 and $35,281 in
1998 and the first three months of 1999, respectively. The Company's purchases
for rental fleet are expected to be approximately $120,000 in 1999.
For the three months ended March 31, 1998 and 1999, the Company's net cash
provided by operations was $7,661 and $17,653, respectively. For the three
months ended March 31, 1998 and 1999, the Company's net cash used in investing
activities was $120,872 and $86,034, respectively. For the three months ended
March 31, 1998 and 1999, the Company's net cash provided by financing
activities was $81,302 and $68,537, respectively. Net cash provided by
financing activities consists of equity capital provided by Golder, Thoma,
Cressey, Rauner Fund V, L.P. and members of management, proceeds from the
Company's initial public offering of Common Stock, net borrowings under the
Company's credit facility and indebtedness under the indentures relating to
the Series B Notes and the Series D Notes.
In July 1998, the Company entered into its credit facility which provides
for a term facility to the Company of $100,000 of term loans and a revolving
credit facility to the Company for up to $300,000 of revolving loans, subject
to availability based on certain financial tests including a borrowing base,
to meet acquisition and expansion needs as well as seasonal working capital
and general corporate requirements. As of March 31, 1999, $291,312 was
outstanding under the credit facility.
The Company believes that its credit facility, together with funds generated
by operations, will provide the Company with sufficient liquidity and capital
resources in the near-term to finance its operations and pursue its business
strategy, including acquisitions. Over the long-term, the Company will need
additional financing to continue its acquisition strategy.
Year 2000 Software Issue
As a part of the Company's strategic information system plan, management
selected one information system to serve as the common system platform for all
operating units. This common system platform is Year 2000 compliant. During
1998 and the first quarter of 1999, in accordance with its plan, the Company
migrated several of the Company's operating units successfully to this new
system. The Company expects to complete the migration of the remainder of its
operating units to the common system platform by June 1999. The Company has
invested approximately $1,295 to date relating to this migration, and
management estimates that the Company will invest an additional $520 in the
future to complete the conversion of its remaining operating units
10
<PAGE>
to this common platform. Substantially all costs associated with this
migration will be capitalized. As a result of this conversion, all operating
units, transactions processing and operating systems will be Year 2000
compliant.
The Company selected this information system based on experience with this
system at its largest operating unit. Management believes the migration plan
is realistic and feasible. However, there can be no assurance that the Company
will complete the migration in a timely manner or successfully identify and
resolve all Year 2000 compliance issues or that such problems will not have a
material adverse effect on the Company's business, results of operations or
financial position. Based on available information, the Company does not
believe it faces any material exposure to significant business interruption as
a result of the Year 2000 compliance of its information system. Accordingly,
the Company has not adopted any formal contingency plan in the event that its
plan to migrate to a common system platform is not completed in a timely
manner.
The Company is also in the process of assessing the Year 2000 readiness of
its suppliers and customers. Based on available information, the Company does
not believe it faces any material exposure to significant business
interruption as a result of third party Year 2000 readiness issues. However,
to the extent that these third parties cannot provide the Company with
products, services or systems that meet Year 2000 requirements on a timely
basis, or in the event that Year 2000 issues disrupt such third parties'
demand for the Company's products or services, the Company's business, results
of operations or financial position could be materially adversely affected.
Note: This document contains forward-looking statements as encouraged by the
Private Securities Litigation Reform Act of 1995. All statements contained in
this document, other than historical information, are forward-looking
statements. These statements represent management's current judgement on what
the future holds. A variety of factors could cause business conditions and the
Company's actual results to differ materially from those expected by the
Company or expressed in the Company's forward-looking statements. These
factors include, without limitation, the Company's ability to successfully
integrate acquired businesses; changes in market price or market demand; loss
of business from customers; unanticipated expenses; changes in financial
markets; and other factors discussed in the Company's filings with the
Securities and Exchange Commission.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company's credit facility provides the Company with a $100 million term
loan and permits the Company to borrow up to an additional $300 million of
revolving loans provided that certain conditions and financial tests are met,
subject to a borrowing base. Borrowings under the credit facility bear
interest, at the Company's option, at either a specified base rate plus the
applicable borrowing margin or at LIBOR plus the applicable borrowing margin.
At May 6, 1999, the Company had total borrowings under the credit facility and
the term loan of $328 million, $178 million of which were subject to interest
rate risk. Each 1.0% increase in interest rates on the unhedged variable rate
debt would impact pretax earnings by approximately $1.8 million.
The Company uses interest rate swap contracts to hedge the impact of
interest rate fluctuations on certain variable rate debt. The Company does not
hold or issue derivative financial instruments for trading or speculative
purposes. The interest rate swap fixes the interest rate at 4.51% on $150
million of variable rate debt through October 23, 2000. The interest
differential is paid or received on a monthly basis and recognized currently
as a component of interest expense. The counterparty to the swap is a major
financial institution and management believes that the risk of incurring
credit losses is remote.
11
<PAGE>
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
Not applicable.
ITEM 2. CHANGES IN SECURITIES
Not applicable.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
Not applicable.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable.
ITEM 5. OTHER INFORMATION
Senior Subordinated Notes due 2004, Series C. On December 11, 1998, the
Company issued $125.0 million of Senior Subordinated Notes due 2004, Series C
(the "Series C Notes") in a private placement, and on January 8, 1999, the
Company issued $50.0 million of additional Series C Notes in a private
placement. On March 16, 1999, the Company completed its exchange of $175.0
million of Senior Subordinated Notes due 2004, Series D, which have been
registered for public trading, for the Series C Notes.
Senior Redeemable Convertible Preferred Stock, Series A. The Company entered
into a Purchase Agreement, dated April 27, 1999, with each of The 1818 Fund,
L.P., Co-Investment Partners, L.P., Erie Indemnity Company, Erie Insurance
Exchange and Aquila Limited Partnership (collectively, the "Purchasers")
pursuant to which the Company agreed to issue, and the Purchasers agreed to
acquire, up to 100,000 shares of the Company's new Senior Redeemable
Convertible Preferred Stock, Series A (the "Preferred Shares") in exchange for
an aggregate amount of cash of up to $100.0 million (the "Transaction"). The
Transaction is expected to take place in two separate phases. In the first
closing on May 14, 1999, the Company issued 60,000 Preferred Shares to the
Purchasers in exchange for $60.0 million in cash ("Phase I"). Upon
consummation of the second closing, the Company expects to issue up to 40,000
additional Preferred Shares to the Purchasers in exchange for up to $40.0
million in cash ("Phase II").
Each Preferred Share is convertible at the option of the holder into the
Company's Common Stock in accordance with a formula equal to $1,000 per share
divided by a conversion price of $13.00 per share, subject to adjustment. If,
at any time after one year from the issue date of the Preferred Shares, the
arithmetic average of the closing market price of the Company's Common Stock
as reported on the New York Stock Exchange over a 60 consecutive trading day
period equals or exceeds $20.00, subject to adjustment, the Company will have
the right, during the 60 day period after the end of such 60 day period, to
require all holders of Preferred Shares to convert all of their shares into
Common Stock according to the above formula. The Preferred Shares will be
voted with the Company's Common Stock on an as converted basis. The holders of
Preferred Shares have the right to designate one member to the Board of
Directors. In connection with the closing of Phase I, the Board of Directors
appointed Lawrence C. Tucker, the designee of the holders of Preferred Shares,
to the Board.
The Preferred Shares are unregistered and, in addition to any resale
limitations imposed by the Securities Act of 1933, as amended (the "Securities
Act"), are subject to certain restrictions on transfer. The Purchasers have
certain rights to require the Company to register their Preferred Shares under
the Securities Act in the future.
12
<PAGE>
Consummation of Phase II is subject to customary conditions, including the
approval by the Company's stockholders of the Transaction. In the event that
the Company does not obtain such stockholder approval, the Company will not
consummate Phase II.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
See Index of Exhibits. The Company did not file any Current Reports on Form
8-K for the quarterly period ended March 31, 1999.
13
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized on May 17, 1999.
National Equipment Services, Inc.
/s/ Dennis O'Connor
By: _________________________________
Dennis O'Connor
Chief Financial Officer
Form 10-Q: For the quarter ended March 31, 1999.
14
<PAGE>
INDEX OF EXHIBITS
<TABLE>
<CAPTION>
Exhibit
Number Description of Document
------- -----------------------
<C> <S> <C>
10.1 Stock Purchase Agreement dated February 26, 1999 among National
Equipment Services, Inc. and Dick Cole and Penelope A. Cole as
Co-Trustees of the Cole Family Trust U/A/D 11/20/1994.
10.2 Purchase Agreement dated as of March 2, 1999 by and among
National Equipment Services, Inc., Mayer-Hammant Equipment,
L.L.C. and the Members of Mayer-Hammant Equipment, L.L.C.
10.3 Stock Purchase Agreement dated as of March 19, 1999 by and among
Shaughnessy Crane Service, Inc. and the Stockholders of
Wellesley Crane Service Co., Inc.
10.4 Stock Purchase Agreement dated April 27, 1999 by and among
National Equipment Services, Inc., The 1818 Fund III, L.P., Co-
Investment Partners, L.P., Erie Indemnity Company, Erie
Insurance Exchange and Aquila Limited Partnership.
11.1 Statement re Computation of Per Share Earnings. Not required
because the relevant computations can be clearly determined from
the material contained in the financial statements included
herein.
21.1 Subsidiaries of the Company.(1)
27.1 Financial Data Schedule.
</TABLE>
- --------
(1) Incorporated by reference to the Company's Annual Report on Form 10-K for
the fiscal year ended December 31, 1998 (File No. 001-14163).
15
<PAGE>
EXHIBIT 10.1
STOCK PURCHASE AGREEMENT
among
NATIONAL EQUIPMENT SERVICES, INC.,
and
DICK COLE
and
PENELOPE A. COLE
AS CO-TRUSTEES OF THE COLE FAMILY TRUST U/A/D 11/20/1984
February 26, 1999
<PAGE>
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
PAGE
<S> <C>
"Accounts Receivable".......................................... 1
"Affiliate".................................................... 1
"Agreement".................................................... 1
"Base Value"................................................... 1
"Closing"...................................................... 1
"Closing Date"................................................. 1
"Code"......................................................... 1
"Company"...................................................... 2
"Company Assets"............................................... 2
"Contract"..................................................... 2
"Environmental Law"............................................ 2
"ERISA"........................................................ 3
"Financial Statements"......................................... 3
"GAAP"......................................................... 3
"Governmental Authority"....................................... 3
"Intellectual Property"........................................ 3
"Inventory".................................................... 4
"IRS".......................................................... 4
"Law".......................................................... 4
"Losses"....................................................... 4
"Material Contracts"........................................... 4
"Non-Competition Agreement".................................... 4
"Permits"...................................................... 4
"Person"....................................................... 4
"Pollutant".................................................... 4
"Real Property"................................................ 5
"Shares"....................................................... 5
"Taxes"........................................................ 5
"Tax Return"................................................... 5
ARTICLE 1. PURCHASE AND SALE OF SHARES.......................... 6
1.1 Purchase and Sale of Shares.......................... 6
1.2 Payment of Purchase Price............................ 6
1.3 Closing Balance Sheet................................ 7
1.4 Loan Pay-Off......................................... 7
1.5 Signal Light......................................... 7
ARTICLE 2. REPRESENTATIONS AND WARRANTIES OF SELLER............. 8
2.1 Due Organization..................................... 8
2.2 Due Authorization.................................... 8
2.3 Ownership of Shares.................................. 9
2.4 Capitalization....................................... 9
2.5 Financial Statements................................. 9
2.6 No Adverse Change.................................... 9
2.7 Assets............................................... 10
2.8 Real Property........................................ 10
2.9 Leases............................................... 10
</TABLE>
<PAGE>
<TABLE>
<S> <C>
2.10 Intellectual Property................................ 11
2.11 Inventory............................................ 11
2.12 Accounts Receivable.................................. 11
2.13 Insurance Policie.................................... 12
2.14 Bank Accounts........................................ 12
2.15 Employees............................................ 12
2.16 Contracts............................................ 12
2.17 Employee Benefit Plans............................... 14
2.18 Compliance with Law.................................. 16
2.19 Environmental Matters................................ 17
2.20 Litigation........................................... 18
2.21 Taxes................................................ 18
2.22 Debt................................................. 19
2.23 Affiliate Transactions............................... 20
2.24 Company's Warranties................................. 20
2.25 Brokers.............................................. 20
2.26 No Other Agreement................................... 20
2.27 Records.............................................. 20
2.28 Certain Payments..................................... 20
2.29 DBE Status........................................... 21
2.30 Claim Experience..................................... 21
2.31 Due Diligence Response............................... 21
2.32 Accuracy of Statements............................... 21
ARTICLE 3. REPRESENTATIONS AND WARRANTIES OF PURCHASER........... 21
3.1 Due Incorporation..................................... 21
3.2 Due Authorization .................................... 21
3.3 Consents.............................................. 21
ARTICLE 4. CONDITIONS PRECEDENT TO OBLIGATIONS
OF PURCHASER.......................................... 22
4.1 Consents and Approvals................................ 22
4.2 Compliance............................................ 22
4.3 Opinion of Counsel.................................... 22
4.4 Deliveries............................................ 22
4.5 Actions or Proceedings................................ 22
ARTICLE 5. CONDITIONS PRECEDENT TO OBLIGATIONS
OF SELLER ............................................ 23
5.1 Compliance............................................ 23
5.2 Opinion of Counsel.................................... 23
5.3 Deliveries............................................ 23
5.4 Actions or Proceedings................................ 23
ARTICLE 6. CLOSING............................................... 23
6.1 Closing............................................... 23
6.2 Deliveries by the Seller.............................. 23
6.3 Deliveries by Purchaser............................... 25
ARTICLE 7. [INTENTIONALLY OMITTED]............................... 25
</TABLE>
ii
<PAGE>
<TABLE>
<S> <C>
ARTICLE 8. SURVIVAL; INDEMNIFICATION............................. 25
8.1 Survival.............................................. 25
8.2 Indemnification by Seller............................. 25
8.3 Indemnification by Purchase........................... 26
8.4 Notice of Claims...................................... 26
ARTICLE 9. MISCELLANEOUS......................................... 27
9.1 Expenses.............................................. 27
9.2 Notices............................................... 27
9.3 Effect of Investigations; Construction................ 28
9.4 Waivers............................................... 28
9.5 Counterparts.......................................... 28
9.6 Applicable Law........................................ 28
9.7 Assignment............................................ 28
9.8 Further Assurance..................................... 28
9.9 Entire Understanding.................................. 29
</TABLE>
iii
<PAGE>
SCHEDULES
---------
Schedule 1.2(a) Payment of Purchase Price
Schedule 2.1 Due Organization
Schedule 2.2 Due Authorization
Schedule 2.5 Financial Statements
Schedule 2.6 Adverse Changes
Schedule 2.7 Ownership of Assets
Schedule 2.9 Leases
Schedule 2.10 Intellectual Property
Schedule 2.11 Inventory
Schedule 2.12 Accounts Receivable
Schedule 2.13 Insurance
Schedule 2.14 Bank Accounts
Schedule 2.15 Employees
Schedule 2.16 Material Contracts
Schedule 2.17 Employee Benefit Plans
Schedule 2.18 Compliance with Law
Schedule 2.19 Environmental Matters
Schedule 2.20 Litigation
Schedule 2.21 Taxes
Schedule 2.22 Debt
Schedule 2.23 Affiliate Transactions
Schedule 2.24 Company's Warranties
Schedule 3.3 Purchaser Consents
iv
<PAGE>
EXHIBITS
--------
Exhibit A Employment Agreement
Exhibit B Non-Competition Agreement
Exhibit C Opinion of Counsel to Seller
Exhibit D Opinion of Counsel to Purchaser
Exhibit E Form of Real Estate Leases
v
<PAGE>
STOCK PURCHASE AGREEMENT
------------------------
THIS STOCK PURCHASE AGREEMENT is made this 26th day of February, 1999, by
and among Richard A. Cole, a/k/a Dick Cole and Penelope A. Cole as co-trustees
of the Cole Family Trust u/a/d 11/20/1984 (Dick Cole and Penelope A. Cole are
collectively referred to as "Seller") and National Equipment Services, Inc., a
Delaware corporation ("Purchaser").
IT IS AGREED as follows:
DEFINITIONS
-----------
The following terms shall have the meanings set forth herein:
"Accounts Receivable" shall mean any accounts receivable, trade
receivables, notes receivable, retainage receivables and other receivables
arising out of the business and operations of the Company.
"Affiliate" of any Person shall mean any other Person directly or
indirectly controlling, controlled by or under common control with such Person.
"Agreement" shall mean this Stock Purchase Agreement, including all
Exhibits and Schedules hereto, as it may be amended from time to time in
accordance with its terms.
"Base Value" shall mean One Million Two Hundred Seventy Six Thousand One
Hundred Ninety Four Dollars ($1,276,194).
"Cash Payment" shall mean Seven Million Seven Hundred Twenty Thousand
Dollars ($7,720,000), payable as provided in Section 1.2.
-----------
"Closing" shall mean the consummation of the purchase of the Shares by
Purchaser, in accordance with Article 6 hereof.
---------
"Closing Balance Sheet" shall have the meaning set forth in Section 1.3.
-----------
"Closing Date" shall mean February 26, 1999.
"Code" shall mean the United States Internal Revenue Code of 1986, as
amended.
"Company" shall mean Barricade & Light Rental, Inc., an Arizona
corporation.
<PAGE>
"Company Assets" shall mean all of the assets of the Company or used by
the Company in its business, whether real, personal, tangible or intangible,
including, without limitation, the assets reflected in the Financial Statements.
"Contract" shall mean any contract, lease, commitment, sales order,
purchase order, indenture, mortgage, note, bond, instrument, license or other
agreement.
"Debt" shall have the meaning set forth in Section 2.22.
------------
"Disbursement Date" shall mean the date 120 days after the Closing Date.
"Disposition Amount" shall mean the sum of the following (in each case
occurring on or after October 31, 1998 and on or before the Closing Date): the
amount of any bonuses, distributions, dividends or payments in redemption made
to any employee, officer, director or stockholder of the Company.
"Employee Benefit Plans" shall have the meaning set forth in Section 2.17.
------------
"Employment Agreement" shall mean the employment agreement to be entered
into between Seller and the Company, to be dated the Closing Date, in the form
of Exhibit A hereto.
---------
"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, voting trust, voting
agreement, put, call, 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 federal, state or local law, statute,
ordinance, regulation, rule, order, consent decree, permit, settlement
agreement, judicial or administrative decision, injunction or requirement of any
Governmental Authority which relates to or otherwise imposes liability or
standards of conduct concerning discharges, releases or threatened releases of
noises, odors or any Pollutants into ambient air, ground or surface water or
land, or otherwise relating to the manufacture, processing, generation,
distribution, use, treatment, storage, disposal, cleanup, transport or handling
of Pollutants, 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, as amended,
the Federal Water Pollution Control Act
2
<PAGE>
of 1972, as amended, the Federal Clean Air Act, as amended, the Federal
Insecticide, Fungicide and Rodenticide Act, as amended, the Occupational Safety
and Health Act, as amended, 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.
"ERISA Affiliate" shall mean, with respect to any person, any corporation,
trade or business which, together with such person, is a member of a controlled
group of corporations or a group of trades or businesses under common control
within the meaning of sections 414(b) or (c) of the Code.
"Financial Statements" shall mean (a) the unaudited balance sheet of the
Company as of June 30, 1998 and statement of income for the twelve months then
ended, and (b) the unaudited balance sheet of the Company as of December 31,
1998 and statement of income for the six months then ended.
"GAAP" shall mean generally accepted accounting principles, consistently
applied.
"General Holdback" shall mean Three Hundred Eighty Six Thousand Dollars
($386,000).
"Governmental Authority" shall mean the government of the United States or
any state or political subdivision thereof and any entity exercising executive,
legislative, judicial, regulatory or administrative functions of or pertaining
to government.
"Intellectual Property" shall mean all United States and foreign patents,
trade names, trademarks, service marks, copyrights (and applications or licenses
for any of the foregoing), trade secrets, inventions, processes, designs, know-
how and formulae, used in or necessary to the conduct of the business of the
Company as presently and historically conducted and relating in any manner to
the traffic safety, control, signage and barricade industry.
"Inventory" shall mean the Company's inventory, including all raw
materials, work in process, finished goods, supplies inventory and rental
inventory, wherever located, as of the Closing Date.
"IRS" shall mean the Internal Revenue Service.
3
<PAGE>
"Law" shall mean any law, regulation, rule, ordinance, order, consent
decree, judgement, stipulation or other requirement.
"Losses" shall mean any and all damages of any nature, liabilities, losses,
claims, actions, causes of action, investigations, proceedings, demands,
obligations, assessments, judgments, penalties, costs, expenses and fees
(including, without limitation, attorneys' fees and litigation expenses and
costs).
"Material Contracts" shall have the meaning set forth in Section 2.16.
------------
"Non-Competition Agreement" shall mean the non-competition agreements to
be executed and delivered by Seller in the form of Exhibit B hereto.
---------
"Non-Competition Payment" shall mean One Hundred Thousand Dollars
($100,000).
"Note Payment" shall mean Seven Hundred Forty Three Thousand Dollars
($743,000) plus accrued interest from November 1, 1998 through the Closing Date
at the per diem rate of $161.83.
"Permits" shall mean all of the licenses, permits, variances, interim
permits, permit applications, approvals or other authorizations under any Law
applicable to the Company or otherwise required in connection with the Company's
operation.
"Person" shall mean any individual, corporation, partnership, limited
liability company, association, trust, Governmental Authority or other entity or
organization.
"Pollutant" shall mean any substance presently listed, defined, designated
or classified as a pollutant or contaminant under any Environmental Law or as
hazardous, toxic, radioactive or dangerous under any Environmental Law. Without
limitation, Pollutant includes any toxic substance or waste, contaminant,
hazardous substance or waste, special waste, industrial substance, lead based
paint, petroleum, petroleum products, any derivative or by-product of petroleum,
polychlorinated biphenyl, radon, radioactive material, urea formaldehyde
asbestos or asbestos containing material.
"Purchase Price" shall mean the sum of (a) the Cash Payment and (b) the
Note Payment. The Purchase Price is subject to adjustment pursuant to Section
-------
1.2(e).
- ------
4
<PAGE>
"Real Estate Leases" shall mean the leases of the Real Property to be
entered into as of the date hereof between the Company, as lessee and Seller, as
lessor.
"Real Property" shall mean the land, buildings, structures and
improvements leased by the Company and located at 3015 East Illini and 3801
South 30th Street, Phoenix, Arizona, 2649 Ruth Rauff Road, Tucson, Arizona, 7045
East Commerce Drive, Kingman, Arizona and 5301 1/2 East Empire Avenue,
Flagstaff, Arizona.
"Shareholder's Equity" shall mean the shareholder's equity of the Company
as of the Closing Date as shown on the Closing Balance Sheet, determined in
accordance with the past practices of the Company, consistently applied.
"Shares" shall mean all of the issued and outstanding shares of common
stock of the Company, consisting of 10,500 shares of common stock, $1.00 par
value, owned by Seller.
"Taxes" shall mean all taxes, charges, fees, duties, levies or other
assessments, 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, interest equalization,
windfall profits, severance and employees' income withholding, unemployment and
Social Security taxes, which are imposed by the United States, or any state,
local or foreign government or subdivision or agency thereof, and such term
shall include any interest, penalties or additions to tax attributable to such
Taxes.
"Tax Indemnification Period" shall means the period (including all prior
taxable years) ending on and including the Closing Date. For any taxable year
of the Company that does not end on, and would otherwise extend beyond, the
Closing Date, there shall be a deemed short taxable year ending on and including
such date and a second deemed short taxable year beginning on and including the
day after such date and ending on the last day of the otherwise applicable tax
year. For purposes of allocating gross income and deductions between deemed
short taxable years, all amounts of income and deduction shall be deemed to have
accrued pro rata during the actual taxable years of the Company, except for
items of income or loss arising from an extraordinary event, which shall be
reflected in the period in which such event occurred.
"Tax Return" shall mean any report, return or other information required
to be supplied to a taxing authority in connection with Taxes.
5
<PAGE>
"To the knowledge of Seller" shall refer to the knowledge of Dick Cole and
Penelope A. Cole after reasonable investigation.
ARTICLE 1.
PURCHASE AND SALE OF SHARES
1.1 Purchase and Sale of Shares. Subject to the terms and conditions of
---------------------------
this Agreement, at the Closing Seller shall sell, assign, transfer, convey and
deliver to Purchaser, and Purchaser shall acquire and take assignment and
delivery of, the Shares free and clear of any Encumbrances. The purchase and
sale of the Shares hereunder shall be deemed to have occurred as of the Closing
Date.
1.2 Payment of Purchase Price.
-------------------------
(a) On the Closing Date, Purchaser shall pay to Seller
an amount equal to (i) the Cash Payment, less the General Holdback and (ii) the
Note Payment, each to the account specified in Schedule 1.2(a).
---------------
(b) On the Disbursement Date, Purchaser shall pay to
Seller the General Holdback, less (i) amounts retained by Purchaser pursuant to
Subsections 1.2(c), (d) or (e) below, (ii) amounts retained by Purchaser to
- ------------------ --- ---
satisfy claims pursuant to Section 8 herein, and (iii) amounts paid or payable
---------
by Purchaser relating to any Taxes which are the responsibility of Seller.
(c) Purchaser shall retain from the General Holdback
the amount of any Accounts Receivables of the Company remaining unpaid as of the
Disbursement Date, net of reserves shown on the Closing Balance Sheet and shall
cause the Company to assign to the party designated by Seller such unpaid
Accounts Receivables. Such assignment shall be without recourse or warranty. To
the extent that the General Holdback is less than the amount of such unpaid
Accounts Receivable (net of reserves shown on the Closing Balance Sheet), Seller
shall pay such deficiency to Purchaser on the Disbursement Date. Seller or his
designee shall conduct any collection of such reassigned receivables in a
commercially reasonable manner and so as not to damage any ongoing relationship
between the Company and the account debtor.
(d) On the Disbursement Date, Seller shall pay
Purchaser the Disposition Amount. Purchaser shall be entitled to retain the
Disposition Amount from the General Holdback. To the extent that the General
Holdback is not sufficient to cover the Disposition Amount, Seller shall pay to
6
<PAGE>
Purchaser, on the Disbursement Date, the amount of such deficiency.
(e) If (i) the Shareholder's Equity stated in the
Closing Balance Sheet exceeds the Base Value, Purchaser shall pay to Seller, on
the Disbursement Date, the amount by which the Shareholder's Equity stated in
the Closing Balance Sheet exceeds the Base Value (and the Purchase Price shall
be increased by such amount), or (ii) the Base Value exceeds the Shareholder's
Equity stated in the Closing Balance Sheet, Purchaser shall retain from the
General Holdback the amount by which the Base Value exceeds the Shareholder's
Equity stated in the Closing Balance Sheet (and the Purchase Price shall be
decreased by such amount). To the extent that the General Holdback is not
sufficient to cover the amount, if any, by which the Base Value exceeds the
Shareholder's Equity stated in the Closing Balance Sheet, Seller shall pay to
Purchaser, on the Disbursement Date, the amount of such deficiency.
(f) All payments required under this Section 1.2 shall
-----------
be made by wire transfer of immediately available funds to the account
designated by the party entitled to payment.
1.3 Closing Balance Sheet.
---------------------
(a) Within 30 days after the Closing Date, Seller shall prepare and
deliver to Purchaser a balance sheet as of the Closing Date (the "Closing
Balance Sheet") setting forth the Shareholder's Equity, which will include the
net income of the Company for the months of November 1998 through February 1999.
The Purchaser shall then have 45 to review the Closing Balance Sheet, at
Purchaser's expense, and confirm that it was prepared in a manner consistent
with the Company's past practices (including the same type of line items as the
balance sheet shown on the Financial Statements) 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 review of the Closing Balance Sheet.
(b) Within thirty (30) days after receipt of the amended Closing
Balance Sheet, Seller shall deliver to Purchaser a written statement describing
his objections, if any, thereto. Unless Seller so objects within such period,
the Closing Balance Sheet, as amended shall become final and binding upon all
parties. If Seller objects within such period, such objection shall be resolved
by the Chicago office of a "big five" accounting firm other than
PricewaterhouseCoopers, which shall be instructed to resolve such dispute within
thirty (30) days. The resolution of disputes by such firm shall be set forth in
writing and shall be conclusive and binding upon the parties and the
7
<PAGE>
Closing Balance Sheet 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. The parties shall cooperate promptly and in
good faith in resolving any dispute regarding the Closing Balance Sheet.
(c) In preparing the Closing Balance Sheet and determining the
Shareholders Equity, no effect shall be given to the payment, release or
discharge, in connection with the Closing, of the Company's promissory note to
Seller in the original principal amount of $743,000 or any other debt of the
Company, whether for borrowed funds, for trade debt or otherwise.
1.4 Loan Pay-off. As of the Closing Date, Purchaser will pay in full
------------
all of the Debt listed on Schedule 2.22 (other than the Premium Payment
-------------
Financing, which shall remain the responsibility of Seller) and provide evidence
to Seller, in form reasonably satisfactory to Seller's counsel, that Seller has
been released from any and all personal guarantees relating to the Debt.
1.5 Signal Light. Purchaser's acquisition of the Shares shall not
------------
include the acquisition of any patent or other property rights which Seller has
in his signal light design or the marketing or other production rights related
to such signal light, which rights shall remain with Seller.
ARTICLE 2.
REPRESENTATIONS AND WARRANTIES
OF SELLER
Seller represents and warrants to Purchaser as of the Closing Date as
follows:
2.1 Due Organization. The Company is a corporation duly organized,
----------------
validly existing and in good standing under the laws of the State of Arizona
with all requisite power and authority to own, lease and operate its properties
and to carry on its business as now being conducted. The Company is duly
qualified to do business and is in good standing in each jurisdiction where the
failure to be so qualified would, in the aggregate, have a material adverse
effect on the business or operation of the Company. Schedule 2.1 is a list of
------------
all jurisdictions in which the Company is so authorized. The Company has no
subsidiaries, either wholly or partially owned, and the Company does not hold
any interest in any other entity.
2.2 Due Authorization. Seller has full power and authority to enter into
-----------------
this Agreement and to carry out the transactions contemplated herein, and this
Agreement has been duly and validly
8
<PAGE>
executed and delivered by Seller and constitutes the legal, valid and binding
obligation of Seller, enforceable in accordance with its terms. The execution,
delivery and performance by Seller of this Agreement and all other documents
contemplated hereby do not and will not violate any Law or Contract binding on
the Company, Seller, the Company Assets or the Shares including, without
limitation, the charter or by-laws of the Company. Except as set forth on
Schedule 2.2, no notice to or consent of any Person is required (i) for Seller
- ------------
to consummate the transactions contemplated hereby or (ii) before a change in
control of the Company can occur.
2.3 Ownership of Shares. Seller has good, valid and marketable legal and
-------------------
beneficial title to the Shares, free and clear of any Encumbrance. The Shares
are duly authorized, validly issued, fully paid and non-assessable and
constitute all of the issued and outstanding shares of capital stock of the
Company. At the Closing, Seller shall transfer to Purchaser good and valid
legal and beneficial title to the Shares free and clear of any Encumbrance.
2.4 Capitalization. The authorized capital stock of the Company consists
--------------
of 2,000,000 shares of common stock, $1.00 par value, of which [10,500] shares
are issued and outstanding. The Company has not granted any option, warrant,
subscription or similar right to any Person to purchase or acquire any rights
with respect to any shares of capital stock of the Company, and there exist no
securities convertible or exchangeable into shares of capital stock of the
Company. The Company holds no interest in any other entity.
2.5 Financial Statements. The Financial Statements fairly present the
--------------------
financial position, assets, liabilities and results of operation of the Company
and changes in financial position with respect to the dates thereof and the
periods covered thereby, and such statements are compilation statements prepared
consistent with the past practices of the Company. The Financial Statements,
including the notes thereto, make full and adequate disclosure of, and provision
for, all obligations and liabilities of the Company, as of the date thereof,
whether accrued, absolute, contingent or otherwise. Accurate and complete
copies of the Financial Statements are set forth on Schedule 2.5. The Financial
------------
Statements are in accordance with the books and records of the Company and do
not reflect any transactions that are not bona fide.
2.6 No Adverse Change. Except as set forth on Schedule 2.6, since June
----------------- ------------
30, 1998, the business of the Company has been conducted only in the ordinary
course consistent with past custom and practice and there has not been any: (a)
material adverse change in the financial condition, business, prospects, or
9
<PAGE>
results of operations of the Company, including, without limitation, any loss or
threatened loss of any material customer or supplier or the termination of any
Material Contract; (b) material loss or damage (whether or not covered by
insurance) to any of the Company Assets; (c) sale, transfer or other disposition
of the Company Assets; (d) indebtedness for borrowed money incurred by the
Company; (e) loans, advances or capital contributions to, or investments in, any
Person; (f) changes in the accounting systems, policies or practices of the
Company; (g) transactions with any of the Company's Affiliates; (h) material
increase in prices charged by any supplier to the Company; (i) capital
improvements undertaken by, or capital expenditures made by, the Company; (j)
(1) declaration or payment of any dividend or distribution with respect to the
shares of the Company's capital stock, or (2) redemption, purchase or other
acquisition or issuance of any of the shares of the Company's capital stock; (k)
bonus or profit sharing payment or authorization thereof; (l) write off or write
down of any Accounts Receivable; (m) increase in wages, salaries, bonus or other
remuneration or compensation arrangement of any employee, officer, director,
shareholder, consultant or agent of the Company; (n) loss of any material
customer, supplier or employee (individually or in the aggregate); or (o) any
Contract entered into or commitment made by the Company with respect to any of
the foregoing. The Company is not delinquent in the payment of any account
payable.
2.7 Assets. Except as disclosed on Schedules 2.7 and 2.9, the Company
------ ------------- ---
has good and marketable title to, and is the sole and lawful owner of, the
Company Assets free and clear of all Encumbrances. Upon the purchase of the
Shares by Purchaser, the Company shall remain the sole and lawful owner of, and
have good and marketable title to, the Company Assets, free and clear of all
Encumbrances except as set forth on Schedule 2.7. The Company Assets and the
------------
property leased pursuant to the lease agreements set forth on Schedule 2.9
------------
constitute all of the assets and properties required for the operation of the
Company's business.
2.8 Real Property. The Real Property includes all land, structures and
-------------
improvements used for the Company's operation. Such structures, improvements and
real property do not violate any applicable zoning or safety or health or
similar law or any Environmental Law. No parcel of land included in the Real
Property relies on or regularly makes use of access to the nearest public road
or right-of-way over land owned by others. There is no pending or threatened
proceeding or governmental action to modify the zoning classification of, to
condemn or take by eminent domain or to otherwise restrict the use of all or any
part of the Real Property.
2.9 Leases. Schedule 2.9 contains a list and description of the terms of
------ ------------
all written or oral leases to which the Company
10
<PAGE>
is a party (as lessee or lessor), relating to real or personal property. With
respect to each lease set forth in Schedule 2.9: (a) such lease is in full force
------------
and effect and fully enforceable in accordance with its terms; (b) all rents
under such lease have been paid; and (c) there exists no event of default or
condition (including the purchase of the Shares hereunder) which, with notice,
lapse of time or both, would constitute a default under such lease, of either
the Lessee or Lessor thereunder. Seller has delivered to Purchaser complete
copies of each lease listed on Schedule 2.9.
------------
2.10 Intellectual Property. Schedule 2.10 is a list of the Intellectual
--------------------- -------------
Property and any license agreement or arrangement pursuant to which the Company
uses any Intellectual Property. Except as set forth on Schedule 2.10: (a) the
-------------
Intellectual Property is owned by the Company; (b) none of the Intellectual
Property has been or is the subject of any pending or, to the knowledge of
Seller, threatened adverse claim; (c) no license agreement to which the Company
or Seller is a party is in default or the subject of any notice of termination,
nor does Seller have reason to anticipate any such default or notice or that the
transactions herein contemplated will result in any such termination; (d)
neither the Company nor Seller has granted any license with respect of any
Intellectual Property; (e) the Company is not obligated to pay any license or
royalty fee with respect to any of the Intellectual Property; and (f) the
Intellectual Property is owned by or licensed exclusively to the Company or
Seller, as the case may be, free and clear of any Encumbrance. The products
that the Company manufactures, sells or leases, and any process, method, part,
design or material it employs, or the marketing and use by the Company of any
such product or any service, do not infringe any trademark, trade name,
copyright, patent, trade secret or proprietary right of another, and the Company
has not received any notice contesting its right to use any trademark, trade
name, copyright, patent, product, process, design, computer program or written
work.
2.11 Inventory. The Company has good and valid title to the Inventory,
---------
free of any Encumbrance. Except as set forth in Schedule 2.11, the Inventory is
-------------
merchantable and usable in the ordinary operations of the Company and is not
obsolete. The Inventory is fairly reflected on the Financial Statements and
valued at its average cost. The Inventory is held in quantities that are
reasonable in light of the historic sales levels of the business of the Company
and is not subject to write down or write off.
2.12 Accounts Receivable. All Accounts Receivables represent 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
11
<PAGE>
services performed, and the Company has performed all of its obligations to
which such Accounts Receivable relates and such Accounts Receivables are good
and collectable in the ordinary course of business (subject to the allowance for
bad debts stated in the Financial Statements and as shown on Schedule 2.12), and
-------------
(b) no Accounts Receivable is subject to any claim for reduction, counterclaim,
set-off, prepayment, recoupment or other claim for credit, allowances or
adjustments by the obligor thereof and no obligor thereof is subject to
bankruptcy or similar proceedings. The Company is the sole owner of the Accounts
Receivables free from all Encumbrances, and no other person or entity has any
right or claim thereto. No pre-payments have been made under any Contracts with
customers. Since June 30, 1998, the Company has not compromised or canceled any
Accounts Receivable, except as disclosed on Schedule 2.12.
-------------
2.13 Insurance Policies. Schedule 2.13 is a list of all policies of
------------------ -------------
insurance currently held and maintained by the Company. All such insurance
provides coverage on an occurrence basis. A copy of each such policy has been
delivered to Purchaser. The Company has paid all premiums due with respect to
each such policy and each such policy is in full force and effect. Since
December 31, 1997, there has not been any material adverse change in the
Company's relationship with its insurers or in the premiums payable under such
policies. Seller has furnished Purchaser with an accurate and complete claims
history for the Company for the past five (5) years.
2.14 Bank Accounts. Schedule 2.14 sets forth the names and locations of
------------- -------------
each financial institution at which the Company has an account or safe deposit
box and the names of all persons authorized to draw thereon or have access
thereto.
2.15 Employees. Schedule 2.15 is a list of the Company's employees,
--------- -------------
indicating the rate of pay or salary of each such employee during the previous
twelve months. The Company's employees are not members of any union, there is
no ongoing effort by any union to enlist the employees of the Company and there
is no request for union or collective bargaining representation pending and, to
the knowledge of Seller, no question regarding union representation has been
raised. Within the last three years, the Company has not experienced any
strikes, picketing, boycott, work stoppage or slowdown, labor dispute or
complaint or union organizational activity. Seller has delivered to Purchaser
an accurate and complete copy of any employee handbook of the Company and any
written work rules pertaining to the Company. Neither the Company nor Seller
has received notice that any key employee of the Company intends to terminate
his employment with the Company or would not be willing to work for the Company
after the Closing. The Company has operated and is currently operating in full
compliance with all
12
<PAGE>
Laws relating to employment and employment practices, terms and conditions of
employment, wages and hours and nondiscrimination. Other than Seller and
Penelope A. Cole, there are no officers or directors of the Company.
2.16 Contracts. Schedule 2.16 is a partial list of written or oral
--------- -------------
Contracts or arrangements as provided below to which the Company is a party, by
which the Company or the Company Assets are bound, to which the Shares are
subject or which otherwise directly relate to the business and operation of the
Company (the "Material Contracts"). Seller has complete copies of each listed
document at the Company's offices at 3015 East Illini in Phoenix and has
provided to Purchaser a written description of each oral arrangement so listed:
(1) any agreement or arrangement with any officer, director or
employee of the Company, or Seller, including, without limitation, agreements
relating to present or future compensation, severance pay or stay bonuses (other
than as set forth on Schedule 2.17);
-------------
(2) any Contract or other arrangement of any kind with any
Affiliate of the Company;
(3) any Contract or arrangement (other than those set forth on
Schedule 2.17) which (i) involves an unperformed commitment in excess of
- -------------
$10,000; (ii) requires performance of any obligations by the Company over a
period in excess of one year, unless terminable by the Company without penalty
upon not more than 30 days' notice or (iii) imposes an obligation of indemnity
on the Company;
(4) any contract or arrangement pursuant to which the Company
has (i) made or will make loans or advances, or (ii) become a guarantor, surety
or pledged its credit on or otherwise become responsible with respect to any
undertaking of another;
(5) any indenture, credit agreement, loan agreement, note,
mortgage, security agreement or commitment for financing;
(6) any agreement or arrangement involving (i) a partnership,
joint venture or other cooperative undertaking, or (ii) with respect to the
Company's business, any restrictions on the (A) geographical area in which the
Company is permitted to operate or (B) scope or type of business;
(7) any power of attorney or agency agreement;
(8) any warranty applicable to the Company; and
13
<PAGE>
(9) all other Contracts not made in the ordinary course of
business.
With respect to each Material Contract (x) such Material Contract is in full
force and effect and fully enforceable in accordance with its terms, (y) there
exists no default thereunder or condition (including the purchase of the Shares
hereunder) which, with notice, lapse of time or both, would constitute a default
thereunder, and (z) there is not pending or threatened any claim with respect to
such Material Contract.
2.17 Employee Benefit Plans.
----------------------
(a) General. Except as set forth on Schedule 2.17, none of the Company or
------- -------------
any of its ERISA Affiliates maintains, is a party to, participates in or has any
liability or contingent liability with respect to:
(i) any "employee welfare benefit plan" or "employee pension benefit
plan" (as those terms are defined in sections 3(1) and 3(2),
respectively, of ERISA, or a "multiemployer plan" (as defined in
section 3(37) of ERISA);
(ii) any retirement or deferred compensation plan, incentive compensation
plan, stock plan, unemployment compensation plan, vacation pay,
severance pay, bonus or benefit arrangement, insurance or
hospitalization program or any other fringe benefit arrangements for
any current or former employee, director, consultant or agent,
whether pursuant to contract, arrangement, custom or informal
understanding, which does not constitute an employee benefit plan (as
defined in section 3(3) of ERISA); or
(iii) any employment agreement or consulting agreement.
(b) Plan Documents and Reports. A true and correct copy of each of the
--------------------------
plans, arrangements, and agreements listed on Schedule 2.17 (referred to
-------------
hereinafter as "Employee Benefit 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, has been supplied to the Purchaser. In the case
of any Employee Benefit Plan which is not in written form, the Purchaser has
been supplied with an accurate description of such Employee Benefit Plan as in
effect on the date hereof. A true and correct copy of the most recent annual
report, actuarial report, accountant's opinion of the plan's financial
statements, summary
14
<PAGE>
plan description and IRS determination letter with respect to each Employee
Benefit Plan, to the extent applicable, and a current schedule of assets (and
the fair market value thereof assuming liquidation of any asset which is not
readily tradable) held with respect to any funded Employee Benefit Plan has been
supplied to the Purchaser, and there have been no material changes in the
financial condition in the respective plans from that stated in the annual
reports and actuarial reports supplied.
(c) Compliance with Laws; Liabilities. As to all Employee Benefit Plans:
---------------------------------
(i) All Employee Benefit Plans comply and have been administered in
form and in operation in all material respects with all
applicable requirements of Law, and no event has occurred which
will or could cause any such Employee Benefit Plan to fail to
comply with such requirements and no notice has been issued by
any governmental authority questioning or challenging such
compliance.
(ii) All Employee Benefit Plans which are employee pension benefit
plans comply in form and in operation with all applicable
requirements of sections 401(a) and 501(a) of the Code; there
have been no amendments to such plans which are not the subject
of a favorable determination letter issued with respect thereto
by the IRS; and no event has occurred which will or could give
rise to disqualification of any such plan under such sections or
to a tax under section 511 of the Code.
(iii) None of the assets of any Employee Benefit Plan are invested in
employer securities or employer real property.
(iv) There have been no "prohibited transactions" (as described in
section 406 of ERISA or section 4975 of the Code) with respect to
any Employee Benefit Plan and none of Seller or the Company has
engaged in any prohibited transaction.
(v) There have been no acts or omissions by Seller or the Company
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 Seller or the Company may
be liable.
(vi) None of the payments contemplated by the Employee Benefit Plans
would, in the aggregate, constitute
15
<PAGE>
excess parachute payments (as defined in section 280G of the Code
(without regard to subsection (b)(4) thereof)).
(vii) There are no actions, suits or claims (other than routine claims
for benefits) pending or threatened involving any Employee
Benefit 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).
(viii) No Employee Benefit Plan is subject to Title IV of ERISA.
(ix) Each Employee Benefit Plan which constitutes a "group health
plan" (as defined in section 607(i) of ERISA or section
4980B(g)(2) of the Code), including any plans of current and
former affiliates which must be taken into account under sections
4980B and 414(t) of the Code or sections 601-608 of ERISA, have
been operated in compliance with applicable law, including
continuation coverage requirements of section 4980B of the Code
and section 601 of ERISA and the portability and
nondiscrimination requirements of sections 9801 and 9802 of the
Code and sections 701-707 of ERISA, to the extent such
requirements are applicable.
(x) None of the Company or any of its subsidiaries has any liability
or contingent liability for providing, under any Employee Benefit
Plan 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.
(xi) Actuarially adequate accruals for all obligations under the
Employee Benefit Plans are reflected in the financial statements
of the Company and such obligations include a pro rata amount of
the contributions and PBGC premiums which would otherwise have
been made in accordance with past practices and applicable law
for the plan years which include the Closing Date.
(xii) There has been no act or omission that would impair the ability
of the Company (or any successor hereto) to unilaterally amend or
terminate any Employee Benefit Plan.
16
<PAGE>
(d) Multiemployer Plans. None of the Company nor any of its ERISA
-------------------
Affiliates contributes to, has contributed to, or has any liability or
contingent liability with respect to a multiemployer plan.
2.18 Compliance with Law. Except as set forth on Schedule 2.18, none of
------------------- -------------
the Company, its personnel, the Company Assets, the Real Property or the
occupancy or operation thereof, violate any Law concerning zoning, building,
occupational health and safety, road safety, employment, fire, labor or contract
procurement or project procurement. Except as set forth in Schedule 2.18, the
-------------
Company is not subject to any charge, assessment or penalty. No notice from any
Governmental Authority has been served upon Seller or the Company claiming any
violation of any Law. The Company holds all of the Permits described on
Schedule 2.18, and no other Permits are necessary for the lawful operation of
- -------------
the Company. None of the Permits listed on Schedule 2.18 will be terminated,
-------------
limited as to transfer or otherwise, or otherwise adversely affected by the
consummation of the transactions contemplated herein. The Company has paid all
fees required by such permits and to enable the Company to conduct its business
as presently conducted.
2.19 Environmental Matters. Except as disclosed on Schedule 2.19: (a) the
--------------------- -------------
Company has obtained all Environmental Permits required or desirable for the
operation of the Company's business or the Company Assets and such Environmental
Permits are valid and in full force and effect; (b) neither any of the Company's
business, any of the Company Assets nor any of the Real Property 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 Seller nor the Company
or any other Person has stored or used any pollutants, contaminants or hazardous
or toxic wastes, substances or materials on or at the Real Property in violation
of any Environmental Law; (d) neither Seller nor the Company has received notice
from any Person advising that any of the Real Property or Company Assets or the
operation of the Company's business violates any Environmental Law or any
Environmental Permit or that Seller or the Company 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 adjacent thereto or any other property
and, to the knowledge of Seller, no such notice is threatened; (e) neither
Seller nor the Company is 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
17
<PAGE>
with the Company's business, the Company Assets or the Real Property; (f)
neither Seller nor the Company or any other Person has buried, dumped, disposed,
spilled or released any Pollutants on, beneath or about any Real 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 have been
on, at or under the Real Property. The Company has timely filed all reports
required to be filed with respect to the Real Property, the Company Assets and
the operation of the Company's business and has generated and maintained all
required data, documentation and records under any applicable Environmental Laws
and Environmental Permits with respect thereto. Neither the Company nor the
operation thereof are the subject of any pending Federal, state, local or
private litigation or proceedings including, without limitation, any
administrative proceeding involving a demand for damages or other potential
liability with respect to violations of any Environmental Law.
2.20 Litigation. Except as disclosed in Schedule 2.20, (a) there are no
---------- -------------
actions, suits, disputes, litigation, proceedings or governmental investigations
whatsoever pending or, to the knowledge of Seller, threatened against or
relating to (i) the Company or Seller's ownership of the Shares, (ii) any
officers, directors, employees or shareholders of the Company in their capacity
as such, (iii) any of the Company Assets or businesses of the Company, or (iv)
the transactions contemplated by this Agreement, and (b) neither the Company nor
Seller is subject to any order, judgment, decree, stipulation, or consent of or
with any Governmental Authority.
2.21 Taxes. Except as disclosed in Schedule 2.21:
----- -------------
(a) The Company has filed (or has had filed on its behalf) on a
timely basis all Tax Returns as required by applicable law on or before the
Closing Date. Each such Tax Return is true, correct and complete in all
respects. All Taxes shown as due and owing on all such Tax Returns have been
paid. The Company has not requested an extension of time within which to file
any Tax Return in respect of any taxable year which has not since been filed.
(b) The Company has or will have no additional liability for Taxes
with respect to any Tax Return which was required by law to be filed on or
before the Closing Date, other than as reflected as liabilities on the Financial
Statements. The amounts provided as a liability on the Financial Statements for
all Taxes are adequate to cover all unpaid liabilities for all Taxes, whether or
not disputed, that have accrued with respect to or are applicable to the period
ended on and including the
18
<PAGE>
Closing Date or to any years and periods prior thereto and for which the Company
and any of its subsidiaries may be directly or contingently liable in their own
right or as a transferee of the assets of, or successor to, any Person.
(c) No federal, state, local or foreign audits or other
administrative proceeding or court proceeding exist with regard to any Taxes or
Tax Returns of the Company. The Company has not received any written notice that
an audit or other administrative proceeding is pending or threatened with
respect to any Taxes due from or with respect to the Company or any Tax Return
filed by or with respect to the Company. The Company has not been granted or
been requested to grant any waiver of any statutes of limitations applicable to
any claim for Taxes.
(d) All Tax deficiencies which have been claimed, proposed or
asserted in writing against the Company has been fully paid or finally settled,
and no issue has been raised in writing in any examination which, by application
of similar principles, could be expected to result in the proposal or assertion
of a Tax deficiency for any other year not so examined.
(e) No written position has been taken on any Tax Return with respect
to the business or operations of the Company for a taxable year for which the
statute of limitations for the assessment of any Taxes with respect thereto has
not expired that is contrary to any publicly announced position of a
Governmental Authority or that is substantially similar to any position which a
Governmental Authority has successfully challenged in the course of an
examination of a Tax Return of the Company.
(f) All Taxes that the Company 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 and other withholding taxes, have been
duly withheld or collected and, to the extent required, have been paid over to
the proper governmental agencies or are held in separate bank accounts for such
purpose.
(g) The Company has not made or become obligated to make, and will
not as a result of any event connected with any transaction contemplated herein
become obligated to make, any payments that could be nondeductible by reason of
Section 280G (without regard to subsection (b)(4) thereof) or 162(m) of the
Code.
(h) The Company is not required to include in income any adjustment
pursuant to Section 481(a) of the Code, for any period after the Closing Date,
by reason of any voluntary or involuntary change in accounting method (nor has
any taxing authority
19
<PAGE>
proposed in writing any such adjustment or change of accounting method).
(i) The Company does not have any liability for Taxes of any person
other than itself under Treasury Regulation Section 1.1502-6 (or any similar
provision of state, local or foreign law).
(j) None of the assets of the Company is subject to a consent
pursuant to Section 341(f) of the Code (or any predecessor provision).
2.22 Debt. Schedule 2.22 lists all outstanding amounts of borrowed money
---- -------------
owed or guaranteed by the Company (collectively, the "Debt"). With respect to
each component of the Debt, (a) there is no event of default in effect or
condition that, with notice, lapse of time or both, would constitute such an
event of default, and (b) Seller has delivered to Purchaser (i) complete and
correct copies of all documents evidencing the Debt and (ii) with respect to any
undocumented Debt, an accurate and complete written explanation of such Debt.
2.23 Affiliate Transactions. Except as set forth in Schedule 2.23, (a)
---------------------- -------------
Seller does not possess any interest in any supplier, customer, lessor or lessee
of, provider of services to, or competitor or potential competitor of, the
Company and (b) no supplier, customer, lessor or lessee of, provider of services
to, or competitor or potential competitor of, the Company possesses any
financial interest in the Company.
2.24 Company's Warranties. Schedule 2.24 contains a list of each express
-------------------- -------------
warranty, if any, given by the Company on units of equipment sold or leased or
services performed by the Company, that is outstanding on the Closing Date.
Seller has furnished Purchaser with a true and complete copy of each such
warranty.
2.25 Brokers. No broker or finder has acted for the Company or 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.
2.26 No Other Agreement. Except with respect to sales or rentals by the
------------------
Company of items of the Inventory in the ordinary course of business consistent
with past practice or the sale of the Shares under this Agreement, none of
Seller, the Company or any of their respective Affiliates has any contract,
agreement, arrangement or understanding with respect to the sale or other
disposition of the Company Assets, the Shares or any other shares of the
Company's stock.
20
<PAGE>
2.27 Records. The copies of the articles of incorporation and by-laws of
-------
the Company that were provided to the Purchaser are true, accurate and complete
and reflect all amendments made through the date of this Agreement. The minute
books for the Company provided to the Purchaser for review contain the true
signatures of the persons purporting to have signed them, and such minute books
contain an accurate record of all corporate actions of the shareholders and
directors (and any committees thereof) of the Company taken by written consent
or at a meeting. All material corporate actions taken by the Company have been
duly authorized or ratified. The stock ledgers of the Company, as previously
provided to the Purchaser, contain accurate and complete records of all
issuances, transfers and cancellations of shares of the capital stock of the
Company.
2.28 Certain Payments. Neither the Company nor any director, officer,
----------------
agent, or employee thereof, or to Seller's knowledge any other Person associated
with or acting for or on behalf of the Company, has directly or indirectly (a)
made any contribution, gift, bribe, rebate, payoff, influence payment, kick-
back, or other payment to any Person, private or public, regardless of form,
whether in money, property, or services (i) to obtain favorable treatment in
securing business, (ii) to pay for favorable treatment for business secured,
(iii) to obtain special concessions or for special concessions already obtained,
or (iv) in violation of any Law, or (b) established or maintained any fund or
asset that has not been recorded in the books and records of the Company.
2.29 No Special Status. No contract or project has been awarded to the
-----------------
Company pursuant to the Company meeting the requirements of a disadvantaged
business enterprise, a small business enterprise, a minority owned enterprise, a
woman owned enterprise or similar classification under any federal, state or
local law.
2.30 Claim Experience. The amount of claims made by customers and third
----------------
parties with respect to the Company's products or services in each of the past
three (3) years has not exceeded .5% of the Company's net sales for each such
year. For purposes of the foregoing, "the amount of claims made" refers to (a)
the amount of the originally asserted claim, and (b) shall be limited to claims
under theories of breach of contract, breach of warranty (express or implied),
strict liability or product liability.
2.31 Due Diligence Materials. Seller has provided, or otherwise made
-----------------------
available, to Purchaser or its representatives all documents of the character
and type described in the Due Diligence Request of Purchaser dated September
1998, and there are no material documents of a material nature in the possession
21
<PAGE>
of Seller or any of its agents or representatives of a character or type
described in such request which have not been so provided to Purchaser.
2.32 Accuracy of Statements. Neither this Agreement nor any response,
----------------------
schedule, statement, certificate or other information furnished by or on behalf
of Seller or the Company in connection herewith contains any untrue statement of
a material fact or omits a material fact necessary to make the statements
contained herein or therein, in light of the circumstances in which they were
made, not misleading.
Each of the foregoing representations and warranties shall be deemed remade
on and as of the Closing Date.
ARTICLE 3.
REPRESENTATIONS AND WARRANTIES OF PURCHASER
Purchaser represents and warrants to Seller as of the Closing Date as
follows:
3.1 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.
3.2 Due Authorization. Purchaser has all requisite corporate 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.
3.3 Consents. Except as set forth on Schedule 3.3, no notice to, filing
-------- ------------
with, authorization of, exemption by, or consent of any Person is required in
order for Purchaser to consummate the transactions contemplated hereby.
Each of the foregoing representations and warranties shall be deemed remade
on and as of the Closing Date.
22
<PAGE>
ARTICLE 4.
CONDITIONS PRECEDENT TO OBLIGATIONS
OF PURCHASER
The obligations of Purchaser under Article 1 of this Agreement are, at the
option of Purchaser, subject to satisfaction of the following conditions
precedent on or before the Closing Date:
4.1 Consents and Approvals. All consents and approvals in writing
----------------------
reasonably satisfactory to Purchaser shall have been received from any lenders,
lessors, Governmental Authorities or other persons or entities whose consent or
approval is required. Purchaser shall have received financing to complete the
transactions contemplated herein on terms satisfactory to Purchaser.
4.2 Compliance. Seller shall, in all material respects, have performed
----------
all of his obligations and agreements to be performed and complied with by him
on or prior to the Closing Date. The representations and warranties of Seller
shall be true and correct on the Closing Date as if made thereon. Seller shall
have delivered to Purchaser a certificate dated as of the Closing Date, signed
by Seller, certifying all of the foregoing.
4.3 Opinion of Counsel. Purchaser shall have received an opinion, dated
------------------
the Closing Date, of Gallagher & Kennedy, counsel for Seller, to the effect set
forth on Exhibit C hereto.
---------
4.4 Deliveries. All of the other agreements, certificates and
----------
instruments to be delivered to Purchaser at the Closing pursuant to Article 6.2
-----------
shall have been delivered to Purchaser.
4.5 Actions or Proceedings. No action or proceeding by any Governmental
----------------------
Authority or other party shall have been instituted or threatened which would
enjoin, restrain or prohibit, or might result in substantial damages in respect
of, this Agreement or the complete consummation of the transactions as
contemplated by this Agreement, and no court order shall have been entered in
any action or proceeding which enjoins, restrains or prohibits this Agreement or
the complete consummation of the transactions as contemplated by this Agreement.
ARTICLE 5.
CONDITIONS PRECEDENT TO OBLIGATIONS OF SELLER
The obligations of Seller under Article 1 of this Agreement are, at the
option of Seller, subject to the satisfaction of the following conditions
precedent on or before the Closing Date:
23
<PAGE>
5.1 Compliance. Purchaser shall, in all material respects, have performed
----------
all obligations and agreements to be performed and complied with by it on or
prior to the Closing Date. The representations and warranties of Purchaser shall
be true and correct on the Closing Date as if made thereon. Purchaser shall have
delivered to Seller a certificate, dated as of the Closing Date, of the
President or a Vice President of Purchaser certifying all of the foregoing.
5.2 Opinion of Counsel. Seller shall have received an opinion, dated the
------------------
Closing Date, of Mayer, Brown & Platt, counsel for Purchaser, to the effect set
forth on Exhibit D.
---------
5.3 Deliveries. All of the other agreements, certificates and
----------
instruments to be delivered pursuant to Section 6.3 shall have been delivered.
-----------
5.4 Actions or Proceedings. No action or proceeding by any governmental
----------------------
agency or other party shall have been instituted or threatened which would
enjoin, restrain or prohibit, or might result in substantial damages in respect
of, this Agreement or the complete consummation of the transactions as
contemplated by this Agreement, and no court order shall have been entered in
any action or proceeding that enjoins, restrains, or prohibits this Agreement or
the complete consummation of the transactions as contemplated by this Agreement.
ARTICLE 6.
CLOSING
6.1 Closing. The Closing shall take place at the offices of Mayer, Brown
-------
& Platt, 190 South LaSalle Street, Chicago, Illinois 60603, at 10:00 A.M. on the
Closing Date.
6.2 Deliveries by the Seller. At the Closing, Seller will deliver:
------------------------
i. certificates evidencing all of the Shares, which
certificates shall be duly endorsed in blank or
accompanied by duly executed stock powers with
signatures guaranteed;
ii. the certificate referred to in Section 4.2;
-----------
iii. the opinion referred to in Section 4.3;
-----------
iv. the Articles of Incorporation of the Company,
certified as of a recent date by the Secretary of
State of Arizona,
24
<PAGE>
indicating amendments thereto to (A) abolish the debt
incurrence restriction stated at Article VIII thereof and
(B) provide for the perpetual existence of the Company;
v. a good standing certificate for the Company, issued as of a
recent date by the Secretary of State of Arizona;
vi. the By-Laws of the Company, certified by the Secretary or
Assistant Secretary of the Company as true and correct;
vii. the stock record book and minute book of the Company and the
corporate seal, if any;
viii. resignations of all directors and officers of the Company;
ix. the Employment Agreement, duly executed by Seller;
x. an affidavit of Seller stating, under penalties of perjury,
Seller's U.S. taxpayer identification number and that Seller
is not a "foreign person" as defined in Section 1445 of the
Code;
xi. the Non-Competition Agreement;
xii. the Real Estate Leases of the Real Property, in the form of
Exhibit E hereto, duly executed by the lessors thereunder;
---------
xiii. a certificate of Seller certifying the Disposition Amount
and any amount due under Section 1.2.
-----------
xiv. a release by Seller of the Company's promissory note to
Seller in the original principal amount of $743,000; and
xv. a release by Seller of any indemnification obligation the
Company may have to him by reason of his status as an
officer or director of the Company, including, without
limitation,
25
<PAGE>
any such obligation arising under the Company's by-laws.
6.3 Deliveries by Purchaser. At the Closing, Purchaser will deliver to
-----------------------
Seller:
i. the payment required by Section 1.2;
-----------
ii. the certificate referred to in Section 5.2;
-----------
iii. the opinion referred to in Section 5.3;
-----------
iv. the Employment Agreement, duly executed by the Company;
v. The Real Estate Leases, duly executed by the Company;
vi. Landlord lien waivers as required by Purchaser; and
vii. The payment and evidence of release required under Section
1.4.
ARTICLE 7.
[INTENTIONALLY OMITTED]
ARTICLE 8.
SURVIVAL; INDEMNIFICATION
8.1 Survival. Subject to the next sentence, the respective
--------
representations and warranties contained herein or in any certificate or other
writing delivered pursuant hereto shall survive the Closing until the second
anniversary of the Closing Date. Notwithstanding the foregoing, (x) the
representations and warranties set forth at Sections 2.1, 2.2, 2.3 and 2.4,
------------ --- --- ---
shall survive the Closing for a period of ten (10) years, (y) the
representations and warranties in Section 2.19 shall survive until the sixth
------------
anniversary of the Closing and (z) the representations and warranties in Section
-------
2.17 and Section 2.21 survive until the 90th day after the applicable statute of
- ---- ------------
limitations.
8.2 Indemnification by Seller. Seller shall indemnify, defend and hold
-------------------------
harmless Purchaser and each of its Affiliates (including, without limitation,
the Company) from and against any Losses arising out of or relating to: (i) any
breach of or inaccuracy in any representation or warranty made by Seller
pursuant to this Agreement or any document delivered pursuant to
26
<PAGE>
this Agreement; (ii) any failure by Seller to perform any covenant (including,
without limitation, the covenants contained in Article 1) under this Agreement
---------
or any document delivered pursuant to this Agreement; (iii) any and all Taxes
that have become due and payable during, or which have accrued with respect to
the Company for, any period included in the Tax Indemnification Period and that
have not been paid prior to the Closing Date (any Taxes attributable to the
operations of the Company payable as a result of an audit of any Tax Return
shall be deemed to have accrued in the period to which such Taxes are
attributable); and (iv) the ownership of the Shares and the business or
operation of the Company on or prior to the Closing Date (including, without
limitation, any Losses from lawsuits pending as of the Closing Date or relating
to the operation of the Company on or prior to the Closing Date, which Losses
are not otherwise covered by existing insurance).
8.3 Indemnification by Purchaser. Purchaser shall indemnify, defend and
----------------------------
hold harmless Seller and his Affiliates from and against any Losses arising out
of or relating to: (a) any breach of or inaccuracy in any representation or
warranty made by Purchaser pursuant to this Agreement; (b) any failure by
Purchaser to perform any covenant or obligation of Purchaser under this
Agreement; (c) the business or operation of the Company after the Closing Date
(other than such matters for which Seller is responsible hereunder); and (d) any
default in the Company's obligations for borrowed funds, but only to the extent
such obligations are identified on Schedule 2.22.
-------------
8.4 Notice of Claims. The indemnified party shall promptly, and in any
----------------
event within 30 days of learning of such matter, notify the indemnifying party
in writing of all matters which may give rise to the right to indemnification
hereunder. If the indemnifying party does not receive notice of any matter known
to the indemnified party and as to which the indemnified party is entitled to
indemnification hereunder within such time period, the indemnifying party shall
not be obligated to indemnify the indemnified party for any increase in the
amount of indemnification obligations under this Agreement that the indemnifying
party can demonstrate is attributable to the failure of the indemnified party to
so notify the indemnifying party within such time period. The indemnified party
shall have the right: (a) with the consent of each party, which shall not be
unreasonably withheld or delayed, to settle all indemnifiable matters related to
claims by third parties which are susceptible to being settled; and (b) to
participate in the defense, through counsel of its own choosing, at its own
expense, of any action which may be brought by a third party in connection
therewith (it being understood that the indemnifying party shall have the right
to defend such third party actions with counsel reasonably acceptable to the
indemnified party). Each party shall keep each
27
<PAGE>
other reasonably informed of the progress of any litigation or settlement
negotiations with third parties in connection with a matter indemnified against
hereunder. Subject to non-waiver of applicable legal privileges, each party
shall permit each other reasonable access to books and records and otherwise
cooperate with any indemnifiable matter resulting from a claim by a third party.
ARTICLE 9.
MISCELLANEOUS
9.1 Expenses. Each party hereto shall bear its own expenses with respect
--------
to this transaction. Seller shall pay all taxes, assessments, charges and fees,
if any, required to be paid in connection with the transfer of the Shares.
9.2 Notices. Any notice, request or instruction to be given hereunder
-------
shall be in writing and shall be deemed to have been given, (a) when received if
given in person, (b) on the date of transmission, if sent by facsimile (receipt
confirmed), (c) one day after being delivered to a nationally recognized
overnight courier or (d) three days after being deposited in the U.S. mail,
certified or registered mail, postage prepaid:
If to Seller, addressed as follows:
__________________
__________________
__________________
__________________
Facsimile: (___) ________
with a copy to:
Gallagher & Kennedy
2600 North Central Avenue
Phoenix, Arizona 85004-3020
Attention: Michael Murphy
Facsimile: (602) 530-8515
If to Purchaser, addressed as follows:
National Equipment Services, Inc.
1800 Sherman Ave., Suite 100
Evanston, Illinois
Attention: Kevin P. Rodgers
Facsimile: (847) 733-1078
28
<PAGE>
with a copy to:
Mayer, Brown & Platt
190 South LaSalle Street
Chicago, Illinois 60603
Attention: Paul M. Crimmins
Facsimile: (312) 701-7711
or to such other individual or address as a party hereto may designate by notice
given as herein provided.
9.3 Effect of Investigations; Construction. Any due diligence review,
--------------------------------------
investigation or inquiry undertaken or performed by or on behalf of Purchaser
shall not waive, limit, qualify or modify the Seller's representations,
warranties, covenants and indemnities in this Agreement or any of Purchaser's
remedies with respect thereto, irrespective of the knowledge and information
received (or which should have been received) therefrom by Purchaser. The
parties acknowledge that Purchaser is undertaking the transactions contemplated
herein in express reliance on such representations, warranties, covenants and
indemnities. This Agreement has been reviewed by each party and its counsel,
and any rule of construction interpreting this Agreement against the drafting
party shall not apply. No specific representation or warranty shall operate to
qualify or limit a more general representation or warranty addressing the same
matter. Each of Dick Cole and Penelope A. Cole, individually, shall be jointly
and severally liable for the representations, warranties and covenants made to
Purchaser hereunder.
9.4 Waivers. The failure of a party hereto to require performance of any
-------
provision hereof shall in no manner affect its right at a later time to enforce
the same. No waiver by a party of any condition or any covenant, representation
or warranty contained herein shall be effective unless in writing. No waiver in
any one instance shall be deemed to be a further or continuing waiver in any
other instance or a waiver of any other condition or covenant, representation or
warranty.
9.5 Counterparts. This Agreement may be executed simultaneously in
------------
counterparts, all of which together shall constitute one and the same
instrument.
9.6 Applicable Law; Forum. This Agreement shall be governed by and
---------------------
construed in accordance with the internal laws of the State of Arizona. The
proper venue for any proceeding at law or in equity will be Maricopa County,
Arizona, and the parties waive any right to object to the venue.
29
<PAGE>
9.7 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. Neither party may assign its rights
hereunder to another Person without the written consent of the other parties,
which shall not be unreasonably withheld or delayed, except that the Purchaser
may assign its rights hereunder to an Affiliate or its lenders so long as
Purchaser remains responsible for its obligations hereunder.
9.8 Further Assurance. Upon the reasonable request of Purchaser, Seller
-----------------
will execute and deliver to Purchaser such other documents, releases,
assignments and other instruments as may be required to effect the transfer and
assignment to Purchaser of, and to vest in Purchaser title to, each of the
Shares.
9.9 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 and discussions relating
to the subject matter hereof and is not intended to confer upon any other person
any rights or remedies hereunder. This Agreement may be amended, modified or
supplemented but only in writing signed by all of the parties hereto. The
schedules and exhibits attached hereto and referenced herein are incorporated
into, and form a part of, this Agreement.
30
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed and delivered on the date first above written.
Purchaser:
NATIONAL EQUIPMENT SERVICES, INC.
By: /s/ Dennis J. O'Connor
------------------------------------
Name: Dennis J. O'Connor
------------------------------
Title: CFO
-----------------------------
Seller:
/s/ Richard Cole
----------------------------------------
DICK COLE
/s/ Penelope A. Cole
----------------------------------------
PENELOPE A. COLE
31
<PAGE>
EXHIBIT 10.2
================================================================================
PURCHASE AGREEMENT
BY AND AMONG
MAYER-HAMMANT EQUIPMENT, L.L.C.
THE MEMBERS OF MAYER-HAMMANT EQUIPMENT, L.L.C.
AND
NATIONAL EQUIPMENT SERVICES, INC.
DATED AS OF MARCH 2, 1999
================================================================================
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
ARTICLE I
DEFINITIONS............................................................. 1
1.1 Definitions.................................................... 1
1.2 Other Definitional Provisions.................................. 4
1.3 Cross Reference of Other Definitions........................... 5
ARTICLE II
PURCHASE AND SALE OF UNITS.............................................. 6
2.1 Unit Purchase.................................................. 6
2.2 Purchase Price for Acquired Units.............................. 6
2.3 Accounts Receivable Adjustment................................. 6
2.4 Closing Transactions........................................... 7
ARTICLE III
CONDITIONS TO CLOSING................................................... 7
3.1 Conditions to the Purchaser's Obligations...................... 7
3.2 Conditions to Each Sellers' Obligations........................ 10
ARTICLE IV
COVENANTS PRIOR TO CLOSING.............................................. 12
4.1 Affirmative Covenants of the Company and Each Seller........... 12
4.2 Negative Covenants of the Company and Each Seller............. 13
4.3 Covenants of Purchaser......................................... 14
ARTICLE V
REPRESENTATIONS AND WARRANTIES
CONCERNING THE COMPANY.................................................. 14
5.1 Organization and Organizational Power.......................... 14
5.2 Authorization of Transactions.................................. 15
5.3 Capitalization................................................. 15
5.4 Subsidiaries; Investments...................................... 15
5.5 Absence of Conflicts........................................... 16
5.6 Financial Statements and Related Matters....................... 16
5.7 Absence of Undisclosed Liabilities............................. 17
5.8 Absence of Certain Developments................................ 17
5.9 Title to Properties............................................ 19
5.10 Taxes.......................................................... 20
</TABLE>
<PAGE>
<TABLE>
<S> <C>
5.11 Contracts and Commitments...................................... 20
5.12 Proprietary Rights............................................. 22
5.13 Litigation; Proceedings........................................ 22
5.14 Brokerage...................................................... 23
5.15 Governmental Licenses and Permits.............................. 23
5.16 Employees...................................................... 23
5.17 Employee Benefit Plans......................................... 23
5.18 Insurance...................................................... 24
5.19 Officers and Directors; Bank Accounts.......................... 24
5.20 Affiliate Transactions......................................... 25
5.21 Compliance with Laws........................................... 25
5.22 Environmental Matters.......................................... 25
5.23 Disclosure..................................................... 26
5.24 Closing Date................................................... 26
ARTICLE VI
REPRESENTATIONS AND WARRANTIES CONCERNING THE SELLERS................... 27
6.1 Authorization of Transactions.................................. 27
6.2 Absence of Conflicts........................................... 27
6.3 Brokerage...................................................... 27
6.4 Shares......................................................... 28
6.5 Closing Date................................................... 28
ARTICLE VII
REPRESENTATIONS AND WARRANTIES CONCERNING THE PURCHASER................. 28
7.1 Organization and Corporate Power............................... 28
7.2 Authorization.................................................. 28
7.3 No Violation................................................... 28
7.4 Governmental Authorities and Consents.......................... 28
7.5 Litigation..................................................... 29
7.6 Brokerage...................................................... 29
7.7 Employees...................................................... 29
7.8 Closing Date................................................... 29
ARTICLE VIII
TERMINATION............................................................. 29
8.1 Termination.................................................... 29
8.2 Effect of Termination.......................................... 30
ARTICLE IX
INDEMNIFICATION AND RELATED MATTERS..................................... 30
9.1 Survival....................................................... 30
</TABLE>
-ii-
<PAGE>
<TABLE>
<S> <C>
9.2 Indemnification................................................. 31
ARTICLE X
ADDITIONAL AGREEMENTS.................................................... 34
10.1 Continuing Assistance........................................... 34
10.2 Tax Matters..................................................... 34
10.3 Employee Matters................................................ 34
10.4 Press Releases and Announcements................................ 34
10.5 Further Transfers............................................... 35
10.6 Specific Performance............................................ 35
10.7 Transition Assistance........................................... 35
10.8 Expenses........................................................ 35
10.9 Exclusivity..................................................... 35
10.10 Books and Records............................................... 36
10.11 Appointment of Representative................................... 36
10.12 Noncompetition, Nonsolicitation and Confidentiality............. 38
ARTICLE XI
MISCELLANEOUS............................................................ 40
11.1 Amendment and Waiver............................................ 40
11.2 Notices......................................................... 40
11.3 Binding Agreement; Assignment................................... 41
11.4 Severability.................................................... 41
11.5 No Strict Construction.......................................... 41
11.6 Captions........................................................ 41
11.7 Entire Agreement................................................ 41
11.8 Counterparts.................................................... 42
11.9 Governing Law................................................... 42
11.10 Parties in Interest............................................. 42
</TABLE>
-iii-
<PAGE>
INDEX OF EXHIBITS
-----------------
Exhibit A - Form of Escrow Agreement
Exhibit B - Form of Employment Agreement
Exhibit C - Form of Opinion of Counsel to the Company and the Sellers
Exhibit D - Form of Opinion of the Counsel to the Purchaser
INDEX OF SCHEDULES
------------------
Schedule of Members
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
Covered Employees Schedule
Noncompete Schedule
-iv-
<PAGE>
PURCHASE AGREEMENT
THIS PURCHASE AGREEMENT is made as of March 2, 1999, by and among
MAYER-HAMMANT EQUIPMENT, L.L.C., a Louisiana limited liability company (the
"Company"), the members of the Company listed on the Schedule of Members
------- -------------------
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 issued and outstanding equity interests of the Company
consist of 2,000 Units (200 Voting Units and 1,800 Non-Voting Units,
collectively the "Common Units");
------------
WHEREAS, the Sellers own beneficially and of record 100% of the issued
and outstanding Common Units; and
WHEREAS, the Purchaser desires to acquire from each Seller, and each
Seller desires to sell to the Purchaser, all of the Common Units owned by such
Seller (collectively, the "Acquired Units").
--------------
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 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.
<PAGE>
"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.
"Excluded Assets and Liabilities" means (i) all life insurance
-------------------------------
policies (less the note payable to C.S.V. Officers Life Ins.) owned by the
Company, (ii) that certain receivable due from Richard Livingston, and (iii) all
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 or relating to any of such assets.
"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, member, stockholder,
-------
partner or Affiliate, as applicable, of the Company or any of its Affiliates or
any immediate family member of
-2-
<PAGE>
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 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.
"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 or any of its Subsidiaries.
"Ordinary Course of Business" means the ordinary course of the
---------------------------
Company's or 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" 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.
"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 any and all patents, patent applications,
------------------
trademarks, service marks, trademark or service mark applications and
registrations, trade and legal 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 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.
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.
-4-
<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
Acquired Units Recitals
Applicable Limitation Date 9.1
Authorized Action 10.11(d)
Cap 9.2(b)(ii)
Cash Portion 2.2
Closing 2.4(a)
Closing Date 2.4(a)
Closing Transactions 2.4(b)
COBRA 5.17(a)
Common Units Recitals
Company Preface
Confidential Information 10.12(c)
Covered Employee 10.3
Employment Agreement 3.1(g)
ERISA 5.17(a)
Escrow Account 2.2
Escrow Agreement 2.2
Financial Statements 5.6(a)
Indemnified Party 9.2(e)
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)
Noncompete Period 10.12(a)
Noncompete Payment 10.12(a)
Noncompeting Parties 10.12(a)
Owned Real Property 5.9(a)
Party Preface
Purchase Price 2.2
-5-
<PAGE>
Purchaser Preface
Purchaser Parties 9.2(a)
Real Property 5.9(b)
Receivables Determination Date 2.3
Representative 10.11(a)
Seller Preface
Seller Parties 9.2(c)
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 12.3
ARTICLE II
PURCHASE AND SALE OF UNITS
--------------------------
2.1 UNIT 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 Units owned by such Seller as such ownership is set forth
on the Schedule of Members attached hereto, free and clear of any Liens.
-------------------
2.2 PURCHASE PRICE FOR ACQUIRED UNITS. The aggregate purchase price
---------------------------------
to be paid to Sellers for the Acquired Units (the "Purchase Price") is
--------------
$25,800,000, which amount shall be paid as follows: (a) the Purchaser shall
deliver to the Sellers $24,500,000 in cash (the "Cash Portion"); and (b) the
------------
Purchaser shall deposit $1,300,000 in an escrow account with Whitney National
Bank in New Orleans, Louisiana (the "Escrow Account") governed by an Escrow
--------------
Agreement substantially in form of Exhibit A 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. In addition, the
Purchaser shall make the $200,000 Noncompete Payment described in Section
10.12(a). The Purchase Price will be allocated among the Sellers in the manner
set forth in Schedule of Members attached hereto. The Purchase Price is subject
-------------------
to adjustment pursuant to Section 2.3.
2.3 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, calculated on a
consolidated basis, in existence as of the Closing (the "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"). 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
-6-
<PAGE>
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. 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 Sellers.
2.4 CLOSING TRANSACTIONS.
--------------------
(a) Closing. The closing of the transactions contemplated by this
-------
Agreement (the "Closing") shall take place by Federal Express of the closing
-------
documents to the offices of Kirkland & Ellis, 200 East Randolph Drive, Chicago,
Illinois 60601, by 10:00 a.m. 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) 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, 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 Units owned by such Seller, duly endorsed for
transfer;
(ii) The Purchaser shall deliver to Sellers the Cash Portion in the
manner set forth on the Schedule of Members in immediately available funds;
-------------------
(iii) The Purchaser shall deliver to the Sellers the Noncompete
Payment in the manner set forth on the Schedule of Members;
-------------------
(iv) The Purchaser shall deposit $1,300,000 in the Escrow Account in
the manner contemplated by the Escrow Agreement; and
(v) 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.
-7-
<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 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
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 Units 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 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 Units 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,
managers, and officers shall have resigned and such resignations shall be
effective as of the Closing Date;
-8-
<PAGE>
(g) The Company and each of Frank Hammant III, Michael Hammant and
Pat Brennan shall have entered into an agreement relating to his employment with
the Company (the "Employment Agreements"), substantially in the form of Exhibit
--------------------- -------
B attached hereto, and the Employment Agreements shall be in full force and
- -
effect;
(h) The Purchaser shall have received an opinion, dated the Closing
Date, of Baldwin & Haspel, L.L.C., counsel to the Company and the Sellers,
substantially in the form of Exhibit C attached hereto;
---------
(i) The Company shall have distributed the Excluded Assets and
Liabilities to the Sellers, and the Sellers shall have accepted and assumed the
Excluded Assets and Liabilities, pursuant to documents reasonably satisfactory
to the Purchaser;
(j) The Purchaser shall have obtained, at the Purchaser's sole cost
and expense: (i) 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") satisfactory to the
-------------
Purchaser, in such amount as the Purchaser 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"); and
--------------
(ii) with respect to each parcel of Leased Property reasonably requested by the
Purchaser or require by any lender to the Purchaser, an ALTA leasehold policy of
title insurance Form B-1990 with deletion or creditor's rights exception issued
by the Title Company in such amount as the Purchaser reasonably determine
insuring title to the leasehold estate in such parcel of Leased Property in the
Company subject only to Permitted Encumbrances. 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 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 such Owned Real
Property or Leased Property; (iv) an endorsement insuring that each street
adjacent to such Owned Real Property or Leased Property is a public street and
that there is direct and unencumbered access, ingress and egress to such street
from such Owned Real Property and Leased Property; (v) if any parcel of Owned
Real Property contains more than 1 record parcel, a contiguity endorsement
insuring that all such record parcels are contiguous to one another; (vi) an
Owner's Comprehensive Endorsement; (vii) a tax parcel endorsement and such other
endorsements as shall be reasonably requested by the Purchaser or required by
any lender to the Purchaser.
(k) The Purchaser shall have received, at the Purchaser's sole cost
and expense, a current ALTA/ACSM survey of each parcel of Owned Real Property
and Leased 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 or Leased 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 or
Leased 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 or Leased Property.
-9-
<PAGE>
(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 (j) 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 members
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 formation
and each state where such company is required to qualify to do business
providing that such company is validly existing 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, as applicable to this transaction, and
estoppel certificates from the Company's and each of its Subsidiaries'
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 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
-10-
<PAGE>
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 personal guarantees of the Sellers with respect to contracts,
leases and other agreements which relate to the Company's business shall have
been released by the beneficiaries thereto;
(d) All governmental filings, authorizations and approvals that are
required for the transfer of the Acquired Units 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;
(e) 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;
(f) The Company and each of Frank Hammant III, Michael Hammant and
Pat Brennan shall have entered into an Employment Agreement, and the Employment
Agreements shall be in full force and effect;
(h) The Sellers shall have received an opinion, dated the Closing
Date, of Kirkland & Ellis, counsel to the Purchaser, substantially in the form
of Exhibit D attached hereto;
---------
(i) The Company shall have distributed the Excluded Assets and
Liabilities to the Sellers, and the Sellers shall have accepted and assumed the
Excluded Assets and Liabilities, pursuant to documents reasonably satisfactory
to the Sellers;
(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 (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
-11-
<PAGE>
(iii) 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 and each of its Subsidiaries 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;
(b) keep in full force and effect its legal 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 past 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 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 used in the
preparation of the Financial Statements;
-12-
<PAGE>
(f) encourage employees 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 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 and 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 Company and its Subsidiaries at reasonable hours, (ii) visit and inspect any
of the properties of the Company and its Subsidiaries, (iii) discuss the
affairs, finances and accounts of the Company and its Subsidiaries with the
respective directors, officers, partners, key employees, key sales
representatives, key suppliers and independent accountants of the Company and
its Subsidiaries, (iv) perform a rental fleet count and evaluation, (v) perform
a physical inventory count (other than a physical count of the inventory on the
premises of customers), (vi) review contracts, (vii) perform a detailed
financial review, and (viii) perform site environmental studies at the expense
of Purchaser.
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 and each of its Subsidiaries 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, 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 past practice, 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;
-13-
<PAGE>
(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) sell, transfer, contribute, distribute, or otherwise dispose of
any securities or assets of the Company or any of its Subsidiaries to any
Person;
(g) incur any indebtedness for borrowed money other than indebtedness
necessary to finance the Company's or its Subsidiaries' working capital needs;
(h) 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.
Notwithstanding the foregoing, the Company may distributed the Excluded Assets
and Liabilities to the Sellers pursuant to documents reasonably satisfactory to
the Purchaser and the Sellers.
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 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,
Frank Hammant, Jr. represents and warrants that:
5.1 ORGANIZATION AND ORGANIZATIONAL POWER. The Company and each of
-------------------------------------
its Subsidiaries is an entity duly organized, validly existing and in good
standing under the laws of its state of formation and is qualified to do
business in every jurisdiction in which it is required to be qualified. The
jurisdictions of formation 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' charter and by-laws (or equivalent documents) have
been furnished to the Purchaser,
-14-
<PAGE>
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 members and board of managers (or the
equivalent), the membership record books (or the equivalent) 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 charter or by-laws (or equivalent documents).
5.2 AUTHORIZATION OF TRANSACTIONS. The Company has full
-----------------------------
organizational 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 organizational proceedings on the part of the Company or any of its
members 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 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 issued and outstanding equity interests of
--------------
the Company consists of 2,000 Common Units. All of the Company's issued and
outstanding units 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 Members 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 Members 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 equity interests (other
than this Agreement). There are no outstanding or authorized unit 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 equity interests of the Company. The Company is not subject
to any obligation (contingent or otherwise) to repurchase or otherwise acquire
or retire any of its equity interests.
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 or any other security
or interest 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. 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 or any of its
-15-
<PAGE>
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 or equity securities of any of the Company's Subsidiaries. There
are no outstanding or authorized equity 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 Units 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 charter or by-laws (or equivalent documents) 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 the Company's (i) unaudited consolidated and
- -------------------
consolidating balance sheet as of December 31, 1998 (the "Latest Balance Sheet")
--------------------
and the related statements of income and cash flows for the ten-month period
then ended and (ii) reviewed consolidated and consolidating balance sheets and
statements of income and cash flows for the fiscal years ended March 31, 1998,
1997 and 1996. 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 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 and
except as noted therein. Purchaser acknowledges that none of the Company's
Financial Statements are audited.
(b) Receivables. The Company'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 Company's or
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
-16-
<PAGE>
of the Latest Balance Sheet. The Purchaser acknowledges that the Company does
not maintain an allowance for doubtful accounts and, instead, utilizes the
direct writeoff method. Accordingly, for purposes of this representation and
section 2.3 the parties agree that the allowance for doubtful accounts shall be
$58,539.89.
(c) Inventory. Except as set forth on Schedule 5.6(c), the Company'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.
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,
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 March 31, 1998, 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 $10,000, to its assets, whether or not covered by
insurance or suffered any substantial destruction of the 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
incurred in the Ordinary Course of Business;
(e) subjected any portion of its properties or assets to any Lien;
-17-
<PAGE>
(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 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 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;
(i) incurred any indebtedness for borrowed money (other than
indebtedness to finance its working capital needs);
(j) 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;
(k) entered into any other material transaction, or materially
changed any business practice;
(l) 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;
(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 capital expenditures or commitments for capital
expenditures that aggregate in excess of $20,000;
(p) made any loans or advances to, or guarantees for the benefit of,
any Persons;
(q) made charitable contributions, pledges, association fees or dues;
-18-
<PAGE>
(r) changed (or authorized any change) in its charter or by-laws (or
equivalent documents); or
(s) 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 any of its Subsidiaries. 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) The leases and subleases described on the "Real Property
-------------
Schedule" attached hereto (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 for the term set
forth on the Real Property Schedule. 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) 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, 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;
(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) 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; and
(v) all buildings, improvements or other property leased or
subleased thereunder have received all approvals of governmental
authorities required in connection with the
-19-
<PAGE>
operation thereof and have been operated and maintained in accordance with
applicable laws, rules and regulations.
(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.
(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,
reasonable wear and tear 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. Except as set forth on the "Taxes Schedule" attached
----- --------------
hereto, (i) the Company and each of its Subsidiaries 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 or any of its Subsidiaries have been paid
or shall be paid by the Company, such Subsidiary 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 or any of its Subsidiaries and neither the Company
nor any Seller reasonably expects that any such assertion or assessment of Tax
liability will be made, (iv) neither the Company nor any of its Subsidiaries has
consented to extend the time in which any Tax may be assessed or collected by
any taxing authority, (v) neither the Company nor any of its Subsidiaries has
been a member of an Affiliated Group, (vi) no claim has ever been made by a
taxing authority in a jurisdiction where the Company or any of its Subsidiaries
does not file Tax Returns that the Company or such Subsidiary is or may be
subject to Taxes assessed by such jurisdiction, (vii) neither the Company nor
any of its Subsidiaries has any 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 and each of its Subsidiaries 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, member, stockholder or other third
party. The Taxes Schedule contains a list of states, territories and
--------------
jurisdictions (whether foreign or domestic) in which the Company and each of its
Subsidiaries is required to file Tax Returns.
-20-
<PAGE>
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 equity purchase, equity 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) 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, not terminable by it on 30 days or less notice without penalties
or involving more than $10,000;
(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 canceled 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
-21-
<PAGE>
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.
(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 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.
(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.
-22-
<PAGE>
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.
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 any of its Subsidiaries or used by
the Company or any of its Subsidiaries in the conduct of their respective
businesses. 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, 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. The Company and each of its Subsidiaries have complied with
all applicable laws relating to the employment of personnel and labor. 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
-23-
<PAGE>
Security Act of 1974 ("ERISA")), or (iii) employee welfare benefit plans, (as
-----
defined in Section 3(1) of ERISA), equity option or equity purchase plans, or
material fringe benefit plans or programs whether in writing or oral and whether
or not terminated. 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 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 and each of its Subsidiaries have 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 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 welfare benefit 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.
5.18 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
-24-
<PAGE>
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 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 or
any of its Subsidiaries.
5.21 COMPLIANCE WITH LAWS. 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.
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<PAGE>
(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 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
------------
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
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<PAGE>
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
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 duly executed and delivered all of the
Transaction Documents to which he is a party, and such Transaction Documents
constitute the valid an binding agreements of such Seller, enforceable against
such Seller in accordance with their terms.
(b) Each such Seller that is a trust 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. The trustee of
each Seller that is a trust 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 Seller that is a trust has 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.
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 Units 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.
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<PAGE>
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 Units as indicated on the Schedule of Members, 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 equity securities 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 equity securities
of the Company.
6.5 CLOSING DATE. All of the representations and warranties
------------
concerning such Seller 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 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.
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.
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<PAGE>
7.4 GOVERNMENTAL AUTHORITIES AND CONSENTS. Except for the HSR
-------------------------------------
Filing, 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 the HSR Filing, 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 EMPLOYEES. The Purchaser intends that the Company will retain
---------
all existing employees of the Company on an at-will basis and with other terms
and conditions as are currently in place after the Closing. The Purchaser shall
cause the Company to comply with its obligations under Section 10.3 below.
Except as specifically provided in Section 10.3 below, nothing in this Section
7.7 or elsewhere in this Agreement shall obligate the Purchaser or the Company
to continue to employ any employee for any period of time.
7.8 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:
(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
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<PAGE>
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; or
(d) by the Representative or the Purchaser if the Closing has not
occurred on or prior to March 31, 1999; provided, however, that neither the
Purchaser nor the Representative shall be entitled to terminate this Agreement
pursuant to this Section 8.1(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.
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 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, members, managers,
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 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 set forth in Section 5.22 (Environmental), the
Applicable Limitation Date shall be the fourth anniversary of the Closing Date,
and (iii) with respect to any Loss arising from or related to a breach of the
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<PAGE>
representations and warranties set forth in Section 5.1 (Organization and
Organizational Power), Section 5.2 (Authorization of Transactions), Section 5.3
(Capitalization), Section 5.5 (Absence of Conflicts), Section 5.14 (Brokerage)
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), 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) Frank Hammant, Jr., alone, 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 any Seller contained in this Agreement or in any certificate
delivered by the Company or any Seller with respect thereto in connection
with the Closing;
(ii) the breach of any covenant or agreement made by the
Company contained in this Agreement to be performed by the Company prior to
or at the Closing;
(iii) the breach of any covenant or agreement made by any Seller
contained in this Agreement; and
(v) any Excluded Asset and Liability.
The Purchaser Party's remedy for any indemnification of Losses hereunder may be
satisfied by proceeding against only Frank Hammant, Jr. individually for all or
any portion of any such Loss. The other Sellers shall not have any liability
under this Section 9.2.
(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 the Purchaser Party gives
the Representative written notice thereof within the Applicable Limitation
Date; and
(ii) 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 $5.0 million (the "Cap"), except for claims for
---
indemnification for breaches of the representations and warranties in
Section 5.10 (Taxes), for which there shall be no cap.
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<PAGE>
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 (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 this Agreement or in any certificate delivered by
the Purchaser with respect thereto in connection with the Closing; or
(ii) the breach of any covenant or agreement made by the
Purchaser contained in this Agreement; and
(iii) any liabilities of the Company arising from the operation
of the Company's business after the Closing (it being understood that nothing in
this clause (iii) shall be construed to limit or impair, or create any right of
setoff or counterclaim with respect to, any claim the Purchaser or the Company
may make as a Purchaser Party against any Seller pursuant to Section 9.2(a)
above).
(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;
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 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 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
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<PAGE>
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 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, if the Indemnifying Party assumes control of
such defense, the Indemnifying Party will 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, 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, (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 Sellers or Purchaser as
indemnification shall be treated as adjustments to the Purchase Price.
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<PAGE>
(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 member, 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
---------------------
10.1 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.
10.2 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) 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 EMPLOYEE MATTERS. If the Company terminates any current
----------------
employee listed on the Covered Employees Schedule attached hereto (each, a
--------------------------
"Covered Employee") without cause (as determined by the Company reasonably and
- -----------------
in good faith) after the Closing and before the first anniversary of the
Closing, the Company will continue to pay to such Covered Employee his base
salary (but no bonuses or other compensation or benefits) for a period of six
months following the date of termination as severance. If the Company
terminates any Covered Employee without cause (as determined by the Company
reasonably and in good faith) on or after the first anniversary of the Closing
and before the second anniversary of the Closing, the Company will continue to
pay to such Covered Employee his base salary (but no bonuses or other
compensation or benefits) for a period of three months following the date of
termination as severance. The amounts payable pursuant to
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<PAGE>
this Section 10(b) shall be reduced by the amount of any other compensation such
Covered Employee receives from the Company.
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 adequately disclose the
transactions contemplated hereby in such registration agreement. 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 Units and any other
transactions contemplated hereby.
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 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");
--------------------
provided that the Sellers shall pay all Transaction Expenses of the Company and
its Subsidiaries (if any). 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 Portion of the Purchase Price and paid directly to the Sellers'
legal counsel,
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<PAGE>
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 Portion of the
Purchase Price shall be reduced dollar-for-dollar. Notwithstanding the above,
Purchaser shall pay the HSR filing fees.
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 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
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 Frank Hammant, Jr. (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;
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<PAGE>
(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 (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 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) 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
10.10(a) above, each Seller acknowledges and agrees that such Representative's
executor, guardian or legal representative, as the case may be,
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<PAGE>
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 10.10(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 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.
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 second 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 of
the Louisiana parishes listed on the Noncompete Schedule attached hereto or in
-------------------
any other geographic area outside of Louisiana 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
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<PAGE>
pay to the Sellers $200,000 in cash on the Closing Date, allocated among the
Sellers in accordance with the Schedule of Members (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 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 10.11 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, 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 10.11(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 "Mayer-Hammant" name 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
10.11, monetary damages shall not constitute a sufficient remedy. Consequently,
in the event of any such breach, the Company, the Purchaser and/or their
respective 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
-39-
<PAGE>
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 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:
NOTICES TO THE REPRESENTATIVE: WITH A COPY TO:
- ----------------------------- --------------
Frank Hammant, Jr. Baldwin & Haspel, L.L.C.
Mayer-Hammant Equipment, L.L.C. Energy Centre, Suite 2200
471 Manhattan Blvd. 1100 Poydras Street
Harvey, LA 70058 New Orleans, LA 70163-2200
Telecopy: (504) 368-4431 Telecopy: (504) 585-7751
Attention: Karl J. Zimmermann, Esq.
NOTICES TO THE COMPANY: WITH A COPY TO:
- ---------------------- --------------
Mayer-Hammant Equipment, L.L.C. Baldwin & Haspel, L.L.C.
471 Manhattan Blvd. Energy Centre, Suite 2200
Harvey, LA 70058 1100 Poydras Street
Telecopy: (504) 368-4431 New Orleans, LA 70163-2200
Attention: Frank Hammant Telecopy: (504) 585-7751
Attention: Karl J. Zimmermann, Esq.
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<PAGE>
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
Attention: Kevin Rodgers Attention: 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 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 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 that
the Purchaser shall remain responsible for its obligations under the 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; and
(c) 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 equity
interests, 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.
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<PAGE>
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.
* * * * *
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<PAGE>
IN WITNESS WHEREOF, the Parties have executed this Purchase Agreement
as of the date first written above.
NATIONAL EQUIPMENT SERVICES, INC.
By: /s/ Paul R. Ingersoll
----------------------------------
Its: Vice President
---------------------------------
MAYER-HAMMANT EQUIPMENT, L.L.C.
By: /s/ Frank J. Hammant, Jr.
----------------------------------
Its: President
---------------------------------
MEMBERS:
/s/ Frank J. Hammant, Jr.
--------------------------------------
SPOUSES: /s/ Mary Youngblood Hammant
--------------------------------------
/s/ Kimberly Kelly Hammant /s/ Frank J. Hammant, III
- ---------------------------- --------------------------------------
/s/ Susan Turan Hammant /s/ Michael K. Hammant
- ---------------------------- --------------------------------------
/s/ Hugh Patrick Rooney /s/ Maryann Hammant Rooney
- ---------------------------- --------------------------------------
/s/ Jeffrey P. Wickersham /s/ Stacey Hammant Wickersham
- ---------------------------- --------------------------------------
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Exhibit 10.3
________________________________________________________________________________
STOCK PURCHASE AGREEMENT
BY AND AMONG
THE STOCKHOLDERS OF WELLESLEY CRANE SERVICE CO., INC.
AND
SHAUGHNESSY CRANE SERVICE, INC.
DATED AS OF MARCH 19, 1999
_______________________________________________________________________________
<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 Holdback................................ 8
2.5 Closing Transactions.................................... 9
ARTICLE III
CONDITIONS TO CLOSING........................................ 9
3.1 Conditions to the Purchaser's Obligations............... 9
3.2 Conditions to Each Sellers' Obligations................. 12
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 Purchaser.................................. 15
ARTICLE V
REPRESENTATIONS AND WARRANTIES CONCERNING THE COMPANY........ 15
5.1 Organization and Corporate Power........................ 15
5.2 Capitalization.......................................... 16
5.3 Subsidiaries; Investments............................... 16
5.4 Absence of Conflicts.................................... 16
5.5 Financial Statements and Related Matters................ 17
5.6 Absence of Undisclosed Liabilities...................... 17
5.7 Absence of Certain Developments......................... 17
5.8 Title to Properties..................................... 19
5.9 Taxes................................................... 20
</TABLE>
-i-
<PAGE>
<TABLE>
<S> <C>
5.10 Contracts and Commitments............................... 21
5.11 Proprietary Rights...................................... 22
5.12 Litigation; Proceedings................................. 22
5.13 Brokerage............................................... 23
5.14 Governmental Licenses and Permits....................... 23
5.15 Employees............................................... 23
5.16 Employee Benefit Plans.................................. 23
5.17 Insurance............................................... 24
5.18 Officers and Directors; Bank Accounts................... 24
5.19 Affiliate Transactions.................................. 24
5.20 Compliance with Laws.................................... 25
5.21 Environmental Matters................................... 25
5.22 Disclosure.............................................. 26
5.23 Closing Date............................................ 26
ARTICLE VI
REPRESENTATIONS AND WARRANTIES CONCERNING THE SELLERS........ 26
6.1 Authorization of Transactions........................... 26
6.2 Absence of Conflicts.................................... 27
6.3 Brokerage............................................... 27
6.4 Shares.................................................. 27
6.5 Closing Date............................................ 27
ARTICLE VII
REPRESENTATIONS AND WARRANTIES CONCERNING THE
PURCHASER.................................................... 27
7.1 Organization and Corporate Power........................ 28
7.2 Authorization of Transaction............................ 28
7.3 No Violation............................................ 28
7.4 Governmental Authorities and Consents................... 28
7.5 Litigation.............................................. 28
7.6 Brokerage............................................... 28
7.7 Closing Date............................................ 28
ARTICLE VIII
TERMINATION.................................................. 29
8.1 Termination............................................. 29
8.2 Effect of Termination................................... 29
ARTICLE IX
INDEMNIFICATION AND RELATED MATTERS.......................... 30
9.1 Survival................................................ 30
9.2 Indemnification......................................... 30
</TABLE>
-ii-
<PAGE>
<TABLE>
<S> <C>
ARTICLE X
ADDITIONAL AGREEMENTS......................................... 34
10.1 Continuing Assistance................................... 34
10.2 Tax Matters............................................. 34
10.3 Press Releases and Announcements........................ 34
10.4 Further Transfers....................................... 35
10.5 Specific Performance.................................... 35
10.6 Confidential Information................................ 35
10.7 Transition Assistance................................... 35
10.8 Expenses................................................ 35
10.9 Exclusivity............................................. 36
10.10 Books and Records....................................... 36
10.11 Appointment of Representative........................... 36
10.12 Noncompetition, Nonsolicitation and Confidentiality..... 38
ARTICLE XI
MISCELLANEOUS................................................. 40
11.1 Amendment and Waiver.................................... 40
11.2 Notices................................................. 40
11.3 Binding Agreement; Assignment........................... 40
11.4 Severability............................................ 41
11.5 No Strict Construction.................................. 41
11.6 Captions................................................ 41
11.7 Entire Agreement........................................ 41
11.8 Counterparts............................................ 41
11.9 Governing Law........................................... 41
11.10 Parties in Interest..................................... 42
</TABLE>
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<PAGE>
INDEX OF EXHIBITS
-----------------
Exhibit A Form of Employment Agreement
Exhibit B Form of Lease
Exhibit C Form of Opinion of Counsel to the Company and the Sellers
Exhibit D Form of Opinion of Counsel to the Purchaser
INDEX OF SCHEDULES
------------------
Schedule of Stockholders
Organization Schedule
Conflicts Schedule
Financial Statements Schedule
Developments Schedule
Real Property Schedule
Liens 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
Tax Allocation Schedule
-iv-
<PAGE>
STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT is made as of March 19, 1999, by and
among the stockholders listed on the Schedule of Stockholders attached hereto
------------------------
(collectively, the "Sellers" and individually, a "Seller"), and SHAUGHNESSY
------- ------
CRANE SERVICE, INC., a Massachusetts corporation (the "Purchaser"). 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 Wellesley Crane Service
Co., Inc., a Massachusetts corporation (the "Company") consists of 7,500 shares
-------
of Common Stock, no par value (the "Common Stock") and 500 shares of Preferred
------------
Stock, $5 par value (the "Preferred Stock");
---------------
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.
<PAGE>
"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 United States generally accepted accounting principles,
----
consistently applied, as in effect on the date of this Agreement.
"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 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 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.
-2-
<PAGE>
"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, or results of operations of the
Company.
"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 all fees, expenses and prepayment premiums
and penalties (if any) which are or would be incurred by the Company in
connection with the repayment of such Indebtedness and the release of any
guaranties related thereto), determined 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).
"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.
"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,
-3-
<PAGE>
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 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.
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
-4-
<PAGE>
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
- ---- -------
338(h)(10) Elections 10.2(c)
Acquired Stock Recitals
Actual Net Equity 2.3(b)
Applicable Limitation Date 9.1
Authorized Action 10.10(d)
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 5.16(a)
Common Stock Recitals
Company Preface
Confidential Information 10.11(c)
Draft Computation 2.3(b)
Employment Agreement 3.1(g)
ERISA 5.16(a)
Financial Statements 5.5(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
HSR Act 3.1(d)
HSR Filing 5.4
Latest Balance Sheet 5.5(a)
Leased Properties 5.8(b)
Leases 3.1(i)
NES Securities 6.5
Net Equity Shortfall 2.3(b)
Net Stockholders Equity 2.3(c)
Noncompete Period 10.11(a)
Noncompete Payment 10.11(a)
-5-
<PAGE>
Noncompeting Parties 10.11(a)
Objection Notice 2.3(b)
Owned Real Property 5.8(a)
Party Preface
Pending Claim 2.4
Purchase Price 2.2
Purchased Equipment Item 2.3(c)
Purchaser Preface
Purchaser Parties 9.2(a)
Real Property 5.8(b)
Remaining Holdback 2.4
Representative 10.10(a)
Seller Preface
Seller Parties 9.2(c)
Surveys 3.1(k)
Title Company 3.1(j)
Title Policies 3.1(j)
Transaction Expenses 10.7
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
--------------
$12,098,000, which amount shall be paid as follows: (a) the Purchaser shall
deliver to the Sellers $11,598,000 in cash (the "Cash Portion"); and (b) 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 and/or Section 9.2. In addition, the
Purchaser shall make the $325,000 Noncompete Payment described in Section
10.11(a). 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 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
-----------------
-6-
<PAGE>
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 "big-five" 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. 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 $3,473,000, 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 Representative 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.
Additionally, if the Actual Net Equity is greater than $3,473,000, the Purchaser
shall pay to 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.
(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 accounts receivable of the Company (net of any allowance for
doubtful accounts receivable utilized for purposes of determining the Actual Net
Equity), 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"). 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 Representative shall pay, or cause to be
paid, 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
-7-
<PAGE>
or delivery of other immediately available funds. Additionally, if the amount of
accounts receivable actually collected as of the 120th day following the Closing
Date exceeds the Accounts Receivable, the Purchaser shall pay to the
Representative, within two (2) business days after the Receivables Determination
Date, the amount of such excess by wire transfer or delivery of other
immediately available funds. 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 2.3, the
Company shall assign any such uncollected Accounts Receivable to the Sellers. In
the event any such assigned uncollected Accounts Receivable is subsequently
received by the Company, the Company shall promptly remit such payment to the
Representative.
2.4 DISTRIBUTION OF HOLDBACK. On the 180th day after the Closing
------------------------
Date, the Purchaser shall pay to the Representative 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 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. In addition, payments of the Holdback to
the Representative pursuant to this Section 2.4 shall include accrued interest
from the Closing Date through the actual payment date at a per annum rate equal
to 5%, calculated on the basis of a 365-day year and the actual number of days
elapsed.
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 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) 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, 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;
-8-
<PAGE>
(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 Noncompete
Payment in the manner set forth on the Schedule of Stockholders; and
------------------------
(iv) 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), 5.23 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, 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 (which
payoff letters and releases shall only be effective if the amounts owing
thereunder are paid by the Purchaser or the Company at the Closing).
(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
-9-
<PAGE>
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 and officers shall have resigned
and such resignations shall be effective as of the Closing Date;
(g) The Company and each of Dana Merloni and Peter Merloni shall
have entered into an agreement relating to his employment with the Company (the
"Employment Agreements"), substantially in the form of Exhibit A attached
- ---------------------- ---------
hereto, and the Employment Agreements shall be in full force and effect;
(h) The Purchaser shall have received an opinion, dated the Closing
Date, of Philip S. Mehall, counsel to the Company and the Sellers, substantially
in the form of Exhibit C attached hereto;
---------
(i) The Sellers shall have caused the Company to enter into a lease
agreement with Peter and Dana Limited Liability Company, with respect to the
facility from which the Company now conducts its business (the "Lease"),
-----
substantially in the form of Exhibit B attached hereto, and the Lease shall be
---------
in full force and effect;
(j) On or prior to the Closing Date, the Sellers shall have
delivered to Purchaser all of the following:
(i) a certificate from 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 (j) 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 landlord approving
the Lease;
(iv) with respect to the Company, certificates of the secretary of
state of the Commonwealth of Massachusetts 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 that are in any Seller's possession;
-10-
<PAGE>
(vii) a landlord consent and estoppel certificate from the Company's
landlord 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;
(k) The 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;
(l) The Purchaser shall be satisfied in its sole discretion with
the results of its business, accounting, insurance, environmental and legal due
diligence review of the Company; 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 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 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
-11-
<PAGE>
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) The Sellers shall have received an opinion, dated the Closing
Date, of Kirkland & Ellis, counsel to the Purchaser, substantially in the form
of Exhibit D attached hereto;
---------
(e) The Company and each of Dana Merloni and Peter Merloni shall
have entered into the Employment Agreements, and the Employment Agreements shall
be in full force and effect;
(f) The Company and Peter and Dana Limited Liability Company shall
have entered into the Lease, and the Lease shall be in full force and effect;
(g) 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) 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
(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 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, and in the case of Sections 4.1(f), (g), (h) and (i) each
Seller also shall:
-12-
<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 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
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 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;
(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);
(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, (iii)
discuss the affairs, finances and accounts of the Company with the respective
directors, officers, partners, key employees, key customers, key sales
representatives, key suppliers and independent accountants of the Company, (iv)
perform a rental fleet count and evaluation, (v) perform a physical inventory
count, (vi) review contracts, (vii) perform a detailed financial review, and
(viii) perform site environmental studies at the expense of Purchaser; and
-13-
<PAGE>
(j) terminate the Medical and Dental Reimbursement Plan.
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 5.7;
(b) 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;
(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, other than distributions to
the Sellers in amounts sufficient to pay federal and state income taxes of the
Company allocable to the Sellers (as a result of the Company's election under
section 1362 of the Code) for the taxable period ending on the Closing Date;
(f) sell, transfer, contribute, distribute, or otherwise dispose of
any securities or assets of the Company to any Person;
(g) incur any indebtedness for borrowed money other than indebtedness
necessary to finance the Company's working capital needs;
(h) 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;
(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); and
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<PAGE>
(c) not take any action which would reasonably be expected to
unreasonably interfere with the business or operations of the Company.
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
Commonwealth of Massachusetts 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 Organization 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.
5.2 CAPITALIZATION. The authorized, issued and outstanding stock of
--------------
the Company consists of 7,500 shares of Common Stock, no par value, of which
113 shares are issued and outstanding and 500 shares of Preferred Stock, $5 par
value, 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 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. 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.
5.3 SUBSIDIARIES; INVESTMENTS. The Company does not own or hold and
-------------------------
has never owned or held 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 no Subsidiaries.
-15-
<PAGE>
5.4 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 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 (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 Organization 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.
5.5 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, 1998 (the "Latest Balance Sheet") and the related statements of
--------------------
income and cash flows for the 12-month period then ended and (ii) unaudited
balance sheets and statements of income and cash flows for the fiscal years
ended September 30, 1997 and 1996. 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.
5.6 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).
-16-
<PAGE>
5.7 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, 1998, 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 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;
(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 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 any 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) incurred any indebtedness for borrowed money (other than
indebtedness to finance its working capital needs);
(j) 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;
(k) entered into any other material transaction, or materially
changed any business practice;
-17-
<PAGE>
(l) 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;
(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 capital expenditures or commitments for capital
expenditures that aggregate in excess of $20,000;
(p) made any loans or advances to, or guarantees for the benefit of,
any Persons;
(q) made charitable contributions, pledges, association fees or dues;
(r) changed (or authorized any change) in its Articles of
Organization or by-laws; or
(s) agreed or committed to do any of the foregoing.
5.8 TITLE TO PROPERTIES.
-------------------
(a) Owned Properties. The Company does not own and has never owned
----------------
any real property.
(b) The leases and subleases described on the "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 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 Real Property Schedule. 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) 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;
-18-
<PAGE>
(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) 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.
(d) Except as set forth on the "Liens Schedule" attached hereto, 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 Real
Property 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, 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 the business of the
Company.
-19-
<PAGE>
5.9 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) 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.
Notwithstanding anything in this Agreement to the contrary, no Seller shall be
responsible for or required to pay on or behalf of the Company any taxes imposed
upon the Company pursuant to Section 1374 of the Code ("Built-In Gains Tax") and
------------------
any corresponding Taxes imposed upon the Company by any state or local taxing
authority. The Taxes Schedule contains a list of states, territories and
--------------
jurisdictions (whether foreign or domestic) in which the Company has filed Tax
Returns.
5.10 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;
-20-
<PAGE>
(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) 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, not terminable by it on 30 days or less notice without penalties
or involving more than $10,000;
(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 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 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 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 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 required to be set forth thereon.
5.11 PROPRIETARY RIGHTS.
------------------
(a) 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
-21-
<PAGE>
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 any Proprietary
Rights.
(b) 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 Sellers'
knowledge, no third party has interfered with, infringed upon, misappropriated,
or otherwise come into conflict with any Proprietary Rights of the Company.
(c) 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. 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.
5.12 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 Sellers' 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 Sellers 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.
5.13 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.
5.14 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 businesses. 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 Sellers' 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.
5.15 EMPLOYEES. Except as set forth on the "Employees Schedule"
--------- ------------------
attached hereto, to the knowledge of theSellers, 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
-22-
<PAGE>
all applicable laws relating to the employment of personnel and labor. The
Company has not 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 Sellers have 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.
5.16 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 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 as set forth on the Benefit Plans Schedule, the Company has never
----------------------
contributed to any multiemployer 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 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 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. All contributions, premiums or payments under or with respect to each
employee benefit plan listed on the Benefit Plans Schedule which are due on or
----------------------
before the Closing Date have been paid on a timely basis.
(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 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 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 Sellers have 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 benefit plans listed on the
Benefit Plans Schedule, the Sellers have furnished to the Purchaser true and
- ----------------------
complete copies of (i) the
-23-
<PAGE>
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) Each employee benefit plan listed on the Benefit Plans Schedule
----------------------
which is intended to be qualified under section 401(a) of the Code (i) has been
amended to reflect all requirements of the Tax Reform Act of 1986 and all
subsequent legislation which is required to be adopted prior to the end of the
applicable remedial amendment period and (ii) has received from the Internal
Revenue Service a favorable determination letter which considers the terms of
the Plan as amended for such changes in law.
(g) The Company has not incurred and has no reason to expect that it
will incur, any liability to the Pension Benefit Guaranty Corporation (other
than 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 Company or any other
entity, that together with the Company is treated as a single employer under
section 414 of the Code, maintains or ever has maintained or to which any of
them contributes, ever has contributed, or ever has been required to contribute.
No actual or potential withdrawal liability exists with respect to any
multiemployer plan (as defined in Section 3(37) of ERISA, including without
limitation, any liability which would exist if the Company withdrew from all
multiemployer plans as of the Closing Date.
5.17 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 has no 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.
5.18 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.
5.19 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.
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<PAGE>
5.20 COMPLIANCE WITH LAWS. The Company, its 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 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.
5.21 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 to 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 businesses. 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
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<PAGE>
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 Companyhas 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.
5.22 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 Sellers have
knowledge which has a Material Adverse Effect or could reasonably be anticipated
to have a Material Adverse Effect.
5.23 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
Representative 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.
-----------------------------
Each such Seller is an individual and 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 has duly executed and delivered all of the Transaction Documents to which
he is a party, and such Transaction Documents constitute the valid an binding
agreements of such Seller, enforceable against such Seller in accordance with
their 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
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<PAGE>
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
Commonwealth of Massachusetts, 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 OF TRANSACTION. The execution, delivery and
----------------------------
performance of this Agreement and the other agreements contemplated hereby to
which the Purchaser is a
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<PAGE>
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 VIII
TERMINATION
-----------
8.1 TERMINATION. This Agreement may be terminated at any time prior
-----------
to the Closing:
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<PAGE>
(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; or
(d) by the Representative or the Purchaser if the Closing has not
occurred on or prior to March 31, 1999; provided, however, that neither the
Purchaser nor the Representative shall be entitled to terminate this Agreement
pursuant to this Section 8.1(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.
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, 10.5 and 10.8 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.
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<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 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 set forth in Section 5.10 (Taxes) and Section 5.16 (Employee
Benefits), 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 or other
event 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), 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 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 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 inArticle
VII (Representations and Warranties Concerning the Purchaser), 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; or
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<PAGE>
(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.
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, 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:
(i) 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 shall not be liable to indemnify any Purchaser
Parties pursuant to Section 9(a)(i) unless and until the Purchaser Parties
have collectively suffered Losses pursuant to such Section in excess of a
$50,000 aggregate threshold ("Threshold") (at which point, subject to the
---------
other limitations herein, the Sellers will be liable to the Purchaser
Parties for all Losses in excess of such Threshold); 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 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 (which exceed the
Threshold, but not in excess of 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
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<PAGE>
(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;
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 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 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 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 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,
if the Indemnifying Party assumes control of such defense, the Indemnifying
Party will 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, 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, (iii) involves a claim to
which the Indemnified Party reasonably believes an adverse determination would
be detrimental to or injure the Indemnified Party's
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<PAGE>
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 Sellers or Purchaser as
indemnification shall be treated as adjustments to the Purchase Price.
(h) Except for liabilities and obligations arising after the Closing
in their capacity as employees of the Company, 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
---------------------
10.1 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
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<PAGE>
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.
10.2 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 a Company of such
Taxes. 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.
(c) The Sellers and the Purchaser shall jointly make a timely
election under Section 338(h)(10) of the Code, and any applicable corresponding
or similar provisions of state or local law (the "338(h)(10) Elections"), with
--------------------
respect to the acquisition of the Company. The Sellers and the Purchaser shall
jointly prepare Internal Revenue Service Form 8023 with respect to the Company,
and such other forms and schedules as are necessary or required to make the
338(h)(10) Elections, and the Company and the Purchaser shall execute such Form
8023, and shall take all such other acts as are necessary to make or perfect
such 338(h)(10) Elections. The allocation of the purchase price among the
Company's assets shall be made in accordance with the "Tax Allocation Schedule"
-----------------------
attached hereto. Such allocation shall be used in preparing (a) Form 8023 and
the schedules attached thereto for each of the Purchaser and the Sellers, and
(b) all Tax Returns. Notwithstanding anything in this Agreement to the contrary,
no Seller shall be responsible for or required to pay on or behalf of the
Company any taxes imposed upon the Company pursuant to Section 1374 of the Code
("Built-In Gains Tax") and any corresponding Taxes imposed upon the Company by
------------------
any state or local taxing authority.
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 by the Sellers 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
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<PAGE>
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 adequately disclose the
transactions contemplated hereby in such registration agreement. 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).
10.4 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 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.
10.6 CONFIDENTIAL INFORMATION. Until the Closing, the Purchaser will,
------------------------
and will cause its employees and agents, to hold in strict confidence, unless
compelled to disclose by judicial or administrative process or, in the opinion
of its counsel, by other requirements of law, all Confidential Information (as
hereinafter defined) and will not disclose the same to any person. If this
Agreement is terminated, the Purchaser will promptly return to the Sellers, all
documents received containing such Confidential Information. For purposes
hereto, "Confidential Information" shall mean all information of any kind
------------------------
concerning the Sellers or the Company, wherever obtained, except information (i)
ascertainable or obtained from public or published information, (ii) received
from a third party not known to the Purchaser to be under an obligation to keep
such information confidential, (iii) which is or becomes known to the public
(other than through a breach of this Agreement), (iv) which the Purchaser can
demonstrate was in its possession prior to the disclosure thereof in connection
with this Agreement, or (v) which the Purchaser can demonstrate was
independently developed by it.
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 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, 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
-35-
<PAGE>
hereby and thereby (collectively, the "Transaction Expenses"); it being
--------------------
understood that the Sellers shall pay the fees, costs and expenses of the
Company 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 10.7 may be
deducted from the Cash Portion 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 Portion shall be reduced dollar-for-dollar.
10.9 EXCLUSIVITY. Until this Agreement is terminated by its terms,
-----------
the Sellers (and 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 (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
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 DANA J. MERLONI (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:
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<PAGE>
(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 (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 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) 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.
-37-
<PAGE>
(c) Replacement of the Representative. Upon the death, disability or
---------------------------------
capacity of the 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 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 10.10(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 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.
(e) Payments to be Made to the Representative. Any payments to be
-----------------------------------------
made by the Purchaser to the Representative pursuant to the terms of this
Agreement shall, at the request of the Representative, be made by the Purchaser
to the Sellers. Any such request by the Representative shall be made in writing
to the Purchaser 1 business day prior to the date such payment is to be made and
shall indicate the apportionment between of the Sellers of such payment.
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 fifth 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 conducts or proposes to
conduct 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
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
-38-
<PAGE>
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 Sellers pursuant to this Section 10.11, the Purchaser shall
pay to the Sellers $325,000 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 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, and shall cause the other Noncompeting Parties to 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, and shall cause the other
---------------
Noncompeting Parties to, 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 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 10.11(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 "Wellesley Crane Service," name or any name confusingly similar
thereto in any manner anywhere in the world after Closing.
-39-
<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, 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.
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:
- ---------------------------- --------------
Dana Merloni Philip S. Mehall, Esq.
Wellesley Crane Service Co., Inc. One Harbour Place, Suite 400
251 Boston Road Portsmouth, NH 03801
Southborough, MA 01772 Telecopy: (603) 433-8638
Telecopy: (508) 481-5169
NOTICES TO PURCHASER: WITH A COPY TO:
- -------------------- --------------
Shaughnessy Crane Service, Inc. Kirkland & Ellis
c/o National Equipment Services, Inc. 200 East Randolph Drive
1800 Sherman Ave., Suite 100 Chicago, IL 60601
Evanston, IL 60201 Telecopy: (312) 861-2200
Telecopy: (847) 733-1078 Attn.: Sanford E. Perl, Esq.
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<PAGE>
Attention: Chief Executive Officer
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) 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. 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; and
(c) 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.
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<PAGE>
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.
* * * * *
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<PAGE>
IN WITNESS WHEREOF, the Parties have executed this Stock Purchase
Agreement as of the date first written above.
SHAUGHNESSY CRANE SERVICE, INC.
By: /s/Paul R. Ingersoll
-------------------------
Its: Vice President
-------------------------
/s/Peter D. Merloni
------------------------------
Peter D. Merloni
/s/Dana J. Merloni
------------------------------
Dana J. Merloni
<PAGE>
EXHIBIT 10.4
================================================================================
STOCK PURCHASE AGREEMENT
By and Among
NATIONAL EQUIPMENT SERVICES, INC.,
THE 1818 FUND III. L.P.,
CO-INVESTMENT PARTNERS, L.P.,
ERIE INDEMNIFY COMPANY,
and
AQUILA LIMITED PARTNERSHIP
------------------------
Dated April 27, 1999
------------------------
================================================================================
<PAGE>
STOCK PURCHASE AGREEMENT, dated April 27, 1999, by and among National
Equipment Service, Inc., a corporation organized under the laws of Delaware (the
"Company"), The 1818 Fund III, L.P., a Delaware limited partnership (the
-------
"Fund"), Co-Investment Partners, L.P., a Delaware limited partnership ("CIP"),
---- ---
Erie Indemnity Company, a Pennsylvania corporation ("Erie Indemnity"), Erie
--------------
Insurance Exchange, a reciprocal organization ("Erie Exchange"), Aquila Limited
-------------
Partnership, a Connecticut limited partnership ("Aquila", and together with the
------
Fund, CIP, Erie Indemnity and Erie Exchange, the "Purchasers")
----------
The Company proposes that the Company issue to the Purchasers and that
the Purchasers purchase, up to 100,000 shares of the Company's Senior Redeemable
Convertible Preferred Stock, Series A, par value $.01 per share, upon the terms
and subject to the conditions set forth in this Agreement.
In consideration of the mutual covenants and agreements set forth
herein and for good and valuable consideration, the receipt and adequacy of
which is hereby acknowledged, the parties hereto agree as follows:
Article 1
DEFINITIONS
-----------
1.1 Definitions. As used in this Agreement, and unless the context
-----------
requires a different meaning, the following terms have the meanings indicated:
"Affiliate" has the meaning ascribed to such term in Rule 12b-2
---------
of the General Rules and Regulations under the Exchange Act; provided that none
--------
of the Purchasers shall be deemed to be an "Affiliate" of the Company.
"Agreement" means this Agreement as the same may be amended,
---------
supplemented or modified in accordance with the terms hereof.
"BBH&Co." means Brown Brothers Harriman & Co., a partnership
-------
organized under the laws of the State of New York.
"Business Day" means any day other than a Saturday, Sunday or
------------
other day on which commercial banks in the City of New York, New York are
authorized or required by law or executive order to close.
"Business Plan" has the meaning assigned to that term in Section
-------------
7.26.
"Certificate of Designation" means the Certificate of
--------------------------
Designation with respect to the Preferred Stock (the form of which is attached
hereto
<PAGE>
2
as Exhibit A) to be adopted by the Board of Directors of the Company and filed
---------
with the Secretary of State of the State of Delaware.
"Closing" means, as applicable, the First Closing or the Second
-------
Closing.
"Closing Date" means, as applicable, the First Closing Date or
------------
the Second Closing Date.
"Code" means the Internal Revenue Code of 1986, as amended.
----
"Commission" means the Securities and Exchange Commission or any
----------
similar agency then having jurisdiction to enforce the Securities Act.
"Commission Documents" means all registration statements, proxy
--------------------
statements, reports and other documents (and all amendments thereto), required
to be filed by the Company under the Securities Act or the Exchange Act.
"Common Stock" means the common stock, par value $.0l per share,
------------
of the Company and each other class of capital stock of the Company that does
not have a preference over any other class of capital stock of the Company as to
dividends or upon liquidation, dissolution or winding up of the Company and in
each case, shall include any other class of capital stock of the Company into
which such stock is reclassified or reconstituted.
"Company" means National Equipment Services, Inc., a Delaware
-------
corporation.
"Condition of the Company" means the assets, business,
------------------------
properties or financial condition of the Company and its Subsidiaries taken as a
whole.
"Consolidated Net Worth" means, as of the date of determination
----------------------
with respect to any Person, the consolidated stockholders' equity of such Person
and its Subsidiaries, determined in accordance with GAAP.
"Contractual Obligations" means as to any Person, any provision
-----------------------
of any security issued by such Person or of any agreement, undertaking,
contract, indenture, mortgage, deed of trust or other instrument to which such
Person is a party or by which it or any of its property is bound.
"Credit Agreement" means the Credit Agreement dated as of July
----------------
17, 1998 by and among the Company, First Union National Bank as Lender and Agent
and the other parties named therein (as amended, modified, supplemented,
replaced or increased).
<PAGE>
3
"Credit Agreement Amendment" has the meaning assigned that term
--------------------------
in Section 3.20.
"Documents" has the meaning assigned to that term in Section
---------
7.20.
"DTC" means the Depositary Trust Company.
---
"Environmental Claims" means any written notification, pursuant
--------------------
to Environmental Laws or principles of common law relating to pollution, or
protection of the environment or health and safety, that any of the current or
past operations of the Company or any of its Subsidiaries, or any by-product
thereof, or any of the property currently or formerly owned, leased or operated
by the Company or any of its Subsidiaries, or the operations or property of any
predecessor of the Company or any of its Subsidiaries, is or may be implicated
in or subject to any Claim, Requirements of Law, or investigation by any
Governmental Authority or any other Person.
"Environmental Compliance Costs" means any expenditures, costs,
------------------------------
assessments or expenses (including any expenditures, costs, assessments or
expenses in connection with the conduct of any Remedial Action, as well as
reasonable fees, disbursements and expenses of attorneys, experts, personnel and
consultants), necessary to cause the operations, real property, assets,
equipment or facilities owned, leased, operated or used by the Company or any of
its Subsidiaries to be in material compliance with Environmental Laws,
principles of common law concerning pollution, protection of the environment or
health and safety, or Permits issued pursuant to Environmental Laws; provided,
--------
however, that Environmental Compliance Costs do not include expenditures, costs,
- -------
assessments or expenses necessary in connection with normal maintenance of such
real property, assets, equipment or facilities or the replacement of equipment
in the normal course of events due to ordinary wear and tear.
"Environmental Laws" means any applicable federal, state,
------------------
territorial, provincial or local law, common law doctrine, rule, order, decree,
judgment, injunction, license, permit or regulation (any of the above having the
force or effect of law) relating to environmental matters, including those
pertaining to land use, air, soil, surface water, ground water (including the
protection, cleanup, removal, remediation or damage thereof), public or employee
health or safety or any other environmental matter, together with any other laws
(federal, state, territorial, provincial or local) relating to emissions,
discharges, releases or threatened releases of any contaminant including,
without limitation, medical, biological, biohazardous or radioactive waste and
materials, into ambient air, land, surface water, groundwater, personal property
or structures, or otherwise relating to the manufacture, processing,
distribution, use, treatment, storage, disposal, transportation, discharge or
handling of any contaminant, including, without limitation, the Comprehensive
Environmental
<PAGE>
4
Response, Compensation, and Liability Act (42 U.S.C. (S) 9601 et seq.), the
-- ---
Hazardous Material Transportation Act (49 U.S.C. (S) 1801 et seq.), the Resource
-- ---
Conservation and Recovery Act (42 U.S.C. (S) 6901 et seq.), the Federal Water
-- ---
Pollution Control Act (33 U.S.C. (S) 1251 et seq.), the Clean Air Act (42 U.S.C.
-- ---
(S) 1251 et seq.), the Toxic Substances Control Act (15 U.S.C. (S) 2601 et
--
seq.), the Federal Insecticide, Fungicide and Rodenticide Act (7 U.S.C. (S) 121
- ---
et seq.), the Asbestos Hazard Emergency Response Act (15 U.S.C. (S) et seq.);
- -- --- -- ---
the Safe Drinking Water Act (42 U.S.C. (S) 300F et seq.); the Oil Pollution Act
-- ---
of 1990 (33 U.S.C. (S) 2701 et seq.); and the Occupational Safety and Health Act
-- ---
(29 U.S.C. (S) 651 et seq.), as such laws have been amended or supplemented and
-- ---
any analogous federal, state or local laws, statutes and regulations promulgated
thereunder.
"ERISA" means the Employee Retirement Income Security Act of
-----
1974, as amended.
"Exchange Act" means the Securities Exchange Act of 1934, as
------------
amended, and the rules and regulations of the Commission thereunder.
"Financial Liabilities" has the meaning assigned that term in
---------------------
Section 7.22.
"First Closing" has the meaning assigned to that term in Section
-------------
2.4.
"First Closing Date" means the date specified in Section 2.4.
------------------
"First Preferred Shares" has the meaning assigned to that term in
----------------------
Section 2.1(a).
"First Purchase Price" has the meaning assigned to that term in
--------------------
Section 2.1(a).
"GAAP" means generally accepted accounting principles in the
----
United States in effect from time to time.
"Governmental Authority" means the government of any nation,
----------------------
state or other political subdivision thereof, any entity exercising executive,
legislative, judicial, regulatory or administrative functions of or pertaining
to government, and any corporation or other entity owned or controlled, through
stock or capital ownership or otherwise, by any of the foregoing.
"Hazardous Materials" means those substances that are regulated
-------------------
by, or form the basis of liability under, any Environmental Laws.
<PAGE>
5
"Hazardous Substance" means any toxic waste, pollutant,
-------------------
contaminant, hazardous substance, toxic substance, hazardous waste, special
waste, industrial substance or waste, petroleum or petroleum-derived substance
or waste, radioactive substance or waste, or any other substance regulated under
any applicable Environmental Law.
"Holder," with respect to Preferred Shares or Common Stock
------
issued upon conversion of the Preferred Shares, means each Purchaser and any
subsequent direct or indirect transferee of such security; provided that the
--------
term Holder shall not include any Person who owns such security if it has been
registered under the Securities Act or if it has been transferred to such Person
after such security has been transferred pursuant to Rule 144 under the
Securities Act (or any successor provision) or otherwise transferred under
circumstances not requiring a legend.
"HSR Act" means the Hart-Scott-Rodino Antitrust Improvements Act
-------
of 1976, as amended, and the rules and regulations of the Federal Trade
Commission thereunder.
"Indebtedness" means as to any Person, without duplication, (a)
------------
all obligations of such Person for borrowed money (including, without
limitation, reimbursement and all other obligations with respect to surety
bonds, letters of credit and bankers' acceptances, whether or not matured), (b)
all obligations evidenced by notes, bonds, debentures or similar instruments,
(c) all obligations to pay the deferred purchase price of property or services,
except trade accounts payable and accrued liabilities arising in the ordinary
course of business, (d) all interest rate and currency swaps and similar
agreements under which payments are obligated to be made, whether periodically
or upon the happening of a contingency, (e) all indebtedness created or arising
under any conditional sale or other title retention agreement with respect to
property acquired by such Person (even though the rights and remedies of the
seller or lender under such agreement in the event of default are limited to
repossession or sale of such property), except trade accounts payable and
accrued liabilities arising in the ordinary course of business, (f) all
obligations under leases which have been or should be, in accordance with GAAP,
recorded as capital leases, (g) all indebtedness secured by any Lien (other than
Liens in favor of lessors under leases other than leases included in clause (f))
on any property or asset owned or held by that Person regardless of whether the
indebtedness secured thereby shall have been assumed by that Person or is non-
recourse to the credit of that Person, (h) all obligations of such Person to
reimburse or prepay any bank or other Person in respect of amounts paid under a
letter of credit, banker's acceptance or similar instrument and (i) all capital
stock issued by such Person subject to mandatory redemption that is not
contingent upon future events or circumstances.
"Indemnified Party" has the meaning assigned to that term in
-----------------
Section 9.1.
<PAGE>
6
"Liabilities" has the meaning assigned to that term in Section
-----------
9.1.
"Lien" means any mortgage, deed of trust, pledge, hypothecation,
----
assignment, encumbrance, lien (statutory or other) or preference, priority or
other security interest or preferential arrangement of any kind or nature
whatsoever (including, without limitation, those created by, arising under or
evidenced by, any conditional sale or other title retention agreement, the
interest of a lessor under a capitalized lease obligation, or any financing
lease having substantially the same economic effect as any of the foregoing).
"Market Price" shall mean, per share of the applicable security
------------
on any date specified herein: (a) the closing price per share of such security
on such date published in The Wall Street Journal or, if no such closing price
-----------------------
on such date is published in The Wall Street Journal, the average of the closing
-----------------------
bid and asked prices on such date, as officially reported on the principal
national securities exchange on which such security is then listed or admitted
to trading; (b) if the applicable security is not then listed or admitted to
trading on any national securities exchange but is designated as a national
market system security, the last trading price of such security on such date; or
(c) if there shall have been no trading on such date, the average of the
reported closing bid and asked prices of such security on such date as shown by
NASDAQ and reported by any member firm of the NYSE, selected by the Company.
"1997 Audited Financials" has the meaning assigned to that term
-----------------------
in Section 7.10.
"1998 Audited Financials" has the meaning assigned to that term
-----------------------
in Section 7.10.
"1999 Interim Financials" has the meaning assigned to that term
-----------------------
in Section 7.10.
"NYSE" means the New York Stock Exchange, Inc.
----
"Person" means any individual, firm, corporation, partnership,
------
limited liability company, trust, incorporated or unincorporated association,
joint venture, joint stock company, Governmental Authority or other entity of
any kind, and shall include any successor (by merger or otherwise) of such
entity.
"Principal Stockholders" means Golder, Thoma, Cressey, Rauner
----------------------
Fund V, L.P., Carl Thoma, William Kessinger or any Affiliates of any such
Person.
"PORTAL" means Private Offerings, Resales and Trading through
------
Automated Linkages.
<PAGE>
7
"Preferred Shares" means the First Preferred Shares and, when
----------------
issued and sold pursuant to the terms of this Agreement, the Second Preferred
Shares.
"Preferred Stock" means the Senior Redeemable Convertible
---------------
Preferred Stock, Series A, par value $.01 per share, of the Company.
"Proxy Statement" has the meaning assigned to that term in
---------------
Section 10.15(a).
"Purchasers" has the meaning set forth in the recitals to this
----------
Agreement.
"Qualified Holder" means any Holder that holds at least 10% of
----------------
the shares of Preferred Stock issued hereunder or the shares of Common Stock
issued upon the conversion of such shares.
"Registration Agreement" means the Registration Agreement, dated
----------------------
as of June 4, 1996, as amended as of December 31, 1996 and July 24, 1998, by and
among the Company, Golder, Thoma, Cressey, Rauner Fund IV, L.P. and R&R Rentals,
Inc.
"Registration Rights Agreement" has the meaning assigned to that
-----------------------------
term in Section 10.16.
"Release" means any release, spill, emission, leaking, pumping,
-------
injection, deposit, disposal, discharge, dispersal, leaching or migration into
or through the indoor or outdoor environment or into, through or out of any
property, including the movement of Hazardous Substances through or in the air,
soil, surface water, ground water or property.
"Remedial Action" means all actions, whether voluntary or
---------------
involuntary, reasonably necessary to comply with, or discharge any obligation
under, Environmental Laws to (i) clean up, remove, treat, cover or in any other
way adjust Hazardous Substances in the indoor or outdoor environment; (ii)
prevent or control the Release of Hazardous Substances so that they do not
migrate or endanger or threaten to endanger public health or welfare or the
environment; or (iii) perform remedial studies, investigations, restoration and
post-remedial studies, investigations and monitoring on, about or in any real
property.
"Requirements of Law" means as to any Person, the Certificate of
-------------------
Incorporation and By-laws or other organizational or governing documents of such
Person, and any law, treaty, rule or regulation or determination of an
arbitrator or a court or other Governmental Authority, in each case applicable
to or binding upon such Person or any of its property or to which such Person or
any of its property is subject.
<PAGE>
8
"Second Closing" has the meaning assigned to that term in Section
--------------
2.5.
"Second Closing Date" means assigned the date specified in
-------------------
Section 2.5.
"Second Preferred Shares" has the meaning assigned to that term
-----------------------
in Section 2.1(b).
"Second Purchase Price" has the meaning assigned to that term in
---------------------
Section 2.1(b).
"Securities Act" means the Securities Act of 1933, as amended,
--------------
and the rules and regulations of the Commission thereunder.
"Solvent" means, with respect to any Person, that the fair
-------
saleable value on a going concern basis of the assets and property of such
Person is, on the date of determination, greater than the total amount of
liabilities (including contingent and unliquidated liabilities) of such Person
as of such date and that, as of such date, such Person is able to pay all
liabilities of such Person as such liabilities mature. In computing the amount
of contingent or liquidated liabilities at any time, such liabilities will be
computed as the amount which, in light of all the facts and circumstances
existing at such time, represents the amount that, in the reasonable
determination of the Company's board of directors, is probable to become an
actual or matured liability.
"Stockholders' Meeting" has the meaning assigned to that term in
---------------------
Section 10.15.
"Subsidiary" means, with respect to any Person, another Person of
----------
which 50% or more of the voting power of the voting equity securities or equity
interest is owned, directly or indirectly, by such first-mentioned Person.
Unless otherwise qualified, all references to a "Subsidiary" or to
"Subsidiaries" in this Agreement shall refer to a Subsidiary or Subsidiaries of
the Company.
"Trading Days" shall mean a day on which the national securities
------------
exchanges are open for trading.
"USTs" means any underground storage tanks or related piping or
----
dispensers.
"Voting Stock" means, with respect to any Person, any securities
------------
or similar instruments of such Person whose holders are entitled under ordinary
circumstances to vote for the election of directors of such Person (irrespective
of whether at such time securities or similar instruments of any other
<PAGE>
9
class or classes shall have or might have voting power by reason of the
happening of any contingency).
"Year 2000 Compliance" has the meaning assigned that term in
--------------------
Section 7.21.
1.2 Accounting Terms. All accounting terms used herein not expressly
----------------
defined in this Agreement shall have the respective meanings given to them in
accordance with sound accounting practice. The term "sound accounting practice"
shall mean such accounting practice as, in the opinion of the independent
accountants regularly retained by the Company, conforms at the time to GAAP
applied on a consistent basis except for changes with which such accountants
concur.
Article 2
PURCHASE AND SALE OF PREFERRED STOCK
------------------------------------
2.1 Purchase and Sale of Preferred Stock.
------------------------------------
(a) Subject to the terms and conditions herein set forth, the
Company agrees that it will issue to each of the Purchasers, and each of the
Purchasers, severally but jointly, agrees that it will acquire from the Company,
at the First Closing, 36,000 shares of Preferred Stock in the case of the Fund,
15,000 shares of Preferred Stock in the case of CIP, 1,800 shares of Preferred
Stock in the case of Erie Indemnity, 4,200 shares of Preferred Stock in the case
of Erie Exchange and 3,000 shares of Preferred Stock in the case of Aquila
(collectively, the "First Preferred Shares") for purchase price of $36,000,000
----------------------
in the case of the Fund, $15,000,000 in the case of CIP, $1,800,000 in the case
of Erie Indemnity, $4,200,000 in the case of Erie Exchange and $3,000,000 in the
case of Aquila (collectively, the "First Purchase Price"), in cash, by wire
--------------------
transfer of immediately available funds to an account designated by the Company
in a notice delivered to each Purchaser one day prior to the First Closing Date.
(b) Subject to the terms and conditions herein set forth, the
Company agrees that it will issue to each of the Purchasers, and each of the
Purchasers, severally but jointly, agrees that it will acquire from the Company,
at the Second Closing, 24,000 shares of Preferred Stock in the case of the Fund,
10,000 shares of Preferred Stock in the case of CIP, 1,200 shares of Preferred
Stock in the case of Erie Indemnity, 2,800 shares of Preferred Stock in the case
of Erie Exchange and 2,000 shares of Preferred Stock in the case of Aquila
(collectively, the "Second Preferred Shares") for a purchase price of
-----------------------
$24,000,000 in the case of the Fund, $10,000,000 in the case of CIP, $1,200,000
in the case of Erie Indemnity, $2,800,000 in the case of Erie Exchange and
$2,000,000 in the Aquila (collectively, the "Second Purchase Price" and together
---------------------
with the First Purchase Price, the
<PAGE>
10
"Purchase Price"), in cash, by wire transfer of immediately available funds to
an account designated by the Company in a notice delivered to each Purchaser one
day prior to the Second Closing Date.
2.2 Certificate of Designation. The Preferred Shares shall have the
--------------------------
rights and preferences set forth in the Certificate of Designation.
2.3 Fees. The Company shall pay to the Purchasers at the First
----
Closing a facility fee equal to 5% of the aggregate First Purchase Price and at
the Second Closing a facility fee equal to 5% of the aggregate Second Purchase
Price, which shall be paid to each Purchaser as follows: (i) at the First
Closing each Purchaser shall be paid as its facility fee with respect to such
closing the amount set forth opposite such Purchaser's name on Schedule 1 hereto
under the heading "First Closing Facility Fee" and (ii) at the Second Closing
each Purchaser shall be paid as its facility with respect to such closing the
amount set forth opposite such Purchaser's name on Schedule 1 hereto under the
heading "Second Closing Facility Fee." All such payments shall be made in cash,
by wire transfer of immediately available funds.
2.4 Closing.
-------
(a) The purchase and issuance of the First Preferred Shares shall
take place at the closing (the "First Closing") to be held at the offices of
-------------
Paul, Weiss, Rifkind, Wharton & Garrison, 1285 Avenue of the Americas, New York,
New York 10019-6064 on May 14, 1999, or such later date on or prior to June 18,
1999 as the parties may agree (the "First Closing Date"), at 10:00 a.m., New
------------------
York City time. At the First Closing, subject to the terms and conditions set
forth herein, the Company shall sell the First Preferred Shares to the
Purchasers by delivering to each Purchaser the First Preferred Shares to be
purchased by it registered in the name of such Purchaser or its designees, with
appropriate issue stamps, if any, affixed at the expense of the Company, free
and clear of any Lien, and each Purchaser shall purchase the First Preferred
Shares to be purchased by it.
(b) The purchase and issuance of the Second Preferred Shares
shall take place at the closing (the "Second Closing") to be held at the offices
--------------
of Paul, Weiss, Rifkind, Wharton & Garrison, 1285 Avenue of the Americas, New
York, New York 10019-6064 on the next Business Day after the Stockholders
Meeting or on such later date on or prior to June 18, 1999 (or, in the event the
Commission conducts a review of the Proxy Statement, July 31, 1999) as the
parties may agree (the "Second Closing Date"), at 10:00 a.m., New York City
-------------------
time. At the Second Closing, subject to the terms and conditions set forth
herein, the Company shall sell the Second Preferred Shares to the Purchasers by
delivering to each Purchaser the Second Preferred Shares to be purchased by it
registered in the name of such Purchaser or its designees, with appropriate
issue stamps, if any, affixed at the expense of the Company, free and clear of
any Lien, and each Purchaser shall purchase the Second Preferred Shares to be
purchased by it.
<PAGE>
11
Article 3
CONDITIONS TO THE OBLIGATION OF THE
PURCHASERS TO CLOSE AT THE FIRST CLOSING
----------------------------------------
The obligation of each Purchaser to purchase the First Preferred
Shares to be purchased by it, to pay the First Purchase Price to be paid by it
at the First Closing and to perform any obligations hereunder shall be subject
to the satisfaction or waiver of the following conditions on or before the First
Closing Date:
3.1 Representations and Warranties True. The representations and
-----------------------------------
warranties of the Company contained in Section 7 hereof shall be true and
correct in all material respects at and as of the First Closing Date as if made
at and as of such date.
3.2 Compliance with this Agreement. The Company shall have performed
------------------------------
and complied with all of its agreements and conditions set forth or contemplated
herein that are required to be performed or complied with by the Company on or
before the First Closing Date.
3.3 Officer's Certificate. Such Purchaser shall have received a
---------------------
certificate, dated the First Closing Date and signed by the President or a Vice-
President of the Company, certifying that the conditions set forth in Sections
3.1 and 3.2 hereof have been satisfied on and as of such date.
3.4 Secretary's Certificate. Such Purchaser shall have received a
-----------------------
certificate, dated the First Closing Date and signed by the Secretary or an
Assistant Secretary of the Company, certifying the truth and correctness of
attached copies of the Certificate of Incorporation and By-laws of the Company
and resolutions of the Board of Directors of the Company approving this
Agreement and the transactions contemplated hereby.
3.5 Documents. Such Purchaser shall have received copies of such
---------
documents as it reasonably may request in connection with the sale of the First
Preferred Shares and the transactions contemplated hereby.
3.6 Purchase Permitted by Applicable Laws; Legal Investment. The
-------------------------------------------------------
acquisition of and payment for the First Preferred Shares to be acquired by such
Purchaser hereunder and the consummation of the transactions contemplated hereby
with respect to such Purchaser (a) shall not be prohibited by any applicable law
or governmental regulation, (b) shall not subject such Purchaser to any penalty
or, in its reasonable judgment, other onerous condition under or pursuant to any
applicable law or governmental regulation and (c) shall be permitted by the laws
and regulations of the jurisdictions to which it is subject.
<PAGE>
12
3.7 Filing of Certificate of Designation. The Certificate of
------------------------------------
Designation shall have been duly filed by the Company with the Secretary of
State of the State of Delaware.
3.8 Opinion of Counsel. Such Purchaser shall have received the
------------------
opinion of Kirkland & Ellis, counsel to the Company, dated the First Closing
Date, with respect to such matters as the Purchasers may reasonably request, in
form and substance reasonably acceptable to the Purchasers.
3.9 Approval of Counsel to the Purchasers. All actions and
-------------------------------------
proceedings hereunder and all documents required to be delivered by the Company
hereunder or in connection with the consummation of the transactions
contemplated hereby, shall have been reasonably acceptable to Paul, Weiss,
Rifkind, Wharton & Garrison, counsel to such Purchaser, as to their form and
substance.
3.10 Consents and Approvals. All consents, exemptions,
----------------------
authorizations, or other actions by, or notices to, or filings with,
Governmental Authorities and other Persons, including, with respect to
Contractual Obligations of the Company, necessary or required in connection with
the execution, delivery or performance by the Company or enforcement against the
Company of this Agreement, the First Preferred Shares or the Registration Rights
Agreement shall have been obtained and be in full force and effect, and such
Purchaser shall have been furnished with appropriate evidence thereof.
3.11 No Material Adverse Change. Since December 31, 1998, there shall
--------------------------
have been no material adverse change, nor shall any such change be threatened,
in the Condition of the Company since that date.
3.12 Conduct of Business. The Company shall have conducted its
-------------------
business in the ordinary course from the date hereof to the First Closing Date,
and no extraordinary or other material transactions not in the ordinary course
of business shall have occurred without such Purchaser's consent, it being
understood and agreed that the acquisition by the Company of (i) all of the
shares of capital stock of another Person or (ii) all or substantially all of
the assets of another Person shall, if such transaction (or series of
transactions) is approved by the Board of Directors of the Company, be
considered to be a transaction conducted in the ordinary course of business for
the purposes of this Section 3.12.
3.13 Registration Rights Agreement. The Company shall have duly
-----------------------------
executed and delivered to such Purchaser the Registration Rights Agreement.
3.14 Charter and By-Laws of the Company. Except for the Certificate
----------------------------------
of Designation, no amendments to the Certificate of Incorporation or By-Laws of
the Company as in effect on the date hereof shall have been effected.
<PAGE>
13
3.15 Market Conditions. Between the date hereof and the First Closing
-----------------
Date, (a) trading in the Common Stock shall not have been suspended by the
Commission or by the NYSE, (b) trading in securities generally on the NYSE shall
not have been suspended or limited or minimum or maximum prices shall not have
been generally established on such exchange, or additional material governmental
restrictions, not in force on the date of this Agreement, shall not have been
imposed upon trading in securities generally by such exchange or by order of the
Commission or any court or other Governmental Authority, (c) a general banking
moratorium shall not have been declared by either Federal or New York State
authorities and (d) any material adverse change in the financial or securities
markets in the United States or in political, financial or economic conditions
in the United States or, other than relating to Iraq or Kosovo, any outbreak or
material escalation of hostilities or declaration by the United States of a
national emergency or war or other calamity or crisis shall not have occurred.
3.16 No Litigation. No action, suit, proceeding, claim or dispute
-------------
shall have been brought or otherwise arisen at law, in equity, in arbitration or
before any Governmental Authority against the Company or any of its Subsidiaries
which would reasonably be expected to (i) have a material adverse effect on the
Condition of the Company or (ii) have a material adverse effect on the ability
of the Company to perform its obligations under this Agreement, the Preferred
Shares or the Registration Rights Agreement.
3.17 No Default or Breach. Neither the Company nor any of its
--------------------
Subsidiaries shall have been in default under or with respect to any Contractual
Obligation in any respect, which, individually or together with all such
defaults, would be materially adverse to the Condition of the Company or which
could materially adversely affect the ability of the Company to perform its
obligations under this Agreement, the Preferred Shares or the Registration
Rights Agreement.
3.18 HSR Act. The waiting period under the HSR Act with respect to
-------
the First Preferred Shares to be acquired by such Purchaser shall have expired
or been terminated.
3.19 Other Purchaser. The Fund shall simultaneously be purchasing
---------------
all the First Preferred Shares to be purchased by it under this Agreement.
3.20 Amendment to the Credit Agreement. Such Purchaser shall have
---------------------------------
received a copy of an amendment to the Credit Agreement (the "Credit Agreement
Amendment") permitting the issuance of the Preferred Stock and amending the
definition therein of the term "Change of Control," in each case in a manner
reasonably satisfactory to such Purchaser.
<PAGE>
14
Article 4
CONDITIONS TO THE OBLIGATION OF THE
PURCHASERS TO CLOSE AT THE SECOND CLOSING
-----------------------------------------
The obligation of each Purchaser to purchase the Second Preferred
Shares to be purchased by it, to pay the Second Purchase Price at the Second
Closing and to perform any obligations hereunder shall be subject to the
satisfaction or waiver of the following conditions on or before the Second
Closing Date:
4.1 Representations and Warranties True. The representations and
-----------------------------------
warranties of the Company contained in Section 7 hereof shall be true and
correct in all material respects at and as of the Second Closing Date as if made
at and as of such date.
4.2 Compliance with this Agreement. The Company shall have performed
------------------------------
and complied with all of its agreements and conditions set forth or contemplated
herein that are required to be performed or complied with by the Company on or
before the Second Closing Date.
4.3 Officer's Certificate. Such Purchaser shall have received a
---------------------
certificate, dated the Second Closing Date and signed by the President or a
Vice-President of the Company, certifying that the conditions set forth in
Sections 4.1 and 4.2 hereof have been satisfied on and as of such date.
4.4 Documents. Such Purchaser shall have received copies of such
---------
documents as it reasonably may request in connection with the sale of the Second
Preferred Shares and the transactions contemplated hereby.
4.5 Purchase Permitted by Applicable Laws; Legal Investment. The
-------------------------------------------------------
acquisition of and payment for the Second Preferred Shares to be acquired by
such Purchaser hereunder and the consummation of the transactions contemplated
hereby with respect to such Purchaser (a) shall not be prohibited by any
applicable law or governmental regulation, (b) shall not subject such Purchaser
to any penalty or, in its reasonable judgment, other onerous condition under or
pursuant to any applicable law or governmental regulation and (c) shall be
permitted by the laws and regulations of the jurisdictions to which it is
subject.
4.6 Opinion of Counsel. Such Purchaser shall have received the
------------------
opinion of Kirkland & Ellis, counsel to the Company, dated the Second Closing
Date, with respect to such matters as the Purchasers may reasonably request, in
form and substance reasonably acceptable to the Purchasers.
4.7 Approval of Counsel to the Purchasers. All actions and
-------------------------------------
proceedings hereunder and all documents required to be delivered by the Company
<PAGE>
15
hereunder or in connection with the consummation of the transactions
contemplated hereby, shall have been reasonably acceptable to Paul, Weiss,
Rifkind, Wharton & Garrison, counsel to such Purchaser, as to their form and
substance.
4.8 Consents and Approvals. All consents, exemptions,
----------------------
authorizations, or other actions by, or notices to, or filings with,
Governmental Authorities and other Persons, including, with respect to
Contractual Obligations of the Company, necessary or required in connection with
the execution, delivery or performance by the Company or enforcement against the
Company of this Agreement, the Second Preferred Shares or the Registration
Rights Agreement shall have been obtained and be in full force and effect, and
such Purchaser shall have been furnished with appropriate evidence thereof.
4.9 No Material Adverse Change. Since December 31, 1998, there shall
--------------------------
have been no material adverse change, nor shall any such change be threatened,
in the Condition of the Company since that date.
4.10 Conduct of Business. The Company shall have conducted its
-------------------
business in the ordinary course from the date hereof to the Second Closing Date,
and no extraordinary or other material transactions not in the ordinary course
of business shall have occurred without such Purchaser's consent, it being
understood and agreed that the acquisition by the Company of (i) all of the
shares of capital stock of another Person or (ii) all or substantially all of
the assets of another Person shall, if such transaction (or series of
transactions) is approved by the Board of Directors of the Company, be
considered to be a transaction conducted in the ordinary course of business for
the purposes of this Section 4.10.
4.11 Charter and By-Laws of the Company. Except for the Certificate
----------------------------------
of Designation, no amendments to the Certificate of Incorporation or By-Laws of
the Company as in effect on the First Closing Date shall have been effected.
4.12 Market Conditions. Between the First Closing Date and the Second
-----------------
Closing Date, (a) trading in the Common Stock shall not have been suspended by
the Commission or by the NYSE, (b) trading in securities generally on the NYSE
shall not have been suspended or limited or minimum or maximum prices shall not
have been generally established on such exchange, or additional material
governmental restrictions, not in force on the date of this Agreement, shall not
have been imposed upon trading in securities generally by such exchange or by
order of the Commission or any court or other Governmental Authority, (c) a
general banking moratorium shall not have been declared by either Federal or New
York State authorities and (d) any material adverse change in the financial or
securities markets in the United States or in political, financial or economic
conditions in the United States or, other than relating to Iraq or Kosovo, any
outbreak or material escalation of
<PAGE>
16
hostilities or declaration by the United States of a national emergency or war
or other calamity or crisis shall not have occurred.
4.13 No Litigation. No action, suit, proceeding, claim or dispute
-------------
shall have been brought or otherwise arisen at law, in equity, in arbitration or
before any Governmental Authority against the Company or any of its Subsidiaries
which would reasonably be expected to, (i) have a material adverse effect on the
Condition of the Company or (ii) have a material adverse effect on the ability
of the Company to perform its obligations under this Agreement, the Preferred
Shares or the Registration Rights Agreement.
4.14 No Default or Breach. Neither the Company nor any of its
--------------------
Subsidiaries shall have been in default under or with respect to any Contractual
Obligation in any respect, which, individually or together with all such
defaults, would be materially adverse to the Condition of the Company or which
could materially adversely affect the ability of the Company to perform its
obligations under this Agreement, the Preferred Shares or the Registration
Rights Agreement.
4.15 HSR Act. The waiting period under the HSR Act with respect to
-------
the Second Preferred Shares to be acquired by such Purchaser shall have expired
or been terminated.
4.16 Other Purchaser. The Fund shall simultaneously be purchasing
---------------
all the Second Preferred Shares to be purchased by it under this Agreement.
4.17 Credit Agreement Amendment. The Credit Agreement Amendment
--------------------------
shall not have been amended, modified or revoked.
4.18 Stockholder Approval. The stockholders of the Company shall
--------------------
have duly approved at the Stockholders Meeting the issuance of the Second
Preferred Shares pursuant to this Agreement.
Article 5
CONDITIONS TO THE OBLIGATION OF THE
COMPANY TO CLOSE AT THE FIRST CLOSING
-------------------------------------
The obligations of the Company to issue and sell the Preferred Shares
to a Purchaser, and to consummate the transactions contemplated herein on the
First Closing Date with respect to such Purchaser, shall be subject to the
satisfaction or waiver of the following conditions on or before the First
Closing Date:
5.1 Representations and Warranties True. The representations and
-----------------------------------
warranties of such Purchaser contained in Article 8 hereof shall be true and
correct in
<PAGE>
17
all material respects at and as of the First Closing Date as if made at and as
of such date.
5.2 Compliance with this Agreement. Such Purchaser shall have
------------------------------
performed and complied with all of its agreements and conditions set forth or
contemplated herein that are required to be performed or complied with by the
Purchasers on or before the First Closing Date.
5.3 Issuance Permitted by Applicable Laws. The issuance of the First
-------------------------------------
Preferred Shares and the consummation of the transactions contemplated hereby by
the Company (a) shall not be prohibited by any applicable law or governmental
regulation, (b) shall not subject the Company to any penalty or, in its
reasonable judgment, other onerous condition under or pursuant to any applicable
law or governmental regulation and (c) shall be permitted by the laws and
regulations of the jurisdictions in which is it subject.
5.4 Approval of Counsel to the Company. All actions and proceedings
----------------------------------
hereunder and all documents required to be delivered by such Purchaser hereunder
or in connection with the consummation of the transactions contemplated hereby,
and all other related matters, shall have been reasonably acceptable to Kirkland
& Ellis, counsel to the Company, as to their form and substance.
5.5 Consents and Approvals. All consents, exemptions,
----------------------
authorizations, or other actions by, or notices to, or filings with,
Governmental Authorities and other Persons necessary or required in connection
with the execution, delivery or performance by such Purchaser or enforcement
against such Purchaser of this Agreement shall have been obtained and be in full
force and effect, and the Company shall have been furnished with appropriate
evidence thereof.
5.6 HSR Act. The waiting period under the HSR Act with respect to
-------
the First Preferred Shares to be acquired by such Purchaser shall have expired
or been terminated.
5.7 Amendment to the Credit Agreement. The parties to the Credit
---------------------------------
Agreement (other than the Company) shall have executed and delivered the Credit
Agreement Amendment.
5.8 Consents and Approvals. All consents, exemptions,
----------------------
authorizations, or other actions by, or notices to, or filings with,
Governmental Authorities and other Persons, including, with respect to
Contractual Obligations of the Company, necessary or required in connection with
the execution, delivery or performance by the Company or enforcement against the
Company of this Agreement, the First Preferred Shares or the Registration Rights
Agreement shall have been obtained and be in full force and effect.
<PAGE>
18
Article 6
CONDITIONS TO THE OBLIGATION
OF THE COMPANY TO CLOSE AT THE SECOND CLOSING
---------------------------------------------
The obligations of the Company to issue and sell the Second Preferred
Shares to a Purchaser, and to consummate the transactions contemplated herein on
the Second Closing Date with respect to such Purchaser, shall be subject to the
satisfaction or waiver of the following conditions on or before the Second
Closing Date:
6.1 Representations and Warranties True. The representations and
-----------------------------------
warranties of such Purchaser contained in Article 8 hereof shall be true and
correct in all material respects at and as of the Second Closing Date as if made
at and as of such date.
6.2 Compliance with this Agreement. Such Purchaser shall have
------------------------------
performed and complied with all of its agreements and conditions set forth or
contemplated herein that are required to be performed or complied with by the
Purchasers on or before the Second Closing Date.
6.3 Issuance Permitted by Applicable Laws. The issuance of the
-------------------------------------
Second Preferred Shares and the consummation of the transactions contemplated
hereby by the Company (a) shall not be prohibited by any applicable law or
governmental regulation, (b) shall not subject the Company to any penalty or, in
its reasonable judgment, other onerous condition under or pursuant to any
applicable law or governmental regulation and (c) shall be permitted by the laws
and regulations of the jurisdictions in which is it subject.
6.4 Approval of Counsel to the Company. All actions and proceedings
----------------------------------
hereunder and all documents required to be delivered by such Purchaser hereunder
or in connection with the consummation of the transactions contemplated hereby,
and all other related matters, shall have been reasonably acceptable to Kirkland
& Ellis, counsel to the Company, as to their form and substance.
6.5 Consents and Approvals. All consents, exemptions,
----------------------
authorizations, or other actions by, or notices to, or filings with,
Governmental Authorities and other Persons necessary or required in connection
with the execution, delivery or performance by such Purchaser or enforcement
against such Purchaser of this Agreement shall have been obtained and be in full
force and effect, and the Company shall have been furnished with appropriate
evidence thereof.
6.6 HSR Act. The waiting period under the HSR Act with respect to
-------
the Second Preferred Shares to be acquired by such Purchaser shall have expired
or been terminated.
<PAGE>
19
6.7 Stockholder Approval. The stockholders of the Company shall have
--------------------
duly approved at the Stockholders' Meeting the issuance of the Second Preferred
Shares pursuant to this Agreement.
6.8 Consents and Approvals. All consents, exemptions,
----------------------
authorizations, or other actions by, or notices to, or filings with,
Governmental Authorities and other Persons, including, with respect to
Contractual Obligations of the Company, necessary or required in connection with
the execution, delivery or performance by the Company or enforcement against the
Company of this Agreement, the Second Preferred Shares or the Registration
Rights Agreement shall have been obtained and be in full force and effect.
Article 7
REPRESENTATIONS AND
WARRANTIES OF THE COMPANY
-------------------------
The Company hereby represents and warrants to the Purchasers as
follows:
7.1 Corporate Existence and Power. The Company, and each of its
-----------------------------
Subsidiaries:
(a) is duly organized, validly existing and in good standing
under the laws of the jurisdiction of its organization;
(b) has (i) full corporate (or other organizational) power and
authority and (ii) all governmental licenses, authorizations, consents and
approvals to own and operate its property, to lease the property it operates as
lessee and to conduct the business in which it is currently, or is currently
proposed to be, engaged;
(c) is duly qualified as a foreign person, licensed and in good
standing under the laws of each jurisdiction where its ownership, lease or
operation of property or the conduct of its business requires such
qualification; and
(d) is in compliance with all Requirements of Law;
except, in the case of (b)(ii), (c) or (d) of this Section 7.1, to the extent
that the failure to do so would not have a material adverse effect on the
Condition of the Company.
7.2 Corporate Authorization; No Contravention. Except as set forth
-----------------------------------------
on Schedule 7.2, the execution, delivery and performance by the Company of this
Agreement, the Registration Rights Agreement and the transactions contemplated
<PAGE>
20
hereby and thereby, including without limitation the issuance of the Preferred
Shares and the Common Stock issuable upon the conversion of the Preferred
Shares:
(a) is within the Company's corporate power and authority and has
been duly authorized by all necessary corporate action;
(b) will not violate, conflict with or result in any breach or
contravention of or the creation of any Lien under, any Contractual Obligation
of the Company or any of its Subsidiaries, or any order or decree directly
relating to the Company or any of its Subsidiaries; and
(c) has been duly authorized by the Board of Directors of the
Company and no other corporate proceedings on the part of the Company or its
stockholders are necessary to authorize or approve the Agreement, the
Registration Rights Agreement or the transactions contemplated hereby and
thereby.
7.3 Governmental Authorization; Third Party Consents. No approval,
------------------------------------------------
consent, exemption, authorization, or other action by, or notice to, or filing
with, any Governmental Authority or any other Person, is necessary or required
in connection with the execution, delivery or performance by the Company or
enforcement against the Company of this Agreement, the Preferred Shares, the
Registration Rights Agreement or the transactions contemplated hereby or
thereby, except for the filing required under the HSR Act.
7.4 Binding Effect. This Agreement has been duly executed and
--------------
delivered by the Company, and at the Closing the Registration Rights Agreement
will be duly executed and delivered by the Company. At the First Closing the
First Preferred Shares will be duly executed and delivered by the Company and at
the Second Closing the Second Preferred Shares shall be duly executed and
delivered by the Company. Assuming it is enforceable against the Purchasers,
this Agreement constitutes the legal, valid and binding obligation of the
Company enforceable against the Company in accordance with its terms, except as
enforcement may be limited by applicable bankruptcy, insolvency, or similar laws
affecting the enforcement of creditors' rights generally or by equitable
principles relating to enforceability. At the Closing, the Registration Rights
Agreement and the Preferred Shares will constitute the legal, valid and binding
obligations of the Company enforceable against the Company in accordance with
their respective terms, except as enforcement may be limited by applicable
bankruptcy, insolvency, or similar laws affecting the enforcement of creditors'
rights generally or by equitable principles relating to enforceability.
7.5 No Legal Bar. Neither the execution, delivery and performance of
------------
this Agreement and the Registration Rights Agreement nor the issuance or
performance of the terms of the Preferred Shares will violate any Requirement of
Law
<PAGE>
21
or any Contractual Obligation of the Company or any of its Subsidiaries or any
rule or regulation of NYSE.
7.6 Litigation.
----------
(a) Except as set forth on Schedule 7.6, there are no actions,
suits, proceedings, claims or disputes pending, or to the best knowledge of the
Company, threatened, at law, in equity, in arbitration or before any
Governmental Authority against the Company or any of its Subsidiaries:
(i) with respect to this Agreement, the Preferred Shares or
the Registration Rights Agreement or any of the transactions contemplated hereby
or thereby; or
(ii) which would, if adversely determined, (i) have a
material adverse effect on the Condition of the Company or (ii) have a material
adverse effect on the ability of the Company to perform its obligations under
this Agreement, the Preferred Shares or the Registration Rights Agreement.
(b) No injunction, writ, temporary restraining order, decree or
any order of any nature has been issued by any court or other Governmental
Authority purporting to enjoin or restrain the execution, delivery and
performance of this Agreement, the Preferred Shares or the Registration Rights
Agreement.
7.7 No Default or Breach. No event has occurred and is continuing
--------------------
(or will occur as a result of the Company entering into this transaction) under
this Agreement, the Preferred Shares or the Registration Rights Agreement which
constitutes a default under or breach of any of the provisions of Article 10 or
11. Neither the Company nor any of its Subsidiaries is in default under or with
respect to any Contractual Obligation in any respect, which, individually or
together with all such defaults, would have a material adverse effect on the
Condition of the Company or on the ability of the Company to perform its
obligations under this Agreement, the Preferred Shares or the Registration
Rights Agreement.
7.8 Title to Properties. The Company and each of its Subsidiaries
-------------------
have good and defensible title to, or hold leases in full force and effect in
all their real property, except for such defects in title as could not,
individually or in the aggregate, have a material adverse effect on the
Condition of the Company or the ability of the Company to perform its
obligations under this Agreement, the Preferred Shares or the Registration
Rights Agreement.
7.9 Taxes. The Company and its Subsidiaries have filed or caused to
-----
be filed, or have properly filed extensions for, all income tax returns which
are required to be filed and have paid or caused to be paid all taxes as shown
on said returns and on all assessments received by it to the extent that such
taxes have
<PAGE>
22
become due, except taxes the validity or amount of which is being contested in
good faith by appropriate proceedings and with respect to which adequate
reserves have been set aside. The Company and its Subsidiaries have paid or
caused to be paid, or have established reserves that the Company reasonably
believes to be adequate for all income tax liabilities applicable to the Company
and its Subsidiaries for all fiscal years which have not been examined and
reported on by the taxing authorities (or closed by applicable statutes).
7.10 Financial Condition. The Company heretofore has delivered to
-------------------
the Purchasers true and correct copies of audited consolidated financial
statements of the Company and its Subsidiaries dated as of December 31, 1997
(the "1997 Audited Financials") and December 31, 1998 (the "1998 Audited
----------------------- ------------
Financials") and the unaudited consolidated financial statements of the Company
- ----------
and its Subsidiaries dated as of March 31, 1999 (the "1999 Interim
------------
Financials"). The 1997 Audited Financials, 1998 Audited Financials and 1999
- ----------
Interim Financials have been prepared in accordance with GAAP applied
consistently and present fairly in all material respects the consolidated
financial condition of the Company as of the dates thereof and the consolidated
results of operations of the Company for the period, or portion thereof, then
ended (except in the case of the 1999 Interim Financials, for normal year-end
adjustment and the absence of footnotes).
7.11 No Material Adverse Change. Since December 31, 1998, there has
--------------------------
not been any material adverse change, nor to the knowledge of the Company is any
such change threatened, in the Condition of the Company.
7.12 Commission Documents. The Company has filed all Commission
--------------------
Documents and the Company has furnished the Purchasers correct and complete
copies of the final version of all Commission Documents, each as filed with the
Commission but without exhibits to any of them. Each Commission Document was
true and accurate in all material respects when filed with the Commission and in
compliance in all material respects with the requirements of its respective
report form.
7.13 Environmental Matters. Except as set forth on Schedule 7.13:
---------------------
(a) Neither the Company nor any of its Subsidiaries is in
violation in any material respect of any applicable Environmental Law.
(b) The Company and its Subsidiaries have all Permits required
pursuant to Environmental Laws that are material to the conduct of the business
of the Company or any of its Subsidiaries, and all such Permits are in full
force and effect. The Company and its Subsidiaries have not received notice of
any action, cause of action, suit, claim, complaint, demand, litigation or
legal, administrative or arbitral proceeding or investigation to revoke, limit
or modify any of such Permits. The Company and each of its Subsidiaries is in
compliance in all material respects with all terms and conditions thereof.
<PAGE>
23
(c) There is no material Environmental Claim pending or, to the
knowledge of the Company, threatened against the Company or any of its
Subsidiaries.
(d) The Company and its Subsidiaries have filed all material
notices required under Environmental Laws indicating the past or present
Release, generation, treatment, storage or disposal of Hazardous Substances.
(e) Except for provisions contained in (i) acquisition
agreements entered into by the Company or any of its Subsidiaries or (ii) leases
of real property entered into by the Company or any of its Subsidiaries, neither
the Company nor any of its Subsidiaries has entered into any written agreement
with any Governmental Body or any other Person by which the Company or any of
the Subsidiaries has assumed responsibility, either directly or as a guarantor
or surety, for the remediation of any condition arising from or relating to a
Release or threatened Release of Hazardous Substances into the environment.
(f) To the knowledge of the Company, there is not any current or
future obligation with respect to a Release or threatened Release of Hazardous
Substances for which the Company or any of its Subsidiaries may be directly or
indirectly responsible in an amount in excess of $250,000.
(g) Except in cases which would not give rise to any liability
of the Company or any of its Subsidiaries under any Environmental Law in excess
of $250,000, there is not now and has not been at any time in the past at, on or
in any of the real properties owned, leased or operated by the Company or any of
its Subsidiaries: (i) any generation, use, handling, Release, treatment,
recycling, storage or disposal of any Hazardous Substances; (ii) any UST,
surface impoundment, lagoon, landfill, solid waste disposal area, or other
containment facility (past or present) for the temporary or permanent storage,
treatment or disposal of Hazardous Substances; (iii) any asbestos-containing
material; (iv) any polychlorinated biphenyls (PCBs) used in hydraulic oils,
electrical transformers or other equipment; (v) any Release or threatened
Release, or any visible signs of Releases or threatened Releases, of a Hazardous
Substance in form or quantity requiring Remedial Action under Environmental
Laws; or (vi) any Hazardous Substances present at such property, excepting such
quantities as are handled in accordance with all applicable Environmental Laws.
(h) Except in cases which would not give rise to any liability
of the Company or any of its Subsidiaries under any Environmental Law in excess
of $250,000, neither the Company or any of its Subsidiaries has transported,
stored, treated or disposed, nor has it allowed or arranged for any third
persons to transport, store, treat or dispose, any Hazardous Substance to or at:
(i) any location other than a site lawfully permitted to receive such substances
for such purposes, or (ii) any location designated for Remedial Action pursuant
to Environmental Laws; nor has it
<PAGE>
24
performed, arranged for or allowed by any method or procedure such
transportation or disposal in contravention of any Environmental Laws or in any
other manner that may result in Environmental Compliance Costs or in an
Environmental Claim.
(i) The Company and each of its Subsidiaries is in full
compliance with the upgrade requirements for USTs in effect as of December 31,
1998 pursuant to the Resource Conservation and Recovery Act, 42 U.S.C. (S) 6901
et seq., except for such noncompliance as would not, individually or in the
- -- ---
aggregate, have a material adverse effect on the Condition of the Company or the
ability of the Company to perform its obligations under this Agreement, the
Preferred Shares or the Registration Rights Agreement.
7.14 Investment Company. Neither the Company nor any Person
------------------
controlling the Company is an "investment company" within the meaning of the
Investment Company Act of 1940, as amended.
7.15 Subsidiaries. Schedule 7.15 sets forth a complete and accurate
------------
list of all of the Subsidiaries of the Company together with their respective
jurisdictions of incorporation or organization. Except as set forth on Schedule
7.15, each such Subsidiary is directly or indirectly wholly owned by the
Company.
7.16 Capitalization. As of the date hereof, the authorized capital
--------------
stock of the Company consists of 100,000,000 shares of Common Stock, par value
$.0l per share, and 10,000,000 shares of preferred stock, par value $.01 per
share, of which as of the date hereof, 24,121,885 shares of Common Stock and no
shares of preferred stock are issued and outstanding. Except as set forth on
Schedule 7.16, there are no shares of capital stock of the Company reserved for
issuance. All of the outstanding shares of capital stock of the Company have
been duly authorized and are fully paid and non-assessable. The Preferred
Shares when issued upon payment of the Purchase Price, and the shares of Common
Stock when issued upon conversion of the Preferred Shares, will be duly
authorized, and, in each case, validly issued, fully paid and nonassessable.
Except as set forth on Schedule 7.16 or in the Certificate of Designation, there
are no options, warrants or other rights to purchase shares of capital stock or
other securities of the Company, nor is the Company obligated in any manner to
issue shares of its capital stock or other securities. Except as contemplated
hereby and for relevant state and federal securities laws, there are no
restrictions on the transfer of shares of capital stock of the Company.
7.17 Solvency. On and as of the Closing Date, after giving effect to
--------
the transactions contemplated in this Agreement, the Company will be Solvent.
7.18 Private Offering. No form of general solicitation or general
----------------
advertising was used by the Company or, to its knowledge, its representatives in
connection with the offer or sale of the Preferred Shares. No registration of
the Preferred Shares pursuant to the provisions of the Securities Act or,
assuming the
<PAGE>
25
accuracy of the representations of the Purchasers in Sections 8.5, 8.6 and 8.7,
any state securities or "blue sky" laws will be required by the offer, sale or
issuance of the Preferred Shares pursuant to this Agreement. The Company agrees
that neither it, nor anyone acting on its behalf, will offer or sell the
Preferred Shares or any other security so as to require the registration of the
Preferred Shares pursuant to the provisions of the Securities Act or any state
securities or "blue sky" laws, unless such Preferred Shares are so registered.
7.19 Broker's, Finder's or Similar Fees. Except as set forth herein,
----------------------------------
there are no brokerage commissions, finder's fees or similar fees or commissions
payable in connection with the transactions contemplated hereby based on any
agreement, arrangement or understanding with the Company or any of its
Subsidiaries, or any action taken by any such entity.
7.20 Full Disclosure. No statement by the Company contained in (i)
---------------
this Agreement or (ii) any Commission Documents or any other documents,
certificates, notices or consents (collectively, "Documents") delivered to any
---------
Purchaser in connection with the purchase and sale of the Preferred Shares at or
prior to the Closing contains (or will contain) an untrue statement of a
material fact or omits (or will omit) to state a material fact required to be
stated therein or necessary to make the statements made, in the light of the
circumstances in which made, not materially false or misleading.
7.21 Year 2000 Compliance. Except as set forth in Schedule 7.21, all
--------------------
computer hardware and software (including all computer hardware and software
contained in imbedded systems) used in the business of the Company and its
Subsidiaries (whether such hardware and software is owned by the Company and its
Subsidiaries or is licensed from third parties) (collectively, the "Technology
----------
Systems") is designed to be used prior to, during and after the calendar year
- -------
2000 and such hardware and software will continue to operate during each such
time period to accurately process date data (including, but not limited to
calculating, comparing and sequencing) from, into and between the twentieth and
twenty-first centuries, including leap year calculations (the "Year 2000
---------
Compliance"), except where to the failure to be so designed or to so operate
- ----------
would not, individually or in the aggregate, have a material adverse effect on
the Condition of the Company. The occurrence of the calendar year 2000 will not
affect the Technology Systems of the Company and its Subsidiaries, except to the
extent that such occurrence would not have a material adverse effect on the
Condition of the Company. To the knowledge of the Company, no material
expenditures in excess of currently budgeted items is necessary to cause
Technology Systems to operate properly prior to, during and after the calendar
year 2000. The Company and its Subsidiaries have taken reasonable steps to
determine whether the failure of any third parties with which the Company and
its Subsidiaries have a material relationship to achieve Year 2000 Compliance
could have a material adverse effect on the Condition of the Company.
<PAGE>
26
7.22 No Undisclosed Financial Liabilities. Except as set forth on
------------------------------------
Schedule 7.22, the Company and its Subsidiaries, after giving effect to the
transactions contemplated hereby, will not have any direct or indirect
indebtedness, liability (including, without limitation, product liability or
warranty claim), obligation, whether known or unknown, fixed or unfixed,
contingent or otherwise, and whether or not of a kind required by GAAP to be set
forth on a financial statement (collectively "Financial Liabilities"), other
---------------------
than (i) Financial Liabilities fully and adequately reflected on the 1998
Audited Financials, (ii) those incurred since December 31, 1998 in the ordinary
course of business, (iii) Financial Liabilities incurred pursuant to this
Agreement and (iv) such additional Financial Liabilities that would not,
individually or in the aggregate, have a material adverse effect on the
Condition of the Company.
7.23 Registration Rights Agreement. Schedule 7.23 sets forth all
-----------------------------
agreements to which the Company or any Subsidiary is a party or by which it is
bound relating to the registration of its securities or, in the case of a
Subsidiary, the securities of the Company. None of the agreements listed on
Schedule 7.23 grants any registration rights to any Person which are
inconsistent with the rights to be granted to the Purchasers in the Registration
Rights Agreement.
7.24 Trade Relations. To the best knowledge of the Company, there
---------------
exists no actual or threatened termination, cancellation or limitation of, or
any adverse modification or change in, the business relationship or business of
the Company and its Subsidiaries taken as a whole or their business with any
customer or any group of customers which is individually or in the aggregate
material to the business of the Company and its Subsidiaries taken as a whole,
or with any material supplier.
7.25 Material Contracts. Neither the Company nor any of its
------------------
Subsidiaries is a party to any Contractual Obligation and is not subject to any
charge, corporate restriction, judgment, injunction, decree or Requirement of
Law materially adversely affecting, or which may adversely affect the Condition
of the Company. Filed as exhibits to the Commission Documents are all contracts,
agreements and commitments of the Company and any Subsidiary, whether written or
oral, including without limitation, any dealer agreements, other than (a) this
Agreement and the Registration Rights Agreement, (b) purchase orders in the
ordinary course of the Company's and any Subsidiary's business, and (c) any
other contracts, agreements and commitments of the Company or any of its
Subsidiaries that (i) do not extend beyond December 31, 2000 and involve the
receipt or payment of not more than $50,000, and (ii) are not material to the
Condition of the Company. All of the contracts, agreements and commitments of
the Company and its Subsidiaries filed as exhibits to the Commission Documents
are in full force and effect and binding upon the parties thereto in accordance
with their terms. Neither the Company nor any of its Subsidiaries, nor, to the
knowledge of the Company or any of its Subsidiaries, any other party to such
contracts, agreements and commitments, is in default thereunder, nor does any
condition exist that with notice or lapse of time, or both would
<PAGE>
27
constitute a default thereunder. Neither the Company nor any of its Subsidiaries
has any knowledge of any proposed, pending, or likely cancellation or
termination of any such contract, agreement or commitment. No violations under
dealer agreements exist, including without limitation, with respect to
territorial exclusivity.
7.26 Business Plan. Prior to the date hereof, the Company delivered
-------------
to each Purchaser its business plans for fiscal year 1999 attached as Schedule
7.26 (the "Business Plan"). The assumptions used in preparation of the Business
-------------
Plan were reasonable when made and continue to be reasonable as of the Closing
Date. The Business Plan has been prepared in good faith and the Business Plan
gives effect to the transactions contemplated by this Agreement. Each Purchaser
acknowledges that the Business Plan contains assumptions about future events and
that actual results during the period or periods covered may differ from the
data and results contained in such Business Plan.
7.27 Internal Controls. The Company and the Subsidiaries maintain a
-----------------
system of internal accounting controls sufficient to provide reasonable
assurances that, to the knowledge of the Company, (a) transactions are executed
in accordance with management's general or specific authorization; (b)
transactions are recorded as necessary (i) to permit preparation of financial
statements in conformity with generally accepted accounting principles and (ii)
to maintain accountability for assets; (c) access to assets is permitted only in
accordance with management's general or specific authorization; and (d) the
recorded accountability for assets is compared with existing assets at
reasonable intervals and appropriate action is taken with respect to any
material differences.
7.28 ERISA. Neither the Company nor any of the Subsidiaries has
-----
violated any provisions of the Employee Retirement Income Security Act of 1974,
as amended ("ERISA"), or the rules and regulations promulgated thereunder,
-----
except for such violations which, singly or in the aggregate, would not have a
material adverse effect on the Condition of the Company.
7.29 Labor Relations. (i) Neither the Company nor any of its
---------------
Subsidiaries is in breach of any collective bargaining agreement, (ii) the
Company and each of its Subsidiaries is in substantial compliance with all
applicable laws respecting employment and employment practices, terms and
conditions of employment and wages and hours, including but not limited to, the
Workers Adjustment and Retraining Notification Act, and neither the Company nor
any of its Subsidiaries is engaged in any unfair labor practice, (iii) there is
no unfair labor practice complaint against the Company or any of its
Subsidiaries pending before the National Labor Relations Board, (iv) there is no
labor strike, material dispute, slowdown or stoppage actually pending or, to the
best of the Company's or any Subsidiary's knowledge, threatened against or
affecting the Company or any of its Subsidiaries, (v) with respect to the
Company or any of its Subsidiaries, no material grievance or arbitration
proceeding arising out of or under collective bargaining
<PAGE>
28
agreements is pending or exists and, to the best of the Company's or any
Subsidiary's knowledge, no claim therefor is threatened, and (vi) neither the
Company nor any of its Subsidiaries (after the date any such Subsidiary became a
Subsidiary of the Company) has experienced any work stoppage since inception.
Article 8
REPRESENTATIONS AND WARRANTIES
AND COVENANTS OF THE PURCHASERS
-------------------------------
Each of the Purchasers represents and warrants (as to itself only) to,
and covenants and agrees (as to itself only) with, the Company as follows:
8.1 Existence and Power. Such Purchaser:
-------------------
(a) is duly organized and validly existing under the laws of the
jurisdiction of its organization; and
(b) has the power and authority to own and operate its property,
to lease the property it operates as lessee and to conduct the business in which
it is currently, or is currently proposed to be, engaged.
8.2 Authorization; No Contravention. The execution, delivery and
-------------------------------
performance by such Purchaser of this Agreement:
(a) is within such Purchaser's power and authority and has been
duly authorized by all necessary action;
(b) does not contravene the terms of such Purchaser's Agreement
of Limited Partnership or other organizational document, or any amendment
thereof or any other Requirement of Law; and
(c) will not violate, conflict with or result in any breach or
contravention of or the creation of any Lien under, any Contractual Obligation
of such Purchaser, or any order or decree directly relating to such Purchaser.
8.3 Binding Effect. This Agreement and, when executed by the Company
--------------
on the First Closing Date, the Registration Rights Agreement has been duly
executed and delivered by such Purchaser, constitutes the legal, valid and
binding obligation of such Purchaser enforceable against it in accordance with
its terms, except as enforceability may be limited by applicable bankruptcy,
insolvency, or similar laws affecting the enforcement of creditors' rights
generally or by equitable principles relating to enforceability.
<PAGE>
29
8.4 No Legal Bar. The execution, delivery and performance of this
------------
Agreement will not violate any Requirement of Law or any Contractual Obligation
of such Purchaser.
8.5 Investment Representations. Such Purchaser understands that
--------------------------
neither the Preferred Shares nor any Common Stock issuable upon conversion of
the Preferred Shares has been registered under the Securities Act and that the
certificates for such securities will bear a legend to that effect.
8.6 Purchase for Own Account. The Preferred Shares (including, for
------------------------
purposes of this Section 8.6, the Common Shares issuable upon conversion of the
Preferred Shares) to be acquired by such Purchaser pursuant to this Agreement
are being acquired for its own account and with no intention of distributing or
reselling such securities or any part thereof in any transaction that would be
in violation of the securities laws of the United States of America, or any
state, without prejudice, however, to the rights of such Purchaser at all times
to sell or otherwise dispose of all or any part of the Preferred Shares under an
effective registration statement under the Securities Act, or under an exemption
from such registration available under the Securities Act, and subject,
nevertheless, to the disposition of such Purchaser's property being at all times
within its control. If such Purchaser should in the future decide to dispose of
any Preferred Shares, such Purchaser understands and agrees that it may do so
only in compliance with the Securities Act and applicable state securities laws,
as then in effect, and that stop-transfer instructions to that effect, where
applicable, will be in effect with respect to such Preferred Shares. If such
Purchaser should decide to dispose of any Preferred Shares, other than pursuant
to the provisions of the Registration Rights Agreement, such Purchaser, if
requested by the Company, will have the obligation in connection with such
disposition, at such Purchaser's expense, of delivering an opinion of counsel of
recognized standing in securities law, in connection with such disposition to
the effect that the proposed disposition of the Preferred Shares would not be in
violation of the Securities Act or any applicable state securities laws and,
assuming such opinion is required and is otherwise appropriate in form and
substance under the circumstances, the Company will accept, and will recommend
to any applicable transfer agent or trustee for any of the Preferred Shares that
it accept, such opinion. Such Purchaser agrees to the imprinting, so long as
required by law, of a legend on certificates representing all of the Preferred
Shares and the shares of Common Stock issued on conversion thereof to the
following effect:
"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933 OR THE SECURITIES LAWS OF ANY STATE AND MAY NOT
BE SOLD OR OTHERWISE DISPOSED OF EXCEPT PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER SUCH ACT AND APPLICABLE STATE SECURITIES LAWS
OR AN APPLICABLE EXEMPTION TO THE REGISTRATION REQUIREMENTS OF SUCH ACT OR
SUCH LAWS."
<PAGE>
30
8.7 Accredited Investor. Such Purchaser is an "accredited investor"
-------------------
as that term is defined in Regulation D promulgated under the Securities Act.
8.8 Broker's, Finder's or Similar Fees. There are no brokerage
----------------------------------
commissions, finder's fees or similar fees or commissions payable in connection
with the transactions contemplated hereby based on any agreement, arrangement or
understanding with such Purchaser or any action taken by such Purchaser.
8.9 Standstill. Each Purchaser agrees that, unless otherwise agreed
----------
by the Company in writing, for a period of three years from the First Closing
Date it will not acquire any Voting Stock of the Company if as a result of such
acquisition, the Purchasers and their Affiliates will beneficially own in the
aggregate in excess of 49% of the Voting Stock of the Company. Notwithstanding
anything to the contrary in the immediately preceding sentence, BBH&Co. shall be
entitled to process any unsolicited orders to buy any Voting Stock of the
Company and BBH&Co. shall be entitled to solicit orders to purchase or recommend
that Persons purchase Voting Stock of the Company.
8.10 Additional Representations. (a) With respect to any Closing that
--------------------------
occurs prior to June 30, 1999, the Fund hereby represents and warrants to the
Company that the "person", as defined in Section 801.1(a)(1) of the Rules (the
"Rules") promulgated under the HSR Act, within which the Fund is included, does
not have annual net sales or total assets of $10,000,000 or more as determined
in accordance with the HSR Act and Rules.
(b) CIP hereby represents and warrants to the Company that no
filing is required under the HSR Act in connection with its purchase of the
First Preferred Shares and Second Preferred Shares to be purchased by it.
Article 9
INDEMNIFICATION
---------------
9.1 Indemnification by the Company. In addition to all other sums
------------------------------
due hereunder or provided for in this Agreement, the Company agrees to indemnify
and hold harmless each Purchaser and its Affiliates (including, without
limitation, Brown Brothers Harriman & Co. and Lexington Partners, Inc. ) and
their respective officers, directors, agents, employees, subsidiaries, partners
and controlling persons (each, an "Indemnified Party") to the fullest extent
-----------------
permitted by law from and against any and all losses, claims, damages, expenses
(including reasonable fees, disbursements and other charges of counsel) or other
liabilities ("Liabilities") resulting from any breach of any covenant,
-----------
agreement, representation or warranty of the Company in this Agreement or any
legal, administrative or other actions
<PAGE>
31
(including actions brought by the Company or any equity holders of the Company
or derivative actions brought by any Person claiming through the Company or in
the Company's name), proceedings or investigations (whether formal or informal),
or written threats thereof, based upon, relating to or arising out of this
Agreement, the Preferred Shares, the Registration Rights Agreement, the
transactions contemplated hereby or thereby, or any indemnified person's role
therein or in the transactions contemplated hereby or thereby as long as a
written claim thereof is made before the expiration of the relevant survival
period set forth in Section 12.1 below; provided, however, that the Company
-------- -------
shall not be liable under this Section 9.1: (a) for any amount paid in
settlement of claims without the Company's consent (which consent shall not be
unreasonably withheld) or (b) to the extent that it is finally judicially
determined that such Liabilities resulted primarily from the willful misconduct,
bad faith or gross negligence of such Indemnified Party or any Affiliate
thereof; provided, further, that if and to the extent that such indemnification
-------- -------
is unenforceable for any reason, the Company shall make the maximum contribution
to the payment and satisfaction of such indemnified liability which shall be
permissible under applicable laws. In connection with the obligation of the
Company to indemnify for expenses as set forth above, the Company further agrees
to reimburse each Indemnified Party for all such expenses (including reasonable
fees, disbursements and other charges of counsel) as they are incurred by such
Indemnified Party; provided, however, that if an Indemnified Party is reimbursed
-------- -------
hereunder for any expenses, such reimbursement of expenses shall be refunded to
the extent it is finally judicially determined that the Liabilities in question
resulted primarily from the willful misconduct, bad faith or gross negligence of
such Indemnified Party or any Affiliate thereof.
9.2 Notification. Each Indemnified Party under this Article 9 will,
------------
promptly after the receipt of notice of the commencement of any action or other
proceeding against such Indemnified Party in respect of which indemnity may be
sought from the Company under this Article 9, notify the Company in writing of
the commencement thereof. The omission of any Indemnified Party so to notify
the Company of any such action shall not relieve the Company from any liability
which it may have to such Indemnified Party (i) other than pursuant to this
Article 9 or (ii) under this Article 9 unless, and only to the extent that, such
omission results in the Company's forfeiture of substantive rights or defenses.
In case any such action or other proceeding shall be brought against any
Indemnified Party and it shall notify the Company of the commencement thereof,
the Company shall be entitled to participate therein and, to the extent that it
may wish, to assume the defense thereof, with counsel reasonably satisfactory to
such Indemnified Party; provided, however, that any Indemnified Party may, at
-------- -------
its own expense, retain separate counsel to participate in such defense.
Notwithstanding the foregoing, in any action or proceeding in which both the
Company and an Indemnified Party is, or is reasonably likely to become, a party,
such Indemnified Party shall have the right to employ separate counsel at the
Company's expense and to control its own defense of such action or proceeding
if, in the reasonable opinion of counsel to such Indemnified Party, (a) there
are or may be legal defenses available to such Indemnified Party or to other
indemnified parties that
<PAGE>
32
are different from or additional to those available to the Company or (b) any
conflict or potential conflict exists between the Company and such Indemnified
Party that would make such separate representation advisable; provided, however,
-------- -------
that in no event shall the Company be required to pay fees and expenses under
this Article 9 for more than one firm of attorneys in any jurisdiction in any
one legal action or group of related legal actions. The Company agrees that the
Company will not, without the prior written consent of such Purchaser, settle,
compromise or consent to the entry of any judgment in any pending or threatened
claim, action or proceeding relating to the matters contemplated hereby (if any
Indemnified Party is a party thereto or has been actually threatened to be made
a party thereto) unless such settlement, compromise or consent includes an
unconditional release of such Purchaser and each other Indemnified Party from
all liability arising or that may arise out of such claim, action or proceeding.
The rights accorded to Indemnified Parties hereunder shall be in addition to any
rights that any Indemnified Party may have at common law, by separate agreement
or otherwise.
9.3 Registration Rights Agreement. Notwithstanding anything to the
-----------------------------
contrary in this Article 9, the indemnification and contribution provisions of
the Registration Rights Agreement shall govern any claim made with respect to
registration statements filed pursuant thereto or sales made thereunder.
Article 10
AFFIRMATIVE COVENANTS
---------------------
The Company hereby covenants and agrees (a) with each Purchaser, with
respect to all of this Article 10, and (b) with any other Qualified Holder, with
respect to all of this Article 10 except Sections 10.1(c),(d) and (e), 10.9,
10.10 and 10.12:
10.1 Financial Statements. The Company shall promptly deliver to such
--------------------
Purchaser and (except with respect to Section 10.1(c),(d) and (e)) any other
Qualified Holder:
(a) as soon as available, but not later than ninety (90) days
after the end of each fiscal year of the Company, a copy of the audited
consolidated balance sheet of the Company and its Subsidiaries as of the end of
such year and the related consolidated statements of income and cash flows for
such fiscal year, setting forth in each case in comparative form the figures for
the previous year, all in reasonable detail and accompanied by a management
discussion and analysis of the operations of the Company and its Subsidiaries
for such fiscal year and by the opinion of PricewaterhouseCoopers LLP (or any
successor thereto) or another nationally recognized independent public
accounting firm which report shall state that such consolidated financial
statements present fairly in all material respects the financial
<PAGE>
33
position for the periods indicated in conformity with GAAP applied on a basis
consistent with prior years (except for changes with respect to which such
accounting firm concurs); provided, however, that the delivery of a copy of the
-----------------
Company's Annual Report on Form 10-K shall satisfy the requirements of this
Section 10.1(a);
(b) commencing with the fiscal period ending on June 30, 1999,
as soon as available, but in any event not later than forty-five (45) days after
the end of each of the first three fiscal quarters of each year, the unaudited
consolidated balance sheet of the Company and its Subsidiaries, and the related
consolidated statements of income and cash flow for such quarter and for the
period commencing on the first day of the fiscal year and ending on the last day
of such quarter, all certified by an appropriate officer of the Company;
provided, however that the delivery of a copy of the Company's Quarterly Report
- -------- -------
on Form 10-Q shall satisfy the requirements of this Section 10.1(b);
(c) commencing with the month ending on April 30, 1999, as
soon as available, but in any event not later than thirty (30) days after the
end of each month, the unaudited monthly and year-to-date financial statements
setting forth in each case, in comparative form, the figures for the previous
year and the budget figures, all certified by an appropriate officer of the
Company;
(d) as soon as available and in any event not later than thirty
(30) days prior to the end of each fiscal year, the financial plan of the
Company and its Subsidiaries for the next succeeding fiscal year, including cash
flow projection and operating budget, calculated monthly, and as soon as
available any updates or revisions to such financial plan;
(e) annual budgets and such other financial and operating data
of the Company and its Subsidiaries, as any Purchaser reasonably may request, to
the extent that such information is formally prepared for the Company's
Chairman, President, Board of Directors, banks, other lenders, security holders,
the SEC or the financial community;
(f) at any time when it is not subject to Section 13 or 15(d)
of the Exchange Act, upon request, to such Purchaser and prospective purchasers
of the Preferred Shares, information of the type that would satisfy the
requirement of subsection (d)(4)(i) of Rule 144A (or any similar successor
provision) under the Securities Act; and
(g) except as otherwise provided in Section 10.1(a) and (b),
promptly after the same are filed, copies of all Commission Documents.
10.2 Certificates; Other Information. The Company shall furnish to
-------------------------------
such Purchaser and to any other Qualified Holder:
<PAGE>
34
(a) concurrently with the delivery of the financial statements
referred to in Section 10.1(a) or 10.1(b), a certificate of the Company's Chief
Financial Officer stating that to the best of knowledge of such officer there is
no default under or breach of Articles 10 and 11, except as specified in such
certificates; and
(b) promptly upon receipt, copies of all accountants'
management letters and all certificates relating to compliance, defaults,
material litigation, and other material adverse changes.
10.3 Preservation of Corporate Existence. Except in connection with a
-----------------------------------
Change of Control, the Company shall, and shall cause each of its Subsidiaries
to:
(a) preserve and maintain in full force and effect its
corporate or organizational existence and good standing under the laws of its
jurisdiction of incorporation or organization except as permitted by Section
11.2;
(b) preserve and maintain in full force and effect all material
rights, privileges, qualifications, licenses and franchises necessary in the
normal conduct of its business; and
(c) use its reasonable efforts to preserve its business
organization.
10.4 Payment of Obligations. The Company shall, and shall cause its
----------------------
Subsidiaries to, pay and discharge as the same shall become due and payable, all
their respective obligations and liabilities, including without limitation:
(a) all tax liabilities, assessments and governmental charges or
levies upon it or its properties or assets, unless the same are being contested
in good faith by appropriate proceedings and adequate reserves in accordance
with GAAP are being maintained by the Company or such Subsidiary;
(b) all lawful claims which the Company and each of its
Subsidiaries is obligated to pay, which are due and which, if unpaid, might by
law become a Lien upon its property, unless the same are being contested in good
faith by appropriate proceedings and adequate reserves in accordance with GAAP
are being maintained by the Company or such Subsidiary; and
(c) all payments of principal of and interest on Indebtedness
when due (giving effect to any grace periods relating thereto);
except, in the case of (a), (b) and (c) of this Section 10.4, to the extent that
the failure to do so would not, individually or in the aggregate, have a
material adverse effect on the Condition of the Company.
<PAGE>
35
10.5 Compliance with Laws. The Company shall comply, and shall cause
--------------------
each Subsidiary to comply, in all material respects with all Requirements of Law
and with the directions of any Governmental Authority having jurisdiction over
it or its business, except such as to which such failure to comply would not
have a material adverse effect on the Condition of the Company.
10.6 Notices. Upon knowledge of the Chief Executive Officer, the
-------
President or the Chief Financial Officer of the Company of the events described
in this Section 10.6, the Company shall give written notice within 15 days to
each Purchaser of any (i) material default or event of default under any
material Contractual Obligation of the Company or any of its Subsidiaries, or
(ii) material dispute, litigation, investigation, proceeding or suspension
which may exist at any time against the Company, or any of its Subsidiaries or
its assets, each accompanied by a statement setting forth details of the
occurrence referred to therein and stating what action the Company proposes to
take with respect thereto.
10.7 Issue Taxes. The Company shall pay, or cause to be paid, all
-----------
documentary and similar taxes levied under the laws of any applicable
jurisdiction in connection with the issuance of the Preferred Shares and the
execution and delivery of the other agreements and documents contemplated hereby
and any modification of the Preferred Shares or such other agreements and
documents and will hold such Purchaser harmless, without limitation as to time,
against any and all Liabilities with respect to all such taxes.
10.8 Reservation of Shares. The Company shall at all times reserve
---------------------
and keep available out of its authorized Common Stock, solely for the purpose of
issue or delivery upon conversion of the Preferred Shares as provided in the
Certificate of Designation, such number of shares of Common Stock as shall then
be issuable or deliverable upon the conversion of all outstanding Preferred
Shares. Such shares of Common Stock shall, when issued or delivered in
accordance with the Certificate of Designation, be duly and validly issued and
fully paid and non-assessable. The Company shall issue the Common Stock into
which the Preferred Shares are convertible upon the proper surrender of the
Preferred Shares in accordance with the provisions of the Certificate of
Designation and shall otherwise comply with the terms thereof.
10.9 Inspection.
----------
(a) The Company will permit, and will cause each of its
Subsidiaries to permit, representatives of each of the Purchasers to visit and
inspect any of its properties, to examine its corporate, financial and operating
records and make copies thereof or abstracts therefrom, and to discuss its
affairs, finances and accounts with their respective directors, officers and
independent public accountants, all at such reasonable times during normal
business hours and as often as may be reasonably requested, upon reasonable
advance notice to the Company.
<PAGE>
36
(b) Each Purchaser will utilize reasonable good faith efforts
to maintain as confidential any information obtained from the Company or its
Subsidiaries (to the extent such Purchaser is advised by the Company that such
information is confidential) pursuant to Sections 10.1, 10.2, 10.6, 10.9 and
10.10 (other than information which (i) at the time of disclosure or thereafter
is generally available to and known by the public (other than as a result of a
disclosure directly or indirectly by such Purchaser or any of its
representatives), (ii) is available to such Purchaser on a non-confidential
basis from a source other than the Company or its Subsidiaries; provided that
--------
such source was not known by such Purchaser to be bound by a confidentiality
agreement with the Company or any of its Subsidiaries, (iii) has been
independently developed by such Purchaser or (iv) which was obtained more than
one year prior to such disclosure); provided, however, each Purchaser may
-------- -------
disclose information (a) to its advisors, representatives, agents, partners (and
their representatives and advisors) and employees, (b) to any prospective
transferee of the Preferred Shares or the Common Shares issuable on the
conversion of the Preferred Shares or of an interest in such Purchaser or in a
successor fund sponsored by the general partner of such Purchaser, (c) as may be
required by law (including a court order, subpoena or other administrative order
or process) or applicable regulations to which such Purchaser is or becomes
subject, (d) in connection with any litigation arising out of or related to this
Agreement, (e) to the executive officers of the Company or any of its
Subsidiaries, or (f) with the consent of the Company.
10.10 Board Representation.
--------------------
(a) The Company shall, at or prior to the First Closing Date,
cause one vacancy to be created on its Board of Directors (by increasing the
number of members of the Board of Directors or otherwise) and at such date shall
cause one person designated by the Fund to be elected to its Board of Directors.
Such designee shall serve until the next succeeding annual meeting of
stockholders of the Company to be held after such election.
(b) Commencing with such next succeeding annual meeting of
stockholders of the Company referred to in Section 10.10(a), and at each annual
meeting of stockholders of the Company thereafter, so long as the Fund holds 20%
of the shares of Common Stock issued or issuable upon conversion of the
Preferred Shares (whether or not the Preferred Shares have been converted)
acquired by the Fund on the First Closing Date and Second Closing Date, if any,
the Fund shall be entitled to designate one director to the Company's Board of
Directors. The Company shall cause such designee of the Fund to be included in
the slate of nominees recommended by the Board to the Company's stockholders for
election as directors, and the Company shall use its reasonable best efforts to
cause the election of such designee, including voting all shares for which the
Company holds proxies (unless otherwise directed by the stockholder submitting
such proxy) or is otherwise entitled to vote, in favor of the election of such
person. Notwithstanding the foregoing, if the Fund has not designated a person
pursuant to Section 10.10(a) and is
<PAGE>
37
entitled to do so, the Fund shall be entitled to receive all notices and
materials distributed to the members of the Board of Directors of the Company,
and to designate one person who shall be entitled to attend all meetings of the
Board of Directors and committees thereof and to receive minutes of all such
meetings upon preparation thereof.
(c) In the event such designee of the Fund shall cease to serve
as a director for any reason, other than by reason of the Fund not being
entitled to designate a designee as provided in Section 10.10(b), the Company
shall use its reasonable best efforts to cause the vacancy resulting thereby to
be filled by a designee of the Fund.
(d) In addition to the rights granted pursuant to Sections
10.10(a), (b) and (c) above, (i) so long as the Fund holds 20%of the shares of
Common Stock issued or issuable upon conversion of the Preferred Shares (whether
or not the Preferred Shares have been converted) acquired by the Fund on the
First Closing Date and the Second Closing Date, if any, the Fund shall have the
right to have a representative attend all regular and special meetings of the
Board of Directors of the Company and (ii) so long as CIP holds 20%of the shares
of Common Stock issued or issuable upon conversion of the Preferred Shares
(whether or not the Preferred Shares have been converted) acquired by CIP on the
First Closing Date and the Second Closing Date, if any, CIP shall have the right
to have a representative attend all regular and special meetings of the Board of
Directors of the Company. These visitation rights shall include the right to
receive the same notice and materials provided to the Board at the same time as
provided to the Board.
10.11 Registration and Listing. If any shares of Common Stock required
------------------------
to be reserved for purposes of conversion of the Preferred Shares as provided in
the Certificate of Designation require registration with or approval of any
Governmental Authority under any Federal or state or other applicable law before
such Common Stock may be issued or delivered upon conversion, the Company will
endeavor in good faith and as expeditiously as possible to cause such Common
Stock to be duly registered or approved, as the case may be, unless such
registration or approval is required solely because of a breach of such
Purchaser's representation contained in Section 8.6. So long as the Common Stock
is quoted on the NYSE or listed on any national securities exchange, the
Company, if permitted by the rules of such system or exchange, will quote or
list and keep quoted or listed on such system or exchange, upon official notice
of issuance, all Common Stock issuable or deliverable upon conversion of the
Preferred Shares. In addition, at the request of such Purchaser, the Company
will endeavor in good faith and as expeditiously as possible to obtain private
placement numbers for the Preferred Shares and the Common Stock issued upon
conversion of the Preferred Shares, assigned by the CUSIP Service Bureau of
Standard & Poors' ratings group and make such securities PORTAL and DTC
eligible.
<PAGE>
38
10.12 HSR Act Filing. The Company shall prepare and file, and
--------------
cooperate with each Purchaser so that it may prepare and file, in each case
within five Business Days of a request by such Purchaser, notification and
report forms in compliance with the HSR Act, and shall otherwise fully comply
with the requirements of the HSR Act. The Company shall bear all of its own
expenses and all out-of-pocket expenses (including filing fees and reasonable
attorneys' fees, charges and expenses) of each Purchaser in connection with any
such preparation and filing.
10.13 Additional Registration Rights. The Company shall not provide
------------------------------
any registration rights with respect to its securities which are inconsistent
with those granted under the Registration Rights Agreement or grant rights with
respect to its securities for a "shelf" registration if similar rights are not
then provided to the Purchasers in the Registration Rights Agreement.
10.14 Change of Control Offer.
-----------------------
(a) If a Change of Control (as defined below) occurs, then the
Company shall within 5 Business Days thereafter offer to purchase from each
Holder of Preferred Shares (a "Change of Control Offer"), and thereafter shall
----------------------
purchase from each Holder which accepts such Change of Control Offer, all (but
not less than all) outstanding Preferred Shares then held by such Holder
pursuant to such Change of Control Offer at a purchase price equal to the
greater of: (A) the amount, if any, that each Holder of shares of Preferred
Stock would be entitled to receive per share of Common Stock in connection with
such Change of Control if such Holder of Preferred Stock had converted its
shares immediately prior to any relevant record date or payment in connection
with such Change of Control, or (B) $20.00 in cash per share of Common Stock
assuming such Holder of Preferred Stock had converted its shares of Preferred
Stock immediately prior to any relevant record date or payment in connection
with such Change of Control or otherwise immediately prior to the occurrence of
such Change of Control, not sooner than 20 days and not later than 40 days after
the date of such notice (subject to compliance with applicable securities laws);
provided, that notwithstanding anything to the contrary contained herein, any
- --------
payment required to be made in connection with the approval by the stockholders
of the Company of a transaction described in clauses (iv) and (v) of the
definition of "Change of Control" shall be made simultaneously with the
consummation of such transaction and any such payment shall not be required to
be made if such transaction does not occur. For the purposes of clause (A) of
the preceding sentence, if, in connection with a Change of Control, the holders
of shares of Common Stock are to receive securities of another Person that are
listed or admitted to trading on a national securities exchange or quoted in the
over-the-counter market, the amount that a Holder of shares of Preferred Stock
would be entitled to receive per share of Common Stock in connection with such
Change of Control shall be deemed to be equal to an amount which is 95% of the
Market Price of the securities to be received per share of Common Stock
calculated as of the Trading Day immediately preceding the occurrence of the
transaction contemplated by such Change of Control.
<PAGE>
39
A "Change of Control" of the Company shall be deemed to have occurred:
-----------------
(i) At such time as any Person or "group" (within the meaning
of Section 13(d)(3) of the Exchange Act) other than the Principal
Stockholders is or becomes the beneficial owner, directly or indirectly, of
outstanding shares of stock of the Company entitling such Person or Persons
to exercise 50% or more of the total votes entitled to be cast at a regular
or special meeting, or by action by written consent, of the stockholders of
the Company in the election of directors (the term "beneficial owner" shall
----------------
be determined in accordance with Rule 13d-3 of the Exchange Act);
(ii) If a majority of the Board of Directors of the Company
shall consist of Persons other than Continuing Directors. The term
"Continuing Director" shall mean any member of the Board of Directors on
--------------------
the First Closing Date, any director elected pursuant to Section 10.10 and
any other member of the Board of Directors who shall be recommended or
elected to succeed a Continuing Director by a majority of Continuing
Directors who are the members of the Board of Directors;
(iii) If immediately after any merger, consolidation,
combination, reclassification or recapitalization or similar transaction,
the Principal Stockholders shall be the beneficial owner (as such term is
defined in clause (i) above), directly or indirectly, of outstanding shares
of stock of the Company (or any Person surviving such transaction)
entitling the Principal Stockholders to exercise 50% or more of the total
voting power of all classes of stock of the Company (or the surviving
Person in such transaction) entitled to vote in the elections of the
directors and, in anticipation of, in connection with or as a result of,
such transaction, the Company (or such surviving Person) shall have
incurred or issued additional Indebtedness such that the total Indebtedness
so incurred or issued equals at least 50% of the consideration payable in
such transaction; provided, however, that any such transaction shall not be
-------- -------
considered a Change of Control if the Holders shall have participated
therein on no less than a pari passu basis (assuming conversion of all of
---- -----
the Holders' Preferred Shares into Common Stock) with the Principal
Stockholders;
(iv) At such time as the stockholders of the Company shall have
approved a reorganization, merger or consolidation or similar transaction,
in each case, with respect to which all or substantially all the Persons
who were the beneficial owners of the outstanding shares of capital stock
of the Company immediately prior to such reorganization, merger or
consolidation, beneficially own, directly or indirectly, less than 50% of
the Voting Stock of the Company (excluding the Voting Stock that the
Holders of Preferred Shares
<PAGE>
40
shall be entitled to receive as a result of such reorganization, merger or
consolidation) resulting from such reorganization, merger or consolidation;
(v) At such time as the stockholders of the Company shall have
approved the sale or other disposition of all or substantially all the
assets of the Company in one transaction or in a series of related
transactions; or
(vi) If any transaction occurs, the result of which is that the
Common Stock is not required to be registered under Section 12 of the
Exchange Act and that the holders of Common Stock do not receive common
stock of the Person surviving such transaction which is required to be
registered under Section 12 of the Exchange Act.
(b) The Change of Control Offer shall remain open from the time
of mailing until the purchase date set forth in the Notice of Offer. The Notice
of Offer shall be accompanied by a copy of the information most recently
required to be supplied under Section 10.1(a) and Section 10.1(b). The Notice of
Offer shall contain all instruments and materials necessary to enable the
Holders to tender Preferred Shares pursuant to the Change of Control Offer. The
Notice of Offer, which shall govern the terms of the Change of Control Offer,
shall state:
(i) that the Change of Control Offer is being made
pursuant to this Section 10.12 and that tendered Preferred Shares will be
purchased;
(ii) the purchase price and the date designated for
purchase;
(iii) that the Change of Control Offer is being made for all
(but not less than all) Preferred Shares held by a Holder;
(iv) that the Preferred Shares purchased pursuant to the
Change of Control Offer shall cease to accrue dividends or interest after
the date designated for purchase;
(v) such other information respecting the procedures for
accepting the Change of Control Offer as the Company shall include and such
other information as may be required by law; and
(vi) that (unless otherwise required by law) any Holder
will be entitled to withdraw its election if the Company receives, not
later than the close of business on the third Business Day next preceding
the date scheduled for purchase, facsimile transmission or letter setting
forth the name of the Holder, the number of Preferred Shares owned by such
Holder
<PAGE>
41
(all of which shall have been delivered for purchase) and a statement that
such Holder is withdrawing its election to have such Preferred Shares
purchased.
(c) The Purchasers understand that the Credit Agreement may
not permit certain payments with respect to the Preferred Stock.
10.15 Proxy Statement and Meeting of Company's Stockholders.
-----------------------------------------------------
(a) The Company shall call a meeting of its stockholders (the
"Stockholders' Meeting") as soon as reasonably practicable after the date of
- ----------------------
this Agreement, for the purpose of voting upon approval of the sale of the
Second Preferred Shares pursuant to this Agreement and such other related
matters as it deems appropriate. In connection with the Stockholders' Meeting,
(i) the Company shall prepare and file with the Commission a Proxy Statement and
mail such Proxy Statement to its stockholders, (ii) the Board of Directors of
the Company shall recommend to its stockholders the approval of the sale of the
Second Preferred Shares pursuant to this Agreement and (iii) the Board of
Directors and officers of the Company shall use their reasonable efforts to
obtain such stockholders' approval. Each Purchaser agrees to assist and
cooperate with the Company in the preparation of the Proxy Statement with
respect to information therein concerning any such Purchaser.
(b) The Company hereby represents, warrants and agrees with the
Purchasers that the Proxy Statement will not, at the time the Proxy Statement is
mailed, and at the date of the Stockholders' Meeting, contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary to make the statements therein, in light of the
circumstances under which they are made, not misleading, or to correct any
statement made in any earlier communication with respect to the solicitation of
any proxy or approval of the transactions contemplated by this Agreement in
connection with which the Proxy Statement shall be mailed. The Company further
represents, warrants and agrees that the Proxy Statement will comply as to form
in all material respects with the provisions of the Exchange Act. The letter to
stockholders, notice of meeting, proxy statement and form of proxy, or any
information statement filed under the Exchange Act, as the case may be, that may
be provided to stockholders of the Company in connection with the transactions
contemplated by this Agreement (including any supplements), and any schedules
required to be filed with the Commission in connection therewith, as from time
to time amended or supplemented, are collectively referred to as the "Proxy
Statement."
(c) The Company shall take all actions necessary in accordance
with the Delaware General Corporation Law and the bylaws of the Company to duly
call, give notice of, convene and hold the Stockholders' Meeting within forty-
five (45) calendar days after the date hereof.
<PAGE>
42
(d) Each Purchaser hereby represents, warrants and agrees with
the Company that, solely with respect to information supplied in writing by such
Purchaser for inclusion in the Proxy Statement, the Proxy Statement will not, at
the time the Proxy Statement is mailed, and at the date of the Stockholders'
Meeting, contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they are made, not
misleading, or to correct any such information previously supplied to the
Company.
10.16 Registration Rights Agreement. Prior to the First Closing Date,
-----------------------------
the Registration Agreement as in effect on the date hereof shall have been
modified to incorporate the Purchasers on the terms set forth on Exhibit B
hereto and on such other terms as the Purchasers may reasonably request (as so
modified, the Registration Agreement shall be referred to herein as the
"Registration Rights Agreement").
- ------------------------------
Article 11
NEGATIVE COVENANTS
------------------
The Company hereby covenants and agrees with each Purchaser and each
Holder that so long as any Preferred Shares are outstanding:
11.1 Consolidations and Mergers. Except in connection with a Change
--------------------------
of Control, the Company shall not merge, consolidate with or into, or convey,
transfer, lease or otherwise dispose of (whether in one transaction or in a
series of transactions) all or substantially all of its assets (whenever
acquired), except the Company may consolidate or merge with or into, or sell all
or substantially all of its assets to, any Person if:
(a) The corporation or partnership formed by such consolidation
or surviving such merger or the Person which acquires all or substantially all
of the assets of the Company shall be (after giving effect to such transaction)
a Solvent corporation or partnership organized or formed, as the case may be,
and existing under, the laws of the United States, any state thereof, or the
District of Columbia and shall expressly assume in writing all of the
obligations of the Company under this Agreement, the Preferred Shares and the
Registration Rights Agreement;
(b) immediately after giving effect to such transaction, no
default under, or breach of, provisions of Articles 10 and 11 exists;
(c) the corporation or partnership formed by or surviving any
such transaction or the Person which acquires all or substantially all of the
assets
<PAGE>
43
of the Company shall have a Consolidated Net Worth at least equal to 90% of the
Consolidated Net Worth of the Company immediately prior to such transaction; and
(d) the Company shall have furnished to the Holders (i) an
opinion of counsel satisfactory to a majority in interest of the Holders
addressing the matters (other than Solvency) set forth in clause (a) above and
(ii) the certificate of the Chief Financial Officer of the Company to the effect
that such transaction has been consummated in compliance with the foregoing
requirements; provided that nothing in this Section 11.1 shall affect the rights
--------
of any Holder under this Agreement, the Preferred Shares or the Registration
Rights Agreement.
11.2 Transactions with Affiliates. The Company shall not, and shall
----------------------------
not permit any of its Subsidiaries to, enter into any transaction with any
Affiliate of the Company or of any such Subsidiary, unless approved by a
majority of the independent directors of the Company or is otherwise on arm's-
length terms.
11.3 No Inconsistent Agreements. Neither the Company nor any of its
--------------------------
Subsidiaries shall enter into any loan or other agreement, or enter into any
amendment or other modification to any currently existing agreement, which by
its terms restricts or prohibits the ability of the Company to issue Common
Stock upon conversion of the Preferred Stock in accordance with the Certificate
of Designation and this Agreement or to perform its obligations under this
Agreement or the Registration Rights Agreement; provided, that it will not be
--------
considered to be a breach of this Section 11.3 if the Credit Agreement restricts
dividends on or the redemption of the Preferred Shares issued pursuant to this
Agreement.
Article 12
MISCELLANEOUS
-------------
12.1 Survival of Provisions. All warranties, representations and
----------------------
covenants made by the Company in or under this Agreement shall be considered to
have been relied upon by each Purchaser and shall survive the execution and
delivery of this Agreement and the issuance to such Purchaser of the Preferred
Shares, regardless of any investigation made by or on behalf of such Purchaser.
All warranties, representations and covenants made by a Purchaser or on its
behalf shall survive the execution and delivery of this Agreement and the
issuance to such Purchaser of the Preferred Shares. Except as otherwise set
forth in Article 10 or 11, all of the representations and warranties made herein
and each of the provisions of Articles 7, 8, 9 and 12 shall survive the
execution and delivery of this Agreement, any investigation by or on behalf of a
Purchaser or any Affiliate, acceptance of the Preferred Shares and payment
therefor, payment or prepayment of the Preferred Shares upon redemption or
otherwise, conversion of the Preferred Shares or termination of this Agreement;
provided that the representations and warranties set
- --------
<PAGE>
44
forth in Articles 7 and 8 shall expire and terminate upon the earlier of (i) the
conversion of all of the Preferred Shares into Common Stock and (ii) ninety (90)
days after the filing of the Company's Form 10-K for the fiscal year ended
December 31, 1999.
12.2 Notices. All notices, demands and other communications provided
-------
for or permitted hereunder shall be made in writing and shall be by registered
or certified first-class mail, return receipt requested, telecopier, courier
service or personal delivery:
(a) if to the Fund at the following address:
The 1818 Fund III, L.P.
c/o Brown Brothers Harriman & Co.
59 Wall Street
New York, New York 10005
Telecopier No.: (212) 493-8429
Attention: Mr. Lawrence C. Tucker
with a copy to:
Paul, Weiss, Rifkind, Wharton & Garrison
1285 Avenue of the Americas
New York, New York 10019-6064
Telecopier No.: (212) 757-3990
Attention: Marilyn Sobel, Esq.
(b) if to CIP at the following address:
Co-Investment Partners, L.P.
660 Madison Avenue
New York, New York 10021
Telecopier No.:
Attention: Walter M. Cain
with a copy to:
Kramer, Levin, Naftalis & Frankel LLP
919 Third Avenue
New York, New York 10022
Telecopier No.: (212) 715-8000
Attention: Michael S. Nelson, Esq.
<PAGE>
45
(c) if to Erie Indemnity or Erie Exchange at the following
address:
c/o Erie Insurance Group
100 Erie Insurance Place
Erie, Pennsylvania 16530
Telecopier No.: (814) 870-4330
Attention: Douglas F. Ziegler
(d) if to Aquila at the following address:
Aquila Limited Partnership
164 Mason Street
Greenwich, CT 06830
Telecopier No.: (203) 618-1257
Attention: Patrick J. Costello
(e) if to the Company at the following address:
National Equipment Services, Inc.
1800 Sherman Avenue
Evanston, Illinois 60201
Telecopier No.: (847) 733-1078
Attention: Kevin Rodgers
with a copy to:
Kirkland & Ellis
200 East Randolph Drive
Chicago, Illinois 60601
Telecopier No.: (312) 861-2200
Attention: Sanford E. Perl, Esq.
All such notices and communications shall be deemed to have been duly
given: when delivered by hand, if personally delivered; when delivered by
courier, if delivered by commercial overnight courier service; five Business
Days after being deposited in the mail, postage prepaid, if mailed; and when
receipt is acknowledged, if telecopied.
12.3 Successors and Assigns. This Agreement shall inure to the
----------------------
benefit of and be binding upon the successors and permitted assigns of the
parties hereto. Each Purchaser may assign any of its rights under this
Agreement, the Preferred Shares or the Registration Rights Agreement to any of
its Affiliates. Subject to the restrictions of this Agreement, each Purchaser
may assign any of its rights under this Agreement (other than those set forth in
Section 10.1(c), (d) or (e),
<PAGE>
46
10.2(b), 10.6, 10.9, 10.10 or 10.12), or the Preferred Shares, or a portion
thereof to any other Holder. Notwithstanding anything to the contrary contained
herein, each Purchaser may assign its rights to purchase shares of Preferred
Stock at the Second Closing pursuant to Section 2.1(b) (and the right to receive
any fees pursuant to Section 2.3); provided, that in no event shall such
--------
Purchaser be relieved of its obligation hereunder to purchase any such shares of
Preferred Stock at the Second Closing; provided, further, that any such assignee
--------- -------
of such rights shall be deemed to be a "Purchaser" for all purposes of this
Agreement. The Company may not assign any of its rights under this Agreement
without the written consent of each Purchaser. Except as provided in Article 9,
no Person other than the parties hereto is intended to be a beneficiary of this
Agreement, the Preferred Shares or the Registration Rights Agreement.
12.4 Amendment and Waiver. No failure or delay on the part of the
--------------------
Company or any Purchaser in exercising any right, power or remedy hereunder
shall operate as a waiver thereof, nor shall any single or partial exercise of
any such right, power or remedy preclude any other or further exercise thereof
or the exercise of any other right, power or remedy. The remedies provided for
herein are cumulative and are not exclusive of any remedies that may be
available to the Company or any Purchaser at law, in equity or otherwise. Any
amendment, supplement, modification or termination of or to any provision of
this Agreement, any waiver of any provision of this Agreement, and any consent
to any departure by the Company from the terms of any provision of this
Agreement, shall be effective only in the specific instance and for the specific
purpose for which made or given and shall be effective only when signed in
writing by or on behalf of holders of at least 51% of the Common Stock issued
and issuable upon conversion of the Preferred Shares (whether or not converted)
it being understood that the terms of this Agreement may be waived or amended
with the written consent of holders of at least 51% of the Common Stock issued
and issuable upon conversion of the Preferred Shares (whether or not converted).
Except where notice is specifically required by this Agreement, no notice to or
demand on the Company in any case shall entitle the Company to any other or
further notice or demand in similar or other circumstances.
12.5 Counterparts. This Agreement may be executed in any number of
------------
counterparts and by the parties hereto in separate counterparts, each of which
when so executed shall be deemed to be an original and all of which taken
together shall constitute one and the same agreement.
12.6 Headings. The headings in this Agreement are for convenience of
--------
reference only and shall not limit or otherwise affect the meaning hereof.
12.7 Determinations. Except where any provision expressly requires
--------------
that a determination be reasonable or a consent not be unreasonably withheld, or
be subject to qualifications to similar effect, all determinations to be made by
the
<PAGE>
47
Company, any Purchaser or any Holder hereunder in its opinion or judgment or
with its approval or otherwise shall be made by it in its sole discretion.
12.8 Governing Law. This Agreement has been negotiated, executed and
-------------
delivered in the State of New York and shall be governed by and construed in
accordance with the laws of the State of New York, without regard to principles
of conflicts of law.
12.9 Jurisdiction. Each party to this Agreement hereby irrevocably
------------
agrees that any legal action or proceeding arising out of or relating to this
Agreement or any agreements or transactions contemplated hereby may be brought
in the courts of the State of New York located in New York City or of the United
States of America for the Southern District of New York and hereby expressly
submits to the personal jurisdiction and venue of such courts for the purposes
thereof and expressly waives any claim of improper venue and any claim that such
courts are an inconveni ent forum. Each party hereby irrevocably consents to
the service of process of any of the aforementioned courts in any such suit,
action or proceeding by the mailing of copies thereof by registered or certified
mail, postage prepaid, to the address set forth in Section 12.2, such service to
become effective 10 days after such mailing.
12.10 Severability. In the event that any one or more of the
------------
provisions contained herein, or the application thereof in any circumstance, is
held invalid, illegal or unenforceable in any respect for any reason, the
validity, legality and enforceability of any such provision in every other
respect and of the remaining provisions hereof shall not be in any way impaired,
unless the provisions held invalid, illegal or unenforceable shall substantially
impair the benefits of the remaining provisions hereof.
12.11 Rules of Construction. Unless the context otherwise requires,
---------------------
"or" is not exclusive, and references to Sections or subsections refer to
Sections or subsections of this Agreement.
12.12 Remedies. If a breach of this Agreement or the Certificate of
--------
Designation by the Company or any of the Purchasers occurs and is continuing,
the Company or any Holder, as the case may be, may pursue any available remedy
by proceeding at law or in equity to enforce the performance (including, without
limitation, the specific performance) of any provision of this Agreement or the
Certificate of Designation. A Holder may maintain a proceeding even if it does
not possess any of the Preferred Shares or does not produce any of them in the
proceeding. Except as otherwise provided by law, a delay or omission by the
Company or any Holder, as the case may be, in exercising any right or remedy
accruing upon any such breach shall not impair the right or remedy or constitute
a waiver of or acquiescence in any such breach. No remedy is exclusive of any
other remedy. All available remedies are cumulative.
<PAGE>
48
12.13 Entire Agreement. This Agreement, together with the Exhibits and
----------------
Schedules hereto, the Certificate of Designation and the Registration Rights
Agreement, is intended by the parties as a final expression of their agreement
and intended to be a complete and exclusive statement of the agreement and
understanding of the parties hereto in respect of the subject matter contained
herein and therein. There are no restrictions, promises, warranties or
undertakings, other than those set forth or referred to herein or therein. This
Agreement, together with the Exhibits and Schedules hereto, the Certificate of
Designation, the Registration Rights Agreement supersede all prior agreements
and understandings between the parties with respect to such subject matter.
12.14 Attorneys' Fees. In any action or proceeding brought to enforce
---------------
any provision of this Agreement, the Certificate of Designation or the
Registration Rights Agreement or any other document or instrument contemplated
hereby or thereby, or where any provision hereof or thereof is validly asserted
as a defense, the successful party shall be entitled to recover reasonable
attorneys' fees, charges and disbursements in addition to any other available
remedy.
12.15 Publicity. Except as may be required by applicable law or
---------
regulation, no party hereto shall issue a publicity release or announcement or
otherwise make any public disclosure concerning this Agreement or the
transactions contemplated hereby, without prior approval by the other parties
hereto. If any announcement is required by law to be made by any party hereto,
prior to making such announcement such party will deliver a draft of such
announcement to the other parties and shall give the other parties an
opportunity to comment thereon.
12.16 Expenses. The Company acknowledges and agrees that if the
--------
transactions contemplated hereby are consummated, the Company shall reimburse
such Purchaser for all (i) reasonable out-of-pocket expenses and all consulting
and legal fees and expenses and other charges of such Purchaser in connection
with the negotiation, execution and delivery of this Agreement, the Preferred
Shares and the Registration Rights Agreement (including, without limitation, all
fees, disbursements and related charges of Paul, Weiss, Rifkind, Wharton &
Garrison) and (ii) reasonable fees and expenses of accountants for the
Purchasers in connection with accounting due diligence, and (iii) the reasonable
expenses incurred by the Purchasers, in connection with consulting services.
All such out-of-pocket fees and expenses incurred by the Purchasers prior to or
in connection with the Closing shall be paid at the Closing, and the Purchasers
may in their discretion offset the amount of such fees and expenses against the
Purchase Price of the Preferred Shares. Notwithstanding the foregoing, the
maximum amount of expenses to be reimbursed by the Company pursuant to this
Section 12.16 shall not exceed $250,000. The Company shall pay the reasonable
fees, out of pocket expenses and all expenses and other charges of each
Purchaser incurred in connection with any amendment to this Agreement, the
Certificate of Designation or the Registration Rights Agreement.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed and delivered by their respective representatives hereunto duly
authorized as of the date first above written.
NATIONAL EQUIPMENT SERVICES, INC.
By:/s/ Kevin P. Rodgers
____________________
Name:Kevin P.Rodgers
Title:CEO
THE 1818 FUND III, L.P.
By: Brown Brothers Harriman & Co.,
General Partner
By:/s/ Lawrence C. Tucker
_______________________
Name:Lawrence C. Tucker
Title: General Partner
CO-INVESTMENT PARTNERS, L.P.
By: CIP Partners, LLC, its
General Partner
By:/s/ Walter M Cain
__________________
Name: Walter M Cain
Title: Individual Managing Member
ERIE INDEMNITY COMPANY
By:/s/ Douglas F. Ziegler
_______________________
Name:Douglas F. Ziegler
Title:Senior Vice President,
Treasurer & Chief Investment
Officer
<PAGE>
ERIE INSURANCE EXCHANGE
By: Erie Indemnity Company,
its attorney-in-fact
By:/s/ Douglas F. Ziegler
______________________
Name:Douglas F. Ziegler
Title: Senior Vice President,
Treasurer & Chief Investment
Officer
AQUILA LIMITED PARTNERSHIP
By: Northway Management Company, LLC,
By:/s/ Patrick J. Costello
________________________
Name:Patrick J. Costello
Title: Chief Financial Officer
<PAGE>
<TABLE>
<CAPTION>
SCHEDULE 1
First Closing Second Closing
Facility Fee Facility Fee
- -------------------------------------------------------------------
<S> <C> <C>
The 1818 Fund III, L.P. $2,520,000 $1,680,000
- -------------------------------------------------------------------
Co-Investment Partners, L.P. $ 300,000 $ 200,000
- -------------------------------------------------------------------
Erie Indemnity Company $ 36,000 $ 24,000
- -------------------------------------------------------------------
Erie Insurance Exchange $ 84,000 $ 56,000
- -------------------------------------------------------------------
Aquila Limited Partnership $ 60,000 $ 40,000
- -------------------------------------------------------------------
- -------------------------------------------------------------------
- -------------------------------------------------------------------
</TABLE>
<PAGE>
Exhibit A
---------
NATIONAL EQUIPMENT SERVICES, INC.
CERTIFICATE OF DESIGNATION OF
SENIOR REDEEMABLE CONVERTIBLE
PREFERRED STOCK, SERIES A, SETTING FORTH THE POWERS,
PREFERENCES, RIGHTS, QUALIFICATIONS, LIMITATIONS AND
RESTRICTIONS OF SUCH SERIES OF PREFERRED STOCK
Pursuant to Section 151 of the Delaware General Corporation Law,
National Equipment Services, Inc., a Delaware corporation (the "Corporation"),
DOES HEREBY CERTIFY:
That pursuant to the authority conferred upon the Board of Directors
of the Corporation by the Certificate of Incorporation of the Corporation (the
"Charter"), the Board of Directors of the Corporation on ________, 1999 duly
adopted the following resolution creating a series of Preferred Stock designated
as Senior Redeemable Convertible Preferred Stock, Series A, and such resolution
has not been modified and is in full force and effect on the date hereof:
RESOLVED that, pursuant to the authority vested in the Board of
Directors of the Corporation in accordance with the provisions of the Charter, a
series of the class of authorized Preferred Stock, par value $0.01 per share, of
the Corporation is hereby created and that the designation and number of shares
thereof and the voting powers, preferences and relative, participating, optional
and other special rights of the shares of such series, and the qualifications,
limitations and restrictions thereof are as follows:
Section 1. Designation and Number.
----------------------
(a) The shares of such series shall be designated as Senior
Redeemable Convertible Preferred Stock, Series A (the "Preferred Stock"). The
number of shares initially constituting the Preferred Stock shall be 100,000,
which number may be decreased (but not increased) by the Board of Directors
without a vote of stockholders; provided, however, that such number may not be
-------- -------
decreased below the number of then outstanding shares of Preferred Stock.
(b) The Preferred Stock shall, with respect to rights on
liquidation, dissolution or winding up, rank prior to all other classes and
series of Junior Stock (as defined below) of the Corporation now or hereafter
authorized including, without limitation, the Common Stock.
(c) Capitalized terms used herein and not otherwise defined shall
have the meanings set forth in Section 11 below.
<PAGE>
Exhibit A
---------
NATIONAL EQUIPMENT SERVICES, INC.
CERTIFICATE OF DESIGNATION OF
SENIOR REDEEMABLE CONVERTIBLE
PREFERRED STOCK, SERIES A, SETTING FORTH THE POWERS,
PREFERENCES, RIGHTS, QUALIFICATIONS, LIMITATIONS AND
RESTRICTIONS OF SUCH SERIES OF PREFERRED STOCK
Pursuant to Section 151 of the Delaware General Corporation Law,
National Equipment Services, Inc., a Delaware corporation (the "Corporation"),
DOES HEREBY CERTIFY:
That pursuant to the authority conferred upon the Board of Directors
of the Corporation by the Certificate of Incorporation of the Corporation (the
"Charter"), the Board of Directors of the Corporation on ________, 1999 duly
adopted the following resolution creating a series of Preferred Stock designated
as Senior Redeemable Convertible Preferred Stock, Series A, and such resolution
has not been modified and is in full force and effect on the date hereof:
RESOLVED that, pursuant to the authority vested in the Board of
Directors of the Corporation in accordance with the provisions of the Charter, a
series of the class of authorized Preferred Stock, par value $0.01 per share, of
the Corporation is hereby created and that the designation and number of shares
thereof and the voting powers, preferences and relative, participating, optional
and other special rights of the shares of such series, and the qualifications,
limitations and restrictions thereof are as follows:
Section 1. Designation and Number.
----------------------
(a) The shares of such series shall be designated as Senior
Redeemable Convertible Preferred Stock, Series A (the "Preferred Stock"). The
number of shares initially constituting the Preferred Stock shall be 100,000,
which number may be decreased (but not increased) by the Board of Directors
without a vote of stockholders; provided, however, that such number may not be
-------- -------
decreased below the number of then outstanding shares of Preferred Stock.
(b) The Preferred Stock shall, with respect to rights on
liquidation, dissolution or winding up, rank prior to all other classes and
series of Junior Stock (as defined below) of the Corporation now or hereafter
authorized including, without limitation, the Common Stock.
(c) Capitalized terms used herein and not otherwise defined shall
have the meanings set forth in Section 11 below.
<PAGE>
2
Section 2. Dividends and Distributions.
---------------------------
Each holder of shares of Preferred Stock, shall be entitled to
receive, when, as and if declared by the Board of Directors, dividends and other
distributions (including, without limitation, any options, warrants or other
rights to acquire capital stock of the Corporation whether or not pursuant to a
shareholder rights plan, "poison pill" or similar arrangement, or other property
or assets) on a parity with each holder of Common Stock. Such dividends and
distributions shall be payable on each share of Preferred Stock in an amount
equal to the dividends per share payable on the number of shares of Common Stock
into which such share of Preferred Stock would be convertible under Section 8 on
the record date for determining eligibility to receive such dividends, or if no
record date is established, on the date such dividends are actually paid.
Section 3. Voting Rights.
-------------
In addition to any voting rights provided by law, the holders of
shares of Preferred Stock shall have the following voting rights:
(a) So long as the Preferred Stock is outstanding, each share of
Preferred Stock shall entitle the holder thereof to vote, in person or by proxy,
at a special or annual meeting of stockholders, on all matters voted on by
holders of Common Stock voting together as a single class with other shares
entitled to vote thereon. With respect to any such vote, each share of
Preferred Stock shall entitle the holder thereof to cast that number of votes
per share as is equal to the number of votes that such holder would be entitled
to cast had such holder converted his shares of Preferred Stock into Common
Stock pursuant to Section 8 on the record date for determining the stockholders
of the Corporation eligible to vote on any such matters.
(b) Unless the consent or approval of a greater number of shares
shall then be required by law, the affirmative vote of the holders of at least
51% of the outstanding shares of Preferred Stock, voting separately as a single
class, in person or by proxy, at a special or annual meeting of stockholders
called for the purpose, shall be necessary to:
(i) increase the authorized number of shares of Preferred
Stock; and
(ii) authorize, adopt or approve an amendment to the Charter
that would increase or decrease the par value of the shares of Preferred Stock,
or alter or change the powers, preferences or special rights of the shares of
Preferred Stock, or otherwise affect the rights of the shares of the Preferred
Stock adversely, including, without limitation, the liquidation preference
provisions.
<PAGE>
3
(c)(i) At each meeting of stockholders at which the holders of
shares of Preferred Stock shall have the right, voting separately as a single
class, to take any action, the presence in person or by proxy of the holders of
record of one-third of the total number of shares of Preferred Stock then
outstanding and entitled to vote on the matter shall be necessary and sufficient
to constitute a quorum. At any such meeting or at any adjournment thereof:
(A) the absence of a quorum of the holders of shares
of Preferred Stock shall not prevent the election of directors, and the absence
of a quorum of the holders of shares of any other class or series of capital
stock shall not prevent the taking of any action as provided in this Section 3;
and
(B) in the absence of a quorum of the holders of
shares of Preferred Stock, a majority of the holders of such shares present in
person or by proxy shall have the power to adjourn the meeting as to the actions
to be taken by the holders of shares of Preferred Stock from time to time and
place to place without notice other than announcement at the meeting until a
quorum shall be present.
(ii) For taking of any action as provided in Section 3(b) by the
holders of shares of Preferred Stock, each such holder shall have one vote for
each share of such stock standing in his name on the transfer books of the
Corporation as of any record date fixed for such purpose or, if no such date be
fixed, at the close of business on the Business Day next preceding the day on
which notice is given, or if notice is waived, at the close of business on the
Business Day next preceding the day on which the meeting is held; provided,
--------
however, that shares of Preferred Stock held by the Corporation or any Affiliate
- -------
of the Corporation shall not be deemed to be outstanding for purposes of taking
any action as provided in this Section 3.
Section 4. Certain Restrictions.
--------------------
(a) Whenever the Corporation shall not have converted Preferred
Stock at a time required by Section 8 or 10, at such time and thereafter until
all conversion obligations provided in Section 8 or 10 that have come due shall
have been satisfied, or whenever the Corporation shall not have redeemed shares
of Preferred Stock at a time required by Section 5, at such time and thereafter
until all redemption obligations provided in Section 5 that have come due shall
have been satisfied or all necessary funds have been set apart for payment, the
Corporation shall not: (A) declare or pay dividends, or make any other
distributions, on any shares of Junior Stock (other than Common Stock) or (B)
declare or pay dividends, or make any other distributions, on any shares of
Parity Stock.
(b) Whenever the Corporation shall not have converted shares of
Preferred Stock at a time required by Section 8 or 10, at such time and
thereafter until all conversion obligations provided in Section 8 or 10 that
have come due shall
<PAGE>
4
have been satisfied, or whenever the Corporation shall not have redeemed shares
of Preferred Stock at a time required by Section 5, at such time and thereafter
until all redemption obligations provided in Section 5 that have come due shall
have been satisfied or all necessary funds have been set apart for payment, the
Corporation shall not redeem, purchase or otherwise acquire for consideration
any shares of Junior Stock or Parity Stock; provided, however, that (A) the
-------- -------
Corporation may accept shares of any Senior Stock, Parity Stock or Junior Stock
for conversion into Junior Stock and (B) the Corporation may at any time redeem,
purchase or otherwise acquire shares of any Parity Stock pursuant to any
mandatory redemption, put, sinking fund or other similar obligation contained in
such Parity Stock, pro rata with the Preferred Stock in proportion to the total
amount then required to be applied by the Corporation to redeem, repurchase, or
otherwise acquire shares of Preferred Stock and shares of such Parity Stock.
(c) The Corporation shall not permit any Subsidiary of the
Corporation, or cause any other Person, to purchase or otherwise acquire for
consideration any shares of capital stock of the Corporation unless the
Corporation could, pursuant to Section 4(b), purchase such shares at such time
and in such manner.
Section 5. Redemption.
----------
(a) On April 30, 2009 (the "Redemption Date"), the Corporation
shall redeem all of the shares of Preferred Stock then outstanding, at a price
per share (the "Redemption Price") equal to (A) the Stated Value, plus (B) an
amount per share equal to all declared and unpaid dividends thereon, to the
Redemption Date, in immediately available funds.
(b) Notice of any redemption of shares of Preferred Stock pursuant
to Section 5(a) shall be given by publication in a newspaper of general
circulation in the Borough of Manhattan, The City of New York (if such
publication shall be required by applicable law, rule, regulation or securities
exchange requirement), not less than 30, nor more than 60, days prior to the
date fixed for redemption. In any case, a similar notice shall be mailed at
least 30, but not more than 60, days prior to the date fixed for redemption to
each holder of shares of Preferred Stock to be redeemed, at such holder's
address as it appears on the transfer books of the Corporation. In order to
facilitate the redemption of shares of Preferred Stock, the Board of Directors
may fix a record date for the determination of shares of Preferred Stock to be
redeemed, or may cause the transfer books of the Corporation for the Preferred
Stock to be closed, not more than 60 days or less than 30 days prior to the date
fixed for such redemption.
(c) At any time after a notice of redemption shall have been mailed
and before the Redemption Date, the Corporation shall deposit for the benefit of
the holders of shares of Preferred Stock to be redeemed the funds necessary for
such
<PAGE>
5
redemption with a bank or trust company in the Borough of Manhattan, The
City of New York, having a capital and surplus of at least $500,000,000. Any
moneys so deposited by the Corporation and unclaimed at the end of two years
from the date designated for such redemption shall revert to the general funds
of the Corporation. After such reversion, any such bank or trust company, upon
demand, shall pay over to the Corporation such unclaimed amounts and thereupon
such bank or trust company shall be relieved of all responsibility in respect
thereof and any holder of shares of Preferred Stock to be redeemed shall look
only to the Corporation for the payment of the Redemption Price. In the event
that moneys are deposited pursuant to this Section 5(c) in respect of shares of
Preferred Stock that are converted in accordance with the provisions of Section
8, such moneys shall, upon such conversion, revert to the general funds of the
Corporation and, upon demand, such bank or trust company shall pay over to the
Corporation such moneys and shall be relieved of all responsibilities to the
holders of such converted shares in respect thereof. Any interest accrued on
funds deposited pursuant to this Section 5(c) shall be paid from time to time to
the Corporation for its own account.
(d) Notice of redemption having been given as aforesaid, upon the
deposit of funds pursuant to Section 5(c) in respect of shares of Preferred
Stock to be redeemed pursuant to Section 5(a), notwithstanding that any
certificates for such shares shall not have been surrendered for cancellation,
from and after the Redemption Date (i) the shares represented thereby shall no
longer be deemed outstanding, (ii) the rights to receive dividends thereon shall
cease to accrue and (iii) all rights of the holders of shares of Preferred Stock
to be redeemed shall cease and terminate, excepting only the right to receive
the Redemption Price therefor and the right to convert such shares into shares
of Common Stock until the close of business on the Redemption Date, in
accordance with Section 8; provided, however, that if the Corporation shall
-------- -------
default in the payment of the Redemption Price, the shares of Preferred Stock
that were to be redeemed shall thereafter be deemed to be outstanding and the
holders thereof shall have all of the rights of a holder of Preferred Stock
until such time as such default shall no longer be continuing or shall have been
waived by holders of at least 51% of the then outstanding shares of Preferred
Stock.
Section 6. Reacquired Shares.
-----------------
Any shares of Preferred Stock converted, exchanged, redeemed,
purchased or otherwise acquired by the Corporation in any manner whatsoever
shall be retired and canceled promptly after the acquisition thereof. All such
shares of Preferred Stock shall upon their cancellation become authorized but
unissued shares of preferred stock, par value $.01 per share, of the Corporation
and, upon the filing of an appropriate Certificate of Designation with the
Secretary of State of the State of Delaware, may be reissued as part of another
series of preferred stock, par value $.01 per share, of the Corporation, but in
any event may not be reissued as shares of Preferred Stock unless all of the
shares of Preferred Stock issued on the Issue Date shall have already been
redeemed or converted.
<PAGE>
6
Section 7. Liquidation, Dissolution or Winding Up.
--------------------------------------
(a) If the Corporation shall commence a voluntary case under the
United States bankruptcy laws or any applicable bankruptcy, insolvency or
similar law of any other country, or consent to the entry of an order for relief
in an involuntary case under any such law or to the appointment of a receiver,
liquidator, assignee, custodian, trustee, sequestrator (or other similar
official) of the Corporation or of any substantial part of its property, or make
an assignment for the benefit of its creditors, or admit in writing its
inability to pay its debts generally as they become due or if a decree or order
for relief in respect of the Corporation shall be entered by a court having
jurisdiction in the premises in an involuntary case under the United States
bankruptcy laws or any applicable bankruptcy, insolvency or similar law of any
other country, or appointing a receiver, liquidator, assignee, custodian,
trustee, sequestrator (or other similar official) of the Corporation or of any
substantial part of its property, or ordering the winding up or liquidation of
its affairs, and on account of any such event the Corporation shall liquidate,
dissolve or wind up, or if the Corporation shall otherwise liquidate, dissolve
or wind up (any such event, a "Liquidation"), no distribution shall be made to
the holders of shares of Junior Stock unless, prior thereto, the holders of
shares of Preferred Stock shall have received an amount per share of Preferred
Stock equal to the greater of (A) the Stated Value, plus all declared and unpaid
dividends to the date of distribution, or (B) the proceeds in Liquidation that
the holders of Preferred Stock would have received in respect of all shares of
Common Stock issuable to such holders upon conversion of a share of Preferred
Stock owned by such holders, assuming that such share of Preferred Stock owned
by such holders had been converted into shares of Common Stock in accordance
with Section 8 immediately prior to the Liquidation (such greater amount being
the "Preferred Stock Liquidation Amount").
(b) Notwithstanding the foregoing, if the assets distributable upon
a Liquidation shall be insufficient to pay in full the Preferred Stock
Liquidation Amount on all shares of Preferred Stock outstanding and any amount
payable to the holders of Parity Stock, then all of the assets available after
payment of any amounts payable on the Senior Stock shall be distributed among
the holders of the Preferred Stock and the Parity Stock ratably in proportion to
the respective amounts of the assets to which they would otherwise be entitled.
(c) Neither the consolidation or merger of the Corporation with or
into any other Person nor the sale or other distribution to another Person of
all or substantially all the assets, property or business of the Corporation,
shall be deemed to be a liquidation, dissolution or winding up of the
Corporation for purposes of this Section 7.
<PAGE>
8
succeeding day on which such share transfer books are open, and such conversion
shall be deemed to have been made at, and shall be made at the Conversion Price
in effect at, such time on such next succeeding day.
(c) To the extent permitted by law, when shares of Preferred Stock
are converted, all dividends which have been declared and are unpaid on the
Preferred Stock so converted to the date of conversion shall be immediately due
and payable and must accompany the shares of Common Stock issued upon such
conversion.
(d) The Conversion Price shall be subject to adjustment as follows:
(i) If the Corporation shall at any time or from time to time
(A) pay a dividend or make a distribution (other than a dividend or distribution
paid to holders of Preferred Stock in the manner provided in Section 2) on the
outstanding shares of Common Stock in capital stock (which, for purposes of this
Section 8(d) shall include, without limitation, any options, warrants or other
rights to acquire capital stock) of the Corporation, (B) subdivide the
outstanding shares of Common Stock into a larger number of shares, (C) combine
the outstanding shares of Common Stock into a smaller number of shares or (D)
issue any shares of its capital stock in a reclassification of the Common Stock,
then, and in each such case, the Conversion Price in effect immediately prior to
such event shall be adjusted (and any other appropriate actions shall be taken
by the Corporation) so that the holder of any share of Preferred Stock
thereafter surrendered for conversion shall be entitled to receive the number of
shares of Common Stock or other securities of the Corporation that such holder
would have owned or would have been entitled to receive upon or by reason of any
of the events described above, had such share of Preferred Stock been converted
immediately prior to the occurrence of such event. An adjustment made pursuant
to this Section 8(d)(i) shall become effective retroactively (A) in the case of
any such dividend or distribution, to a date immediately following the close of
business on the record date for the determination of holders of Common Stock
entitled to receive such dividend or distribution or (B) in the case of any such
subdivision, combination or reclassification, to the close of business on the
day upon which such corporate action becomes effective.
(ii) If the Corporation shall at any time or from time to time
issue shares of Common Stock (or securities convertible into or exchangeable for
Common Stock, or any options, warrants or other rights to acquire shares of
Common Stock) for a consideration per share less than the Conversion Price per
share of Common Stock then in effect at the record date or issuance date, as the
case may be (the "Date"), referred to in the following sentence (treating the
price per share of any security convertible or exchangeable or exercisable into
Common Stock as equal to (A) the sum of the price for such security convertible,
exchangeable or exercisable into Common Stock plus any additional consideration
payable (without regard to any anti-dilution adjustments) upon the conversion,
exchange or exercise of such security
<PAGE>
8
succeeding day on which such share transfer books are open, and such conversion
shall be deemed to have been made at, and shall be made at the Conversion Price
in effect at, such time on such next succeeding day.
(c) To the extent permitted by law, when shares of Preferred Stock
are converted, all dividends which have been declared and are unpaid on the
Preferred Stock so converted to the date of conversion shall be immediately due
and payable and must accompany the shares of Common Stock issued upon such
conversion.
(d) The Conversion Price shall be subject to adjustment as follows:
(i) If the Corporation shall at any time or from time to time
(A) pay a dividend or make a distribution (other than a dividend or distribution
paid to holders of Preferred Stock in the manner provided in Section 2) on the
outstanding shares of Common Stock in capital stock (which, for purposes of this
Section 8(d) shall include, without limitation, any options, warrants or other
rights to acquire capital stock) of the Corporation, (B) subdivide the
outstanding shares of Common Stock into a larger number of shares, (C) combine
the outstanding shares of Common Stock into a smaller number of shares or (D)
issue any shares of its capital stock in a reclassification of the Common Stock,
then, and in each such case, the Conversion Price in effect immediately prior to
such event shall be adjusted (and any other appropriate actions shall be taken
by the Corporation) so that the holder of any share of Preferred Stock
thereafter surrendered for conversion shall be entitled to receive the number of
shares of Common Stock or other securities of the Corporation that such holder
would have owned or would have been entitled to receive upon or by reason of any
of the events described above, had such share of Preferred Stock been converted
immediately prior to the occurrence of such event. An adjustment made pursuant
to this Section 8(d)(i) shall become effective retroactively (A) in the case of
any such dividend or distribution, to a date immediately following the close of
business on the record date for the determination of holders of Common Stock
entitled to receive such dividend or distribution or (B) in the case of any such
subdivision, combination or reclassification, to the close of business on the
day upon which such corporate action becomes effective.
(ii) If the Corporation shall at any time or from time to time
issue shares of Common Stock (or securities convertible into or exchangeable for
Common Stock, or any options, warrants or other rights to acquire shares of
Common Stock) for a consideration per share less than the Conversion Price per
share of Common Stock then in effect at the record date or issuance date, as the
case may be (the "Date"), referred to in the following sentence (treating the
price per share of any security convertible or exchangeable or exercisable into
Common Stock as equal to (A) the sum of the price for such security convertible,
exchangeable or exercisable into Common Stock plus any additional consideration
payable (without regard to any anti-dilution adjustments) upon the conversion,
exchange or exercise of such security
<PAGE>
9
into Common Stock divided by (B) the number of shares of Common Stock initially
underlying such convertible, exchangeable or exercisable security), then, and in
each such case, the Conversion Price then in effect shall be adjusted by
dividing the Conversion Price in effect on the day immediately prior to the Date
by a fraction (x) the numerator of which shall be the sum of the number of
shares of Common Stock outstanding on the Date plus the number of additional
shares of Common Stock issued or to be issued (or the maximum number into which
such convertible or exchangeable securities initially may convert or exchange or
for which such options, warrants or other rights initially may be exercised) and
(y) the denominator of which shall be the sum of the number of shares of Common
Stock outstanding on the Date plus the number of shares of Common Stock which
the aggregate consideration for the total number of such additional shares of
Common Stock so issued or be issued upon the conversion, exchange or exercise of
such convertible or exchangeable securities or options, warrants or other rights
(plus the aggregate amount of any additional consideration initially payable
upon such conversion, exchange or exercise of such security) would purchase at
the Conversion Price on the Date.
Such adjustment shall be made whenever such shares, securities, options,
warrants or other rights are issued, and shall become effective retroactively to
a date immediately following the close of business (1) in the case of issuance
to stockholders of the Corporation, as such, on the record date for the
determination of stockholders entitled to receive such shares, securities,
options, warrants or other rights and (2) in all other cases, on the date
("issuance date") of such issuance; provided that:
--------
(A) the determination as to whether an adjustment is
required to be made pursuant to this Section 8(d)(ii) shall be made upon the
issuance of such shares or such convertible or exchangeable securities, options,
warrants or other rights;
(B) if any convertible or exchangeable securities, options,
warrants or other rights (or any portions thereof) which shall have given rise
to an adjustment pursuant to this Section 8(d)(ii) shall have expired or
terminated without the exercise thereof and/or if by reason of the terms of such
convertible or exchangeable securities, options, warrants or other rights there
shall have been an increase or increases, with the passage of time or otherwise,
in the price payable upon the exercise or conversion thereof, then the
Conversion Price hereunder shall be readjusted (but to no greater extent than
originally adjusted) on the basis of (x) eliminating from the computation any
additional shares of Common Stock corresponding to such convertible or
exchangeable securities, options, warrants or other rights as shall have expired
or terminated, (y) treating the additional shares of Common Stock, if any,
actually issued or issuable pursuant to the previous exercise of such
convertible or exchangeable securities, options, warrants or other rights as
having been issued for the consideration actually received and receivable
therefor and
<PAGE>
10
(z) treating any of such convertible or exchangeable securities, options,
warrants or other rights which remain outstanding as being subject to exercise
or conversion on the basis of such exercise or conversion price as shall be in
effect at this time; and
(C) no adjustment in the Conversion Price shall be made
pursuant to this Section 8(d)(ii) as a result of any issuance of securities by
the Corporation in respect of which an adjustment to the Conversion Price is
made pursuant to Section 8(d)(i).
(iii) If the Corporation shall at any time or from time to time
distribute to all holders of shares of its Common Stock (including any such
distribution made in connection with a consolidation or merger in which the
Corporation is the resulting or surviving corporation and the Common Stock is
not changed or exchanged) cash, evidences of indebtedness of the Corporation or
another issuer, securities of the Corporation or another issuer or other assets
(excluding (A) dividends or distributions paid or made in the manner provided in
Section 2, and (B) dividends payable in shares of Common Stock for which
adjustment is made under Section 8(d)(i)) or rights or warrants to subscribe for
or purchase securities of the Corporation (excluding those referred to in
Section 8(d)(ii) or those in respect of which an adjustment in the Conversion
Price is made pursuant to Section 8(d)(i) or (ii)), then, and in each such case,
the Conversion Price then in effect shall be adjusted by dividing the Conversion
Price in effect immediately prior to the date of such distribution by a fraction
(x) the numerator of which shall be the Market Price of the Common Stock on the
record date referred to below and (y) the denominator of which shall be such
Market Price of the Common Stock less the then Fair Market Value (as determined
by the Board of Directors of the Corporation) of the portion of the cash,
evidences of indebtedness, securities or other assets so distributed or of such
subscription rights or warrants applicable to one share of Common Stock (but
such denominator not to be less than one). Such adjustment shall be made
whenever any such distribution is made and shall become effective retroactively
to a date immediately following the close of business on the record date for the
determination of stockholders entitled to receive such distribution.
(iv) If the Corporation, at any time or from time to time, shall
take any action affecting its Common Stock similar to or having an effect
similar to any of the actions described in any of Section 8(d)(i) through
Section 8(d)(iii), inclusive, or Section 8(h) (but not including any action
described in any such Section) and the Board of Directors of the Corporation in
good faith determines that it would be equitable in the circumstances to adjust
the Conversion Price as a result of such action, then, and in each such case,
the Conversion Price shall be adjusted in such manner and at such time as the
Board of Directors of the Corporation in good faith determines would be
equitable in the circumstances (such determination to be evidenced in a
resolution, a certified copy of which shall be mailed to the holders of the
Preferred Stock).
<PAGE>
11
(v) Notwithstanding anything herein to the contrary, no
adjustment under this Section 8(d) need be made to the Conversion Price unless
such adjustment would require an increase or decrease of at least 1% of the
Conversion Price then in effect. Any lesser adjustment shall be carried forward
and shall be made at the time of and together with the next subsequent
adjustment, which, together with any adjustment or adjustments so carried
forward, shall amount to an increase or decrease of at least 1% of such
Conversion Price. Any adjustment to the Conversion Price carried forward and not
theretofore made shall be made immediately prior to the conversion of any shares
of Preferred Stock pursuant hereto.
(vi) Notwithstanding anything herein to the contrary, no
adjustment under this Section 8(d) shall be made (x) upon the sale or grant of
shares of Common Stock or options with respect to Common Stock in an aggregate
amount not to exceed 3,181,419 shares of Common Stock (assuming the exercise of
all such options) to employees or directors of the Corporation or to other
service providers, or upon the issuance of shares of Common Stock upon exercise
of any such options, if the sales price or exercise price thereof was not less
than the Market Price of the Common Stock on the date such shares of Common
Stock or options were sold or granted; provided, that in the case of options,
--------
Market Price shall be measured as of the time any such option was granted, not
at the time of exercise, or (y) upon any adjustment in the Conversion Price
itself; provided, that the number set forth in clause (x) shall be equitably
--------
adjusted for subsequent stock splits, stock combinations, stock dividends and
recapitalizations.
(e) If the Corporation shall take a record of the holders of its
Common Stock for the purpose of entitling them to receive a dividend or other
distribution, and shall thereafter and before the distribution to stockholders
thereof legally abandon its plan to pay or deliver such dividend or
distribution, then thereafter no adjustment in the Conversion Price then in
effect shall be required by reason of the taking of such record.
(f) Upon any increase or decrease in the Conversion Price, then, and
in each such case, the Corporation promptly shall deliver to each registered
holder of Preferred Stock at least 5 Business Days prior to effecting any of the
foregoing transactions a certificate, signed by the President or a Vice-
President and by the Treasurer or an Assistant Treasurer or the Secretary or an
Assistant Secretary of the Corporation, setting forth in reasonable detail the
event requiring the adjustment and the method by which such adjustment was
calculated and specifying the increased or decreased Conversion Price then in
effect following such adjustment.
(g) No fractional shares or scrip representing fractional shares
shall be issued upon the conversion of any shares of Preferred Stock. If more
than one share of Preferred Stock shall be surrendered for conversion at one
time by the same holder, the number of full shares of Common Stock issuable upon
conversion thereof shall be computed on the basis of the aggregate Stated Value
of the shares of
<PAGE>
12
Preferred Stock so surrendered. If the conversion of any share or shares of
Preferred Stock results in a fraction, an amount equal to such fraction
multiplied by the Current Market Price of the Common Stock on the Business Day
preceding the day of conversion shall be paid to such holder in cash by the
Corporation.
(h) In case of any capital reorganization or reclassification or
other change of outstanding shares of Common Stock (other than a change in par
value, or from par value to no par value, or from no par value to par value), or
in case of any consolidation or merger of the Corporation with or into another
Person (other than a consolidation or merger in which the Corporation is the
resulting or surviving Person and which does not result in any reclassification
or change of outstanding Common Stock), (any of the foregoing, a "Transaction"),
the Corporation, or such successor or purchasing Person, as the case may be,
shall execute and deliver to each holder of Preferred Stock at least 10 Business
Days prior to effecting any of the foregoing Transactions a certificate that the
holder of each share of Preferred Stock then outstanding shall have the right
thereafter to convert such share of Preferred Stock into the kind and amount of
shares of stock or other securities (of the Corporation or another issuer) or
property or cash receivable upon such Transaction by a holder of the number of
shares of Common Stock into which such share of Preferred Stock could have been
converted immediately prior to such Transaction. Such certificate shall provide
for adjustments which shall be as nearly equivalent as may be practicable to the
adjustments provided for in this Section 8. If, in the case of any such
Transaction, the stock, other securities, cash or property receivable thereupon
by a holder of Common Stock includes shares of stock or other securities of a
Person other than the successor or purchasing Person and other than the
Corporation, which controls or is controlled by the successor or purchasing
Person or which, in connection with such Transaction, issues stock, securities,
other property or cash to holders of Common Stock, then such certificate also
shall be executed by such Person, and such Person shall, in such certificate,
specifically acknowledge the obligations of such successor or purchasing Person
and acknowledge its obligations to issue such stock, securities, other property
or cash to the holders of Preferred Stock upon conversion of the shares of
Preferred Stock as provided above. The provisions of this Section 8(h) and any
equivalent thereof in any such certificate similarly shall apply to successive
Transactions.
(i) In case at any time or from time to time:
(i) the Corporation shall declare a dividend (or any other
distribution) on its Common Stock;
(ii) the Corporation shall authorize the granting to the holders
of its Common Stock of rights or warrants to subscribe for or purchase any
shares of stock of any class or of any other rights or warrants;
<PAGE>
13
(iii) there shall be any reclassification of the Common Stock, or any
consolidation or merger to which the Corporation is a party and for which
approval of any shareholders of the Corporation is required, or any sale or
other disposition of all or substantially all of the assets of the Corporation;
or
(iv) there shall be any voluntary or involuntary dissolution,
liquidation or winding up of the Corporation;
then the Corporation shall mail to each holder of shares of Preferred Stock at
such holder's address as it appears on the transfer books of the Corporation, as
promptly as possible but in any event at least 10 days prior to the applicable
date hereinafter specified, a notice stating (x) the date on which a record is
to be taken for the purpose of such dividend, distribution or rights or warrants
or, if a record is not to be taken, the date as of which the holders of Common
Stock of record to be entitled to such dividend, distribution or rights are to
be determined, or (y) the date on which such reclassification, consolidation,
merger, sale, conveyance, dissolution, liquidation or winding up is expected to
become effective. Such notice also shall specify the date as of which it is
expected that holders of Common Stock of record shall be entitled to exchange
their Common Stock for shares of stock or other securities or property or cash
deliverable upon such reclassification, consolidation, merger, sale, conveyance,
dissolution, liquidation or winding up.
(j) The Corporation shall at all times reserve and keep available for
issuance upon the conversion of the Preferred Stock pursuant to Section 8(a) or
10(a), such number of its authorized but unissued shares of Common Stock as will
from time to time be sufficient to permit the conversion of all outstanding
shares of Preferred Stock, and shall take all action required to increase the
authorized number of shares of Common Stock if at any time there shall be
insufficient authorized but unissued shares of Common Stock to permit such
reservation or to permit the conversion of all outstanding shares of Preferred
Stock.
(k) The issuance or delivery of certificates for Common Stock upon the
conversion of shares of Preferred Stock pursuant to Section 8(a) or 10(a) shall
be made without charge to the converting holder of shares of Preferred Stock for
such certificates or for any tax in respect of the issuance or delivery of such
certificates or the securities represented thereby, and such certificates shall
be issued or delivered in the respective names of, or (subject to compliance
with the applicable provisions of federal and state securities laws) in such
names as may be directed by, the holders of the shares of Preferred Stock
converted; provided, however, that the Corporation shall not be required to pay
-------- -------
any tax which may be payable in respect of any transfer involved in the issuance
and delivery of any such certificate in a name other than that of the holder of
the shares of Preferred Stock converted, and the Corporation shall not be
required to issue or deliver such certificate unless or until the Person or
Persons requesting the issuance or delivery thereof shall have paid to the
Corporation the
<PAGE>
15
Persons entitled to receive such Common Stock as the record holder or holders
thereof for all purposes immediately prior to the close of business on the next
succeeding day on which such share transfer books are open, and such conversion
shall be deemed to have been made at, and shall be made at the Conversion Price
in effect at, such time on such next succeeding day.
(c) To the extent permitted by law, when shares of Preferred Stock
are converted, all dividends declared and unpaid on the Preferred Stock so
converted to the date of conversion shall be immediately due and payable and
must accompany the shares of Common Stock issued upon such conversion.
(d) Notice of a conversion of shares of Preferred Stock pursuant to
Section 10(a) shall be given by publication in a newspaper of general
circulation in the Borough of Manhattan, The City of New York (if such
publication shall be required by applicable law, rule, regulation or securities
exchange requirement), not less than 30, nor more than 60, days prior to the
Mandatory Conversion Date and a similar notice shall be mailed at least 30, but
not more than 60 days prior to the Mandatory Conversion Date to each holder at
such holder's address as it appears on the transfer books of the Corporation. In
order to facilitate the conversion of shares of Preferred Stock hereunder the
Board of Directors may fix a record date for the determination of shares of
Preferred Stock to be converted, or may cause the transfer books of the
Corporation for the Preferred Stock to be closed, not more than 60 or less than
30 days prior to the Mandatory Conversion Date.
(e) Unless otherwise agreed, on or prior to the Mandatory Conversion
Date, the Corporation shall deposit for the benefit of the holders of shares of
Preferred Stock to be exchanged the shares of Common Stock and cash in the
amount of declared and unpaid dividends (the "Dividends") necessary for such
exchange with a bank or trust company in the Borough of Manhattan, The City of
New York, having a capital and surplus of at least $500,000,000. Any shares of
Common Stock and Dividends so deposited by the Corporation and unclaimed at the
end of two years from the date designated for such exchange shall revert to the
Corporation. After such reversion, any such bank or trust company shall, upon
demand, return to the Corporation such unclaimed shares of Common Stock and
Dividends and thereupon such bank or trust company shall be relieved of all
responsibility in respect thereof and any holder of shares of Preferred Stock to
be converted shall look only to the Corporation for the delivery of the shares
of Common Stock and Dividends. In the event that shares of Common Stock and
Dividends are deposited pursuant to this Section 10(e) in respect of shares of
Preferred Stock that are converted prior to the Mandatory Conversion Date in
accordance with the provisions of Section 8, such shares of Common Stock and
Dividends shall, upon such conversion, revert to the Corporation and, upon
demand, such bank or trust company shall return to the Corporation such shares
of Common Stock and Dividends and shall be relieved of all responsibilities to
the holders of such converted shares in respect thereof. Any dividends accrued
on shares of Common Stock deposited
<PAGE>
16
pursuant to this Section 10(e) shall accrue for the accounts of, and be payable
to, the holders of shares of Preferred Stock to be exchanged therefor. Any
interest accruing on the Dividends shall be for the benefit and be payable to
the Corporation.
(f) Notice of Mandatory Conversion having been given as aforesaid,
upon the deposit of shares of Common Stock and Dividends pursuant to Section
10(e) in respect of shares of Preferred Stock to be converted pursuant to
Section 10(a), notwithstanding that any certificates for such shares shall not
have been surrendered for cancellation, from and after the Mandatory Conversion
Date (i) the shares represented thereby shall no longer be deemed outstanding,
(ii) the rights to receive dividends thereon shall cease to accrue, and (iii)
all rights of the holders of shares of Preferred Stock to be converted shall
cease and terminate, excepting only the right to receive the shares of Common
Stock and Dividends and the right to convert such Preferred Stock into shares of
Common Stock until the close of business on the Mandatory Conversion Date, in
accordance with Section 8; provided, however, that if the Corporation shall
-------- -------
default in the execution and delivery of the shares of Common Stock or
Dividends, the shares of Preferred Stock that were to be converted shall
thereafter be deemed to be outstanding and the holders thereof shall have all of
the rights of a holder of Preferred Stock until such time as such default shall
no longer be continuing or shall have been waived by holders of at least 51% of
the then outstanding shares of Preferred Stock.
Section 11. Definitions.
-----------
For the purposes of this Certificate of Designation of Preferred
Stock, the following terms shall have the meanings indicated:
"Affiliate" shall have the meaning ascribed to such term in Rule
12b-2 of the General Rules and Regulations under the Exchange Act; provided that
--------
"Affiliate" shall not include any purchaser under the Stock Purchase Agreement
or any Affiliate of any such purchaser.
"Business Day" shall mean any day other than a Saturday, Sunday
or other day on which commercial banks in The City of New York, New York are
authorized or required by law or executive order to close.
"Common Stock" shall mean the common stock, par value $.01 per
share, and each other class of capital stock, of the Corporation that does not
have a preference over any other class of capital stock of the Corporation as to
dividends or upon liquidation, dissolution or winding up of the Corporation and,
in each case, shall include any other class of capital stock of the Corporation
into which such stock is reclassified or reconstituted.
"Current Market Price" per share shall mean, on any date
specified herein for the determination thereof, (a) the average daily Market
Price of the
<PAGE>
16
pursuant to this Section 10(e) shall accrue for the accounts of, and be payable
to, the holders of shares of Preferred Stock to be exchanged therefor. Any
interest accruing on the Dividends shall be for the benefit and be payable to
the Corporation.
(f) Notice of Mandatory Conversion having been given as aforesaid,
upon the deposit of shares of Common Stock and Dividends pursuant to Section
10(e) in respect of shares of Preferred Stock to be converted pursuant to
Section 10(a), notwithstanding that any certificates for such shares shall not
have been surrendered for cancellation, from and after the Mandatory Conversion
Date (i) the shares represented thereby shall no longer be deemed outstanding,
(ii) the rights to receive dividends thereon shall cease to accrue, and (iii)
all rights of the holders of shares of Preferred Stock to be converted shall
cease and terminate, excepting only the right to receive the shares of Common
Stock and Dividends and the right to convert such Preferred Stock into shares of
Common Stock until the close of business on the Mandatory Conversion Date, in
accordance with Section 8; provided, however, that if the Corporation shall
-------- -------
default in the execution and delivery of the shares of Common Stock or
Dividends, the shares of Preferred Stock that were to be converted shall
thereafter be deemed to be outstanding and the holders thereof shall have all of
the rights of a holder of Preferred Stock until such time as such default shall
no longer be continuing or shall have been waived by holders of at least 51% of
the then outstanding shares of Preferred Stock.
Section 11. Definitions.
-----------
For the purposes of this Certificate of Designation of Preferred
Stock, the following terms shall have the meanings indicated:
"Affiliate" shall have the meaning ascribed to such term in Rule
12b-2 of the General Rules and Regulations under the Exchange Act; provided that
--------
"Affiliate" shall not include any purchaser under the Stock Purchase Agreement
or any Affiliate of any such purchaser.
"Business Day" shall mean any day other than a Saturday, Sunday
or other day on which commercial banks in The City of New York, New York are
authorized or required by law or executive order to close.
"Common Stock" shall mean the common stock, par value $.01 per
share, and each other class of capital stock, of the Corporation that does not
have a preference over any other class of capital stock of the Corporation as to
dividends or upon liquidation, dissolution or winding up of the Corporation and,
in each case, shall include any other class of capital stock of the Corporation
into which such stock is reclassified or reconstituted.
"Current Market Price" per share shall mean, on any date
specified herein for the determination thereof, (a) the average daily Market
Price of the
<PAGE>
17
Common Stock for those days during the period of 40 days, ending on such date,
which are Trading Days, and (b) if the Common Stock is not then listed or
admitted to trading on any national securities exchange or quoted in the over-
the-counter market, the Market Price on such date.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended, and the rules and regulations of the Securities and Exchange Commission
thereunder.
"Fair Market Value" shall mean the amount which a willing buyer,
under no compulsion to buy, would pay a willing seller, under no compulsion to
sell, in an arm's-length transaction (assuming in the case of Common Stock (i)
that the Common Stock is valued "as if fully distributed" and (ii) no
consideration is given for minority investment discounts, or discounts related
to illiquidity or restrictions on transferability).
"Issue Date" shall mean the original date of issuance of shares
of Preferred Stock to the holders pursuant to the Stock Purchase Agreement.
"Junior Stock" shall mean any capital stock of the Corporation
ranking junior (either as to dividends or upon liquidation, dissolution or
winding up) to the Preferred Stock including, without limitation, the Common
Stock.
"Market Price" shall mean, per share of Common Stock on any date
specified herein: (a) the closing price per share of the Common Stock on such
date published in The Wall Street Journal or, if no such closing price on such
-----------------------
date is published in The Wall Street Journal, the average of the closing bid and
-----------------------
asked prices on such date, as officially reported on the principal national
securities exchange on which the Common Stock is then listed or admitted to
trading; (b) if the Common Stock is not then listed or admitted to trading on
any national securities exchange but is designated as a national market system
security, the last trading price of the Common Stock on such date; or (c) if
there shall have been no trading on such date or if the Common Stock is not so
designated, the average of the reported closing bid and asked prices of the
Common Stock on such date as shown by NASDAQ and reported by any member firm of
the NYSE, selected by the Corporation. If neither (a), (b) or (c) is applicable,
Market Price shall mean the Fair Market Value per share determined in good faith
by the Board of Directors of the Corporation which shall be deemed to be Fair
Market Value unless holders of at least 51% of the outstanding shares of
Preferred Stock request that the Corporation obtain an opinion of a nationally
recognized investment banking firm chosen by such holders (at the Corporation's
expense), in which event Fair Market Value shall be as determined by such
investment banking firm.
"NASDAQ" shall mean the National Market System of the NASDAQ
Stock Market.
<PAGE>
18
"NYSE" shall mean the New York Stock Exchange, Inc.
"Parity Stock" shall mean any capital stock of the Corporation,
including the Preferred Stock, ranking on a par (either as to dividends or upon
liquidation, dissolution or winding up) with the Preferred Stock.
"Person" shall mean any individual, firm, corporation,
partnership, trust, incorporated or unincorporated association, joint venture,
joint stock company, government (or an agency or political subdivision thereof)
or other entity of any kind, and shall include any successor (by merger) of such
entity.
"Senior Stock" shall mean any capital stock of the Corporation
ranking senior (either as to dividends or upon liquidation, dissolution or
winding up) to the Preferred Stock.
"Stated Value" shall mean $1000 per share of Preferred Stock
"Stock Purchase Agreement" shall mean the Stock Purchase
Agreement, dated ________, 1999 between the Corporation, The 1818 Fund III, L.P.
and the other parties signatory thereto, as the same may be amended from time to
time.
"Subsidiary" shall mean, with respect to any Person, a
corporation or other entity of which 50% or more of the voting power of the
voting equity securities or equity interest is owned, directly or indirectly, by
such Person.
"Trading Days" shall mean a day on which the national securities
exchanges are open for trading.
Section 12. Modification or Amendment.
-------------------------
Except as specifically set forth herein, modifications or
amendments to this Certificate of Designation may be made by the Corporation
with the consent of the holders of at least 51% of the outstanding shares of
Preferred Stock.
IN WITNESS WHEREOF, National Equipment Services, Inc. has caused
this Certificate to be duly executed in its corporate name on this ____ day of
_________, 1999.
NATIONAL EQUIPMENT SERVICES, INC.
By: ___________________________________
Name:
Title:
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED FINANCIAL STATEMENTS OF NATIONAL EQUIPMENT SERVICES, 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> 3-MOS 3-MOS
<FISCAL-YEAR-END> Dec-31-1999 Dec-31-1998
<PERIOD-START> Jan-01-1999 Jan-01-1998
<PERIOD-END> Mar-31-1999 Mar-31-1998
<CASH> 500 344
<SECURITIES> 0 0
<RECEIVABLES> 58,258 53,323
<ALLOWANCES> 2,848 2,590
<INVENTORY> 21,744 15,606
<CURRENT-ASSETS> 0 0
<PP&E> 481,346 444,378
<DEPRECIATION> 50,871 37,108
<TOTAL-ASSETS> 802,709 720,483
<CURRENT-LIABILITIES> 0 0
<BONDS> 581,959 513,836
0 0
0 0
<COMMON> 241 241
<OTHER-SE> 137,455 136,625
<TOTAL-LIABILITY-AND-EQUITY> 802,709 720,483
<SALES> 27,630 6,336
<TOTAL-REVENUES> 87,532 22,151
<CGS> 12,337 3,224
<TOTAL-COSTS> 52,294 13,500
<OTHER-EXPENSES> 21,364 5,338
<LOSS-PROVISION> 522 2,559
<INTEREST-EXPENSE> 12,722 3,100
<INCOME-PRETAX> 1,359 290
<INCOME-TAX> 571 151
<INCOME-CONTINUING> 788 139
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 788 139
<EPS-PRIMARY> 0.03 0.01
<EPS-DILUTED> 0.03 0.01
</TABLE>
